The tax administration of the future will be digitized and use new technologies which revolutionize tax processes, enhancing speed and accuracy.
The pandemic and the ensuing economic crisis have created a unique and time-sensitive opportunity for governments to digitize tax administration.
From mobilizing stimulus payments and other fiscal incentives for vulnerable populations, to strengthening tax collection to stabilizing finances and investing in sustainable development, tax administrations must accelerate digitalization and further explore innovative technology solutions.
Over the past two decades, tax authorities have harnessed digital technology to improve their efficiency in collecting taxes and increasing transparency, as well as providing better service through streamlined processes and user-friendly interfaces.
Digital transformation can also provide a mechanism to dramatically improve compliance and reduce burdens. Digitalization is already present in some countries in the Asia-Pacific region, but others can benefit from it as well. Digital transformation enhances speed, accuracy, the ability to integrate data from numerous sources at once and in any format, and at the same time, vastly enriches taxpayer service capabilities and access.
But strategizing and planning for a digital transformation may be daunting, given that such an endeavor requires changes ranging from laws to processes and to fundamental concepts of how tax administration should work (including the critical role data plays as the driver of a digitized tax administration).
Each administration in the region differs in their digital transformation journey. Although there are common overall objectives and standardized phases and endpoints, each transition is different due to a multitude of factors, including the baseline, availability of infrastructure to support a digital transformation, tax administration and taxpayer capacity.
Digitalization is already present in some countries in the Asia-Pacific region, but others can benefit from it as well.
Our research outlines clear steps in planning, designing, and executing a digital transformation journey, including:
- Strategic planning, bearing in mind the gap between goals and what is possible at the outset. A digital transformation strategy should be part of an overall government vision for the digital development of the country. This defines the government aspirations and objectives and sets the parameters for what digital tax administration should look like. For example, Kazakhstan has created digital roadmaps for individual stages and outputs, along with a general roadmap.
- Decisions on design and phasing (how far and how fast); Once the endpoint is decided, digitization planning focuses on what is achievable in what timeframe. After assessing resources (financial, human, technological), a decision should be made about whether the transformation should be one umbrella project or a series of self-contained phases. Many countries have decided to phase implementation of digital tax administration (for example, Malaysia, Thailand, and Indonesia) in comparison with Estonia, which undertook digital tax transformation in a comprehensive project.
- Translating planning into implementation: the construction of a digital road map that contains all components of change management, including building capacity. It also sets up a checklist and planning guide for each step and defines milestones for progress. Recognizing the many-faceted areas to be covered in the design of digital transformation of the tax administration, Indonesia added workstreams. These included project management, procurement and systems, and a governance component in its assessment both of readiness to reform and also expectations for the subcomponents of its digital transformation plan.
- Implementation, review and assessment, and redesign. This building stage entails continuous self-assessment and course correction as building blocks and processes are put in place. For instance, the Philippines defined their 10-year digital transformation roadmap, which consisted of 49 projects to be implemented in a phased manner. It assessed the existing projects as a driver which enables tax authorities to collect taxes by means of electronic payment channels.
To begin the process, the conversation needs to start among tax administrator decision makers about the main areas that should be addressed to jump-start the digital transformation of tax administrations.