Tax Administration Digitalisation and Digital Transformation Initiatives

2. Digital identity

Increasingly, engagements between tax administrations and citizens and businesses are happening online which requires a secure and unique identification of all actors involved. Trusted digital identities1 play a key role as they provide certainty as regards the identification of taxpayers. They give access to online services, allow for the matching of available information and the delegation of representation, and are also instrumental for the provision of joined-up government services and machine-to-machine processes.

This chapter surfaces details around the adoption of digital identities by tax administrations, including their coverage and authentication methods, required for taxpayers to access digital services. It also looks at authorisation processes put in place by tax administrations.

Digital identity usage

Almost all administrations now have digital identity systems in place for individuals and businesses, establishing a strong foundation for digital transformation (see Table 2.1.). The table also shows that it is not necessarily the administration that provides the digital identity. In many jurisdictions the digital identity can be provide by another government body or, in about one third of the jurisdictions, by a private sector body.

The trend is increasingly for these digital identities to enable access to services from other parts of government or third parties. As can be seen in Table 2.1., in more than half of the jurisdictions the digital identity provided by the tax administration can also be used to access services from other government bodies and in around 15% of jurisdictions it can be used to access private sector services.

Table 2.1. Use of digital identities, 2024

Percent of administrations that have the respective process in place

Taxpayer type	Taxpayers are required to use an approved digital identity (DI) to access secure digital services offered by the administration	If yes, …
		DI used to access the services can be provided by (multiple answers possible)			DIs are interoperable (if several bodies can provide a DI)	DI offered by the tax administration can also be used to access services from…
		Tax administration	Another government body	Private sector body
						Another government body	Private sector body
Individual	98.1	71.7	66.0	34.0	67.7	55.3	15.8
Business	96.3	71.2	48.1	36.5	75.0	59.5	13.5

Source: (OECD et al., 2024[1]), Inventory of Tax Technology Initiatives, https://www.oecd.org/content/oecd/en/data/datasets/inventory-of-tax-technology-initiatives.html (accessed on 7 February 2025).

In most jurisdiction it has become the norm to access tax administration services by using an approved digital identity. As Table 2.2. shows, in around two thirds of jurisdictions, between 81% and 100% of individuals use a digital identity to access secure digital services offered by the tax administration. This number is even higher for businesses, with close to 90% of administrations reporting the use of a digital identity by more than 80% of businesses.

Table 2.2. Estimated percentage of the taxpayer population that uses a digital identity to access secure digital services offered by the administration, 2024

Percent of administrations that report a digital identity usage in the respective range

Taxpayer type	Estimated percentage of the taxpayer population that uses an approved DI to access the services
0-20 percent	21-40 percent	41-60 percent	61-80 percent	81-100 percent
Individual	0.0	15.1	7.6	11.3	66.0
Business	5.8	1.9	0.0	5.8	86.5

Note: Percentages relate to administrations that require the use of an approved digital identity (see Table 2.1.).

Source: (OECD et al., 2024[1]), Inventory of Tax Technology Initiatives, https://www.oecd.org/content/oecd/en/data/datasets/inventory-of-tax-technology-initiatives.html (accessed on 7 February 2025).

The digital identity solutions offered by tax administrations can have a range of features. As highlighted by Table 2.3., for both individuals and businesses, the majority of these solutions are built upon an existing domestic identity system as opposed to being completely new. Nearly two fifths of digital identify solutions can connect with foreign identity systems, although only 65% of these are already done in practice. In the majority of cases, the digital identity is created on request as opposed to automatically.

Table 2.3. Selected features of the digital identity solution, 2024

Percent of administrations that have the respective process in place

Taxpayer type	Underlying DI solution for is …		Connection with foreign identity systems			DI is created …
Built upon an existing domestic identity system	Completely new	DI solution can connect with foreign identity systems	If yes, the connection with foreign identity systems is …
			Already done in practice	A theoretical possibility	Automatically	On request
Individual	79.2	20.8	37.7	65.0	35.0	17.0	83.0
Business	75.0	25.0	38.5	65.0	35.0	17.3	82.7

Note: Percentages relate to administrations that require the use of an approved digital identity (see Table 2.1.).

Source: (OECD et al., 2024[1]), Inventory of Tax Technology Initiatives, https://www.oecd.org/content/oecd/en/data/datasets/inventory-of-tax-technology-initiatives.html (accessed on 7 February 2025).

Authentication methods

With the significant uptake in the use of digital identities to access online services (as reported in Table 2.2.), it is of utmost importance to have enhanced security systems in place against digital identify theft. It is therefore of no surprise that all administrations report that they apply authentication methods to verify the digital identity when used online.

The type of verification method varies, however, as can be seen in Table 2.4. which shows that password-based authentication is used by 77% of administrations, followed by multi-factor authentication and mobile app. A few administrations are also using facial recognition or fingerprint to authenticate the digital identity of a taxpayer. In addition, two-thirds of the administrations reported that their use of different authentication methods is based on the level of security required for certain types of interactions.

Table 2.4. Digital identity authentication, 2024

Percent of administrations that have the respective process in place

Authentication methods used by the tax administration									Use of different authentication methods based on the level of security required for certain types of interactions
Password-based authentication	ID card	Mobile app	Voice recognition	Facial recognition	Retina scan	Finger-print	Multi-factor authentication	Other
77.4	39.6	41.5	1.9	17.0	1.9	17.0	69.8	22.6	66.7

Note: Percentages relate to administrations that require the use of an approved digital identity (see Table 2.1.).

Source: (OECD et al., 2024[1]), Inventory of Tax Technology Initiatives, https://www.oecd.org/content/oecd/en/data/datasets/inventory-of-tax-technology-initiatives.html (accessed on 7 February 2025).

Authorisation

Traditionally, many taxpayers are using third parties, such as tax advisors, accountants or intermediaries, to deal with their tax affairs. Close to 90% of tax administrations have therefore put in place processes that allow taxpayers to authorise third parties to access secure digital services on their behalf (see Table 2.5.). Of those that do, almost 90% allow access to be assigned to a named individual, while two thirds allow an entity to be given access.

Table 2.5. Authorisation for accessing secure digital services offered by the tax administration, 2024

Percent of administrations that have the respective process in place

Taxpayers can authorise third parties to access secure digital services	If yes, …
	Authorisation can be assigned to …		Authorised third party can represent …
A named individual	An entity	An individual	An entity
86.8	87.0	65.2	93.5	93.5

Note: Percentages relate to administrations that require the use of an approved digital identity (see Table 2.1.).

Source: (OECD et al., 2024[1]), Inventory of Tax Technology Initiatives, https://www.oecd.org/content/oecd/en/data/datasets/inventory-of-tax-technology-initiatives.html (accessed on 7 February 2025).

Innovations

Addressing security and privacy challenges around the use of digital identities, tax administrations are starting to look into innovative technological approaches. As Table 2.6. shows, close to 10% of administrations indicated using self-sovereign identity approaches that give individuals control of their digital identities, and 14% of administrations reported using a digital identity wallet solution where identity data and official documents are stored and managed. Around 6% of administration reported the use of artificial intelligence as part of the digital identity system, while none have reported the use of blockchain.

Table 2.6. Use of innovative technologies or solutions with respect to digital identity, 2024

Percent of administrations that have the respective process in place

Type of technology or solution used
Blockchain	Self-sovereign identity	Digital identity wallet solution	Artificial intelligence
0.0	9.4	13.5	5.7

Note: Percentages relate to administrations that require the use of an approved digital identity (see Table 2.1.).

Source: (OECD et al., 2024[1]), Inventory of Tax Technology Initiatives, https://www.oecd.org/content/oecd/en/data/datasets/inventory-of-tax-technology-initiatives.html (accessed on 7 February 2025).

Additional information on the use of digital identities within tax administration, such as on the different domestic solutions adopted as well as the challenges related to cross-border processes, can be found in the OECD report Tax Administration 3.0 and the Digital Identification of Taxpayers: Initial Findings (OECD, 2022[2]).

References

[2] OECD (2022), Tax Administration 3.0 and the Digital Identification of Taxpayers: Initial Findings, OECD Publishing, Paris, https://doi.org/10.1787/3ab1789a-en.

[1] OECD et al. (2024), Inventory of Tax Technology Initiatives, https://www.oecd.org/content/oecd/en/data/datasets/inventory-of-tax-technology-initiatives.html (accessed on 7 February 2025).

Note

← 1.  For the purpose of the survey underlying the Inventory of Tax Technology Initiatives (OECD et al., 2024[1]), digital identity is considered to be an electronic representation of an individual or business which enables them to be sufficiently distinguished when interacting online. The digital identity includes attributes which are bound to a credential that is used to authenticate the individual or business.