Why DPI and tax, now?
ODI Global’s 2025 Emerging Themes report on public finance in the digital era rightly reframed ‘digitalisation’ less as a set of IT projects and more as a shift in how governments function: how information is generated, shared, governed and acted upon across the state (Long and Naik, 2025). This shift in perspective is crucial for taxation because tax administration, one of the most data-intensive public functions, is already digitalising rapidly, and sits at the centre of inter-institutional collaboration – linking registries, payments, customs, business processes and, increasingly, digital service delivery. As last year’s report emphasised across multiple chapters, the promise of digital reforms depends on whether governments can move beyond agency-specific systems towards government-wide approaches to data exchange, interoperability and accountable use.
Tax is an especially revealing domain for the broader debates on state capacity and digitalisation. Many low-income countries have already digitised core tax functions – registration, filing and payment – and are expanding tools such as e-invoicing and real-time reporting. These reforms are often pursued to reduce compliance costs, improve enforcement and support domestic revenue mobilisation, but they also bring familiar risks: exclusion of marginalised groups, unequal digital access, opaque automation and erosion of trust when digital systems are experienced as unaccountable, punitive or error-prone (Naik and Nandakumar, 2025; Okunogbe and Santoro, 2023). At the same time, aspirations such as using AI in public finance and strengthening fiscal transparency via technology are constrained by budgets, the limits of current analytics, inconsistent standards, weak governance and data that remain siloed and riddled with gaps (Long et al., 2025).
This chapter focuses on how digital public infrastructure (DPI) and taxation fit together. DPI is best understood as a set of shared digital rails – plus the technical standards and governance arrangements around them – that can be reused across sectors. Three building blocks of DPI are often emphasised in practice: (i) trusted digital identity and authentication; (ii) fast, low-cost digital payment rails; and (iii) secure data exchange mechanisms (registries, standards, consent layers and Application Programming Interfaces) that allow institutions to share and reuse information responsibly (G20, 2023; Clark et al., 2025). For tax administrations, these rails can reduce duplication, lower compliance burdens and reshape tax administrations into more data-driven, better-performing institutions (Ogembo et al., 2025).
The interface between DPI and tax has unusually high stakes. Linking identity, payments and administrative records can enable frictionless compliance and better detection of evasion and fraud, but it can also lead to surveillance, exclusion and coercive enforcement that discourages participation in the formal economy and weakens the trust that undergirds the fiscal social contract (Ogembo et al., 2025). Tax, therefore, distils the central cross-cutting question for digital-era state capacity: how can digital systems help governments function better, while ensuring government digitalisation protects and enhances rights, builds trust and includes those least-well served by digital and non-digital channels?
There is also an important fiscal sustainability dimension. Secure, inclusive digital rails require recurring investments, including for cybersecurity, maintenance, upgrades and assistive channels. If DPI-enabled tax reforms can deliver credible fiscal dividends – for instance through more efficient tax collection and lower administrative burdens – they can help finance the continuation and scaling of digital reforms across government in a virtuous cycle (Ogembo et al., 2025). This contrasts with other ways in which governments have sought to integrate digitalisation with taxation in recent years, such as through taxes on mobile money, many of which have proved neither financially nor politically sustainable (Mader et al., 2022; Hearson et al., 2024).
In sum, this chapter asks: how can shared digital rails strengthen tax capacity in practice – and how can tax policy and administration, in turn, strengthen and sustain DPI? Where the 2025 tax chapter assessed the trajectory and impacts of tax digitalisation, this chapter homes in on the DPI–tax interface as a government-wide issue. While Naik and Nandakumar (2025) demonstrate why digital tools and third-party data can improve tax outcomes, this chapter asks what it takes to make those gains durable and scalable when tax systems must operate across shared infrastructure and cross-government data ecosystems.
Read the full chapter. This is a chapter in the second edition of ‘Public Finance in the Digital Era: Emerging Themes’ (aka the Emerging Themes Report, ETR). All of the chapters in this year’s ETR can be found here.
