Many countries find themselves in a tightening fiscal vise. Revenue streams are stagnating while expenditure pressures accelerate. Aging populations demand more healthcare and pension support. Climate-related disasters require costly adaptation, reconstruction, and insurance mechanisms. Public expectations for social protection, infrastructure, energy transition, and digital connectivity rise year after year. Budgets stretch, deficits widen, and borrowing space narrows. In this environment, Domestic Resource Mobilization (DRM) is no longer simply a desirable policy goal, rather DRM is an economic imperative.
DRM has become a central development priority for countries seeking to reduce external dependency, increase fiscal space, and strengthen national sovereignty. In this pursuit, the most common prescription offered by reformers and development partners has been tax policy modernization which requires drafting new tax codes, revising rates, expanding bases, harmonizing incentives, and strengthening legal frameworks. Yet in practice, these technically sound reforms often fall short of expectations. New tax laws alone do not increase revenue. They must be implemented through tax administrations capable of applying them consistently, efficiently, and transparently. And this, in many countries, remains the critical constraint.
Why Policy Reform Alone Fails
Many tax administrations still operate under traditional structures aligned around tax types, such as personal income tax, VAT, excise, and corporate income taxes. This design produces duplication, fragmented authority, inconsistent taxpayer treatment, and an overall lack of strategic coordination.
Most officials working within these systems have spent decades navigating such structures. They have expertise, influence, incentive and jurisdictional power embedded in the existing order. Understandably, they defend it. These officials often interpret modernization narrowly as “computerization” or digitizing records, automating returns, introducing platforms for payment and data analysis, while retaining the old structure and power dynamics within their organization.
Digitalization is necessary, but insufficient.
Before technology one must understand the antiquated or working processes within the existing system. Often re-engineering these processes are necessary but deemed secondary by the officials. Process mapping, reorganizing workflows, establishing unified taxpayer services, risk-based audit frameworks, and voluntary compliance strategies require people to work differently. That demands new learning, new thinking, and temporary reduction in comfort and control. Already overloaded officials may not immediately see personal benefit, only disruption.
And where change requires champions, we often assume change agents exist. That assumption is an exception, not a baseline.
The Core Challenge: Organizational DNA, Not Just Tools
The primary barrier to tax administration modernization is not tax design or IT deployment, it is institutional behavior. Many administrations still function through structures that served a purpose decades ago, but over time, they have become anchored to routines, hierarchies, and personalities that are difficult to rationalize in a modern context. These legacy patterns create systems misaligned with contemporary approaches to compliance, risk management, and service-oriented revenue mobilization.
Modernization, therefore, is not purely technical. It is cultural.
A credible DRM reform strategy must acknowledge that shifting organizational DNA requires change management: leadership that inspires confidence, a culture that values learning and adaptation, and behaviors that support rather than resist reform.
Functional reorganization provides the structural backbone for such change, especially when anchored around core operational units:
- Taxpayer services
- Audit and compliance
- Collections and arrears
- Policy and legal integration
- Large taxpayer operations
- Risk and data analytics
These functions perform best when authority is clearly defined, processes are streamlined, information moves seamlessly, and incentives reward compliance rather than bureaucracy.
Yet functional reorganization rarely emerges organically. It requires tempering that entails a deliberate change-management fulcrum that balances disruption with stability, sparks momentum, and guides it in a coherent direction.
A Strategic Approach: Creating Competing Internal Change Agents
If relying on a single reform champion is not feasible, the alternative is to cultivate competitive leadership capacity across several influential officials within the tax administration. Each senior figure exercises formal or informal authority and will often seek to preserve or increase that authority over time. Institutional change may be perceived either as a threat to their influence or as an opportunity to strengthen it. The key is to frame and sequence reforms in a way that encourages these leaders to see themselves as owners of change rather than subjects of it, allowing momentum for transformation to emerge from within the system rather than depending on one individual alone.
The key is to channel ambition in a productive direction.
By strategically aligning reform incentives with opportunities for jurisdictional expansion, we shift internal rivalry into a driver of modernization. If one powerful official adopts strengthened taxpayer-service systems, others may seek influence over new audit methodologies, analytics reforms, or compliance divisions. Momentum is built not by imposition, but through competitive alignment. This dynamic, when guided, produces multiple competing internal change agents, a coalition despite their interjurisdiction rivalry rather than a hero. Reform becomes a race toward relevance, not resistance.
Technical Assistance Must Work with Institutional Psychology
External advisers are often trained in tax policy, IT, and process engineering, but successful DRM reform requires equal fluency in organizational behavior. Technical sequencing matters:
- Map existing processes before digitalizing them
- Reengineer workflows before issuing IT procurement
- Train progressively, with visible benefits to daily work
- Establish functional structures before enforcing new laws
- Incentivize reform by expanding useful jurisdiction, not shrinking it
Institutional resistance is rarely irrational; it is structural. Reform must acknowledge this, and design around it.
Turning Rivalry into Reform
DRM succeeds when tax administrations evolve beyond tax types and toward function-based, data-driven, service-oriented architecture. With intentional sequencing, strategic empowerment, and well-targeted technical support, entrenched officials can become the architects of modernization rather than the barrier to it.
Reform is not a technical exercise alone. It is a behavioural engine. And when aligned properly, that engine can power one of the most transformative levers of national development.
Disclaimer: Statements expressed in this blog reflect the personal opinion of the author and do not represent the position or policy of GBPG or entities we are affiliated with. While we strive to ensure the accuracy of the information presented, we make no guarantees regarding its completeness, reliability, or accuracy.
