Digital transformation has been an integral part of tax administration in recent years, with administrations increasingly investing resources into reforming their processes to become truly digital. In the context of the digital transformation of wider society, it is imperative that tax administrations keep pace. Technology and digital services have remodelled the way individuals and businesses operate, and tax administrations are adapting to this by fundamentally changing their operating models to benefit from what digital technologies, including the increasing interconnections between digital systems, can now offer.
The heart of the Tax Administration 3.0 vision as described in the OECD’s 2020 flagship publication Tax Administration 3.0: The Digital Transformation of Tax Administration (OECD, 2020[1]) is the idea that the tax administration of the future will be fully taxpayer-centric, with a focus on how to make taxation a seamless and burden-free process. The different systems and technologies that citizens, businesses and public authorities use – their “natural systems” – are becoming increasingly interconnected. This is now making it more feasible to move taxation processes into taxpayer natural systems where taxable events take place, or are recorded, thus offering opportunities to reduce recording, reporting and calculation burdens.
One of the most important developments has been the rapid evolution of Artificial Intelligence (AI). AI is increasingly being used by tax administrations to improve efficiency and effectiveness within the tax administration on a range of areas, from improving customer services to detecting tax fraud. While AI undoubtedly offers many opportunities, its adoption by tax administrations must be subject to appropriate governance to ensure objectivity, data privacy and trust.
At the heart of the digital transformation process is the staff of the tax administration. The skillsets required by tax administrations are changing, with a greater need for digitally literate staff and people with technical expertise in data management, new technologies and cybersecurity. Project management skills to deliver technical projects and change management skills will also be valuable.
Tax Administration Digitalisation and Digital Transformation Initiatives looks at the progress administrations have made in implementing digital solutions and digital transformation reforms. It does so by analysing the data from the Inventory of Tax Technology Initiatives (OECD et al., 2024[2]), and considering these within the context of the six Tax Administration 3.0 building blocks as illustrated in Figure 1.1.:
Digital identity: As tax administrations are increasingly delivering their services online, digital identity has become a cornerstone of tax administrations’ work. Without secure digital identities, it is not possible to move fully to machine-to-machine interactions. Chapter 2 sets out the digital identity services offered by tax administrations, including their usage and key features. It also examines authentication methods and authorisation processes.
Taxpayer touchpoints: Taxpayers have more contact with the tax administration than ever before, especially as administrations offer more online services, often in collaboration with wider government and third parties. This is facilitated through various taxpayer touchpoints, which Chapter 3 looks at in more detail.
