Domestic revenue mobilisation (DRM) is once again at the centre of the sustainable development financing agenda, as narrowing an annual $4.3 trillion sustainable development goals (SDG) financing gap through enhanced DRM is an urgent matter. Omitting the role of Digital Public Infrastructure for Domestic Revenue Mobilisation would be a huge missed opportunity for international development stakeholders. This blog discusses why it is so and what needs to change, looking at how the issue has been discussed in recent conferences and the case of Ethiopia.
Generic and old-fashioned tax administrative functioning will not help
As the Official Development Assistance (ODA) toward low- and middle-income countries (LMICs) has been declining in recent years—further exacerbated by the official USAID closure and the UKAID cut earlier in 2025—tax administrations in LMICs need to revamp their operations so that they can generate domestic resources to finance development initiatives, including poverty reduction, education, healthcare, and key infrastructure developments. Rapid technological advancement and digitalisation in particular offer opportunities to overhaul the old ways of operating in many tax administrations, (such as conducting poorly organised, ad-hoc, manual tax assessment system).
Currently, nearly 80% of low-income countries collect taxes below the threshold seen as necessary for sustainable economic growth,15% of GDP. In the new “tax era of development”, ICTD researchers argue that building better tax capacity is crucial to averting debt crises and being able to invest for sustainable development. Evidence-based reforms and integrating research with tax administration help tax administrations be smarter, not harder—even in digital approaches. A well-implemented Digital Public Infrastructure for Domestic Revenue Mobilisation, including digital IDs, digital payments, and data exchange, presents a massive opportunity for better tax systems in LMICs.
Governments are already spending millions of dollars for ID system development with little effort given to revenue generation
Governments across the LMICs are largely investing in digital ID system. However, only a few African countries (such as Rwanda, Ghana, Nigeria, Kenya) are attempting to use their ID system for better revenue generation. Malawi was also explicitly lauded for its success in its digital ID adoption, but the opportunity to transform tax administration and improve compliance has not yet been seized.
Digitalisation enhances the potential for interoperability, seamless data sharing and integrated datasets, so that, for example, financial flows data and business transaction footprints can support government revenue-raising systems more actively. But storing such vast data will be certainly costly and further needs its own data management, seamless data-sharing frameworks, and privacy and data security protocols.
African tax administrations also need to train their future workforce to harvest these new digital resources. Especially, they should prepare themselves to use Artificial Intelligence (AI) and Machine Learning in reshaping the culture of tax audit and improving the risk matrices of tax assessment and identifying tax fraud and evasion more effectively. Such learning also must encompass recognising the limitations of AI and the importance of keeping ‘humans in the loop’ to correct errors.
Missed opportunities to bring more attention in big international stages
Two recent international conferences, which I attended, were missed opportunities to the role of DPI in taxation in general and in aiding its use in more effective DRM across LMICs in particular. The ID4Africa 2025 conference in Addis Ababa, Ethiopia (May 20 – 23) had the theme “Digital Identity at Scale: Prioritizing use, accelerating impact”. The conference brought together more than 2200 participants from more than 55 countries across the world, and more than 120 identity technology developers showcasing their technology solutions and clearly showed how digital ID systems have been rapidly gaining traction in Africa. Yet the role of digital IDs in building efficient tax systems was shockingly overlooked and tax related questions during discussions were often ignored, if raised at all. While this year the organisers focused on direct digital ID use cases, such as travel, finance and migration, in future conferences DPI in tax should receive more attention for its more state-building and wider development implications.
The 4th International Conference on Financing for Development (FfD4) in Seville (June 30 to July 3) discussed the challenges and way forward for sustainable development financing. The resulting new DRM actions outlined in the Seville Declaration generally aim to advance fair and effective DRM, foster policy coherence, and reinforce the social contract through collaborative partnerships and knowledge-sharing. This new initiative seeks to mobilise the international community to strengthen tax systems in support of the Sustainable Development Goals (SDGs). However, making real progress on the SDGs will largely depend on countries’ ability to raise domestic revenues and digital technology must play a critical role in monitoring, facilitation and enforcing compliance. Yet Digital Public Infrastructure for Domestic Revenue Mobilisation was omitted in the Seville Declaration as well as during the Addis Tax Initiative (ATI) General Assembly 2025 that followed—another missed opportunity to highlight its potential to transform revenue mobilisation capacity.
Ethiopia shows how, with leveraging DPI for DRM, it is the implementation that matters
Ethiopia has made significant strides in rolling out the foundational ID system —Fayda ID. Currently, more than 21 million people are registered. Tax administrations and both federal and regional governments have also started to integrate Fayda ID with tax identification number (TIN) registration, as we discussed its tax potentials in our 2024 blog. The expectation was that the tax administration would use Fayda ID for tax base expansion, stronger monitoring and enforcement, and for better tax governance.
But the Ethiopian tax administration stuck to using the Fayda ID only for registration purposes. This shows a lack of readiness to leverage the unique, interoperable and traceable ID for a systemwide integration of economic and financial activities for more robust, data-driven tax compliance enforcement purposes. Furthermore, the tax administration is not yet developing an instant TIN registration system, thus failing to reduce both administrative costs and the taxpayer burdens by using the Fayda ID database for online TIN registration.
Beyond taxation, so far, the lack of an integrated database and the absence of open data access policies constrain researchers in objectively evaluating the economy-wide impacts of DPI. Early-stage assessments and observations, however, indicate that Fayda adoption is more urban-centric, leaving the rural population behind. This may further widen the rural-urban divide in using technologies and undermine the digital inclusion agenda.
The way forward for Digital Public Infrastructure and Domestic Revenue Mobilisation
The success of domestic revenue mobilisation through digital public infrastructures depends on three key actions.
- First, we need a rigorous evidence base to shape how DPIs can effectively boost revenue.
- Second, it’s essential to foster a stronger collaboration between research institutions, tax administrations and national identity authorities to ensure solutions are both data-driven and practical.
- Finally, international development stakeholders such as ID4Africa and ATI should consider DPI a priority strategy in DRM and bring the conversation to the global stages. This can be done, for instance, by including DPI and Tax Administrations as a separate use case in their upcoming conferences.
