Policy Brief 21
Digital public infrastructure (DPI) – a set of interoperable digital systems and platforms that support service delivery, data exchange, and the functions of public and private sectors at scale – is expected to revolutionise public services and reshape the digital economy. This policy brief acknowledges that the interface between tax and DPI has unusually high stakes, and that some previous experience with digitalisation of tax administration has run counter to DPI’s core principles of openness, inclusion, and user empowerment. However, with careful alignment of DPI agendas and the digitalisation of tax that is already happening, tax offers a powerful opportunity to strengthen DPI.
We argue that, on the one hand, tax matters for DPI reforms because it drives adoption, promotes interoperability, builds heavily on digitalised data, necessitates governance safeguards, and promotes DPI sustainability. On the other hand, DPI matters for tax because it can enable frictionless compliance, help combat tax evasion and fraud, and broaden the fiscal base in inclusive ways. We note how in lower- and middle-income countries (LMICs) tax authorities are often leaders in digitalisation, and taxation is a key domain in which digital identity (ID), digital payment systems, and secure data exchange – often referred to as the three main DPI pillars – can evidently improve public service delivery. However, this will only happen if the legal, technical, and political process of DPI reform puts citizens – not just states and technology firms – at the heart of digital transformation. If concerns about surveillance and exclusion are addressed effectively, tax systems can be a key proving ground for the value of DPI for citizens and governments in LMICs. We recommend a number of principles to guide the collaborative work of tax administrations and the DPI community.
Key messages:
- DPI and tax must be aligned. DPI has immense transformative potential for governments, societies, and economies. As tax authorities worldwide undergo rapid digitalisation – whether by choice or necessity – it is important that these efforts align with and reinforce DPI agendas, rather than inadvertently undermining them. This policy brief outlines actionable strategies to ensure tax digitalisation complements DPI objectives.
- DPI can make tax systems more efficient, inclusive, and transparent. Tax administration presents an important opportunity to demonstrate how DPI can be designed and governed to build public trust.
- DPI strengthens tax systems through better identification, compliance, and transparency. Digital IDs and interoperable payment systems can reduce duplication and improve taxpayer verification, while data exchange systems can enhance enforcement. Successful implementation may boost tax morale by making compliance fairer and less of a burden for citizens.
- Tax-linked DPI reforms can deliver tangible fiscal and governance benefits. By expanding revenue collection and reducing administrative burdens, DPI can help governments to fund development and social investment. Digital tax administration requires robust privacy protection and governance frameworks, making it a pivotal domain for rights-respecting digital reform.
- Trust and inclusion are essential for successful DPI-tax integration. To protect citizens’ rights, DPI for taxation must be secure, transparent, and inclusive from the outset. This entails open standards, citizen oversight, data minimisation, and maintaining offline options for those without digital access.
- Policy success depends on incremental, accountable, and inclusive implementation. Governments should start small, build modular systems, and involve civil society in co-designing DPI-tax applications. Legal safeguards, assistive channels, and smart data-sharing across agencies can help build trust, reduce costs, and unlock the full potential of DPI in tax reform.
