Digital financial services (DFS) and digital ID systems are becoming ever more prevalent in low- and middle-income countries, and have become critical components of broader tax reform and domestic revenue mobilization (DRM) efforts. These technologies promise to reduce tax compliance costs for taxpayers and lessen the administrative burden on officials, improve access to third-party data, limit the scope for corruption and collusion, and improve both the usability of front-end taxpayer services and the efficiency of back-end data management systems and processes. However, very little is known about how well DFS and digital ID systems deliver on these promises.
In this report, our researchers Moyo Arewa and Laura Muñoz will present the state of existing evidence on the capacity of DFS and digital ID technologies to augment tax administration in low- and middle-income countries. In particular, this report will consider a) how these technologies actually work and how, in principle, they can improve tax administration outcomes; b) how tax administrations – particularly in low capacity contexts – have implemented or enabled DFS and digital ID systems, and; c) the institutional, administrative, regulatory, and political enablers (or barriers) underpinning tax administrations’ investments in these digital technologies.
Insights from this report will inform DIGITAX’s future research in this area, and guide practitioners and policy-makers looking to better understand how tax administrations can take better advantage of digital technologies.