Tax Administration Digitalisation and Digital Transformation Initiatives

4. Data management and standards

Data plays a central role in modern tax administrations, facilitating effective tax collection, compliance enforcement, and informed decision making. Increasing volumes of data are being handled by tax administrations as they transform into data-driven organisations. While the location of this data becomes less relevant under the Tax Administration 3.0 vision (OECD, 2020[1]), it still requires the application of mechanisms to manage and to protect data.

As shown in Table 4.1., around three quarters of tax administrations have a comprehensive data management strategy, and this chapter looks at some of the underlying mechanisms put in place by tax administrations covering data governance, data collection, data sharing and data analytics.

Data governance

The increasing volumes of data being handled by tax administrations has also been accompanied by the development and the application of more sophisticated approaches to protect and manage data and ensure data confidentiality, helping to uphold taxpayer trust in the system while ensuring compliance with legal obligations.

Alongside the digitalisation of tax administrations, there is an increased role for data analytics and AI-driven automation, which can assist tax administrations in modernising processes such as the pre-filling of tax returns, data sharing and withholding tax calculations as well as the wider provision of digital taxpayer services.

Data confidentiality and security, as well as enhanced data quality standards, also underpins the effective and secure exchange of information within jurisdictions, including with third parties, as well as between governments, helping ensure that all parties have trust in the exchange frameworks.

Data governance lies at the centre of data management as it ensures the availability, quality and security of data, and thus helps upholding taxpayer trust in the system. With the amount of incoming data and its use expanding, tax administrations are investing into data governance processes and safeguards to ensure that the data is stored and used appropriately and well protected, internally as well as externally.

Table 4.1. takes a closer look at some of the data governance practices applied by tax administrations around:

• Data quality: The importance of data quality cannot be overstated. Having accurate, complete and timely data is a necessity for any tax administration. In this respect, it is good to see that 85% of administrations assess the quality of reported data.

• Data access and security: Protecting data from unauthorised access is a key priority for tax administrations as data breaches, internally and externally, can undermine trust in the wider tax system. Nearly all administrations control user data access and security, and 94% have both cyber security units and hire external parties to test the security of systems. Moreover, 87% of administrations have systems in place that automatically detect unauthorised data access, and 85% employ a Data Privacy Officer.

• Data ethics: Three quarters of administrations report having in place a data ethics framework to guide the appropriate and responsible use of data.

Already 17% of administrations report having started using artificial intelligence as part of their data governance, something that is likely to grow quickly.

Table 4.1. Data governance, 2024

Percent of administrations that have the respective process in place

Comprehensive data management strategy exists	Quality of reported data is assessed	Data ethics framework in place	User data access and security is controlled	Unauthorised access is automatically detected	Data Privacy Officer is employed	Cyber security unit exists	External parties hired to test the security of systems	Artificial intelligence used as part of the data governance process
72.2	85.2	75.9	98.1	87.0	85.2	94.4	94.4	16.7

Source: (OECD et al., 2024[2]), 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).

Data collection

Receiving data from taxpayer business systems and third parties

With more and more data becoming available in electronic format, the access, transfer and integration of data has also changed. Instead of taxpayers having to process data and put it in paper or online forms, tax administrations increasingly receive data directly from taxpayer business systems and third parties. This requires effective collaboration with third parties to ensure that the systems are accurate, secure and operate smoothly. Application programming interfaces (APIs) are playing a greater role in this, as seen in Chapter 3, but there are also now mechanisms that allow administrations to access the data directly in the taxpayer natural systems.

As part of pay-as-you-earn (PAYE) systems tax administrations have received data directly from employer business systems since many years. As Table 4.2. highlights, for around 80% of administrations this is now also the case for other data beyond PAYE. Of those that receive such data, 93% of administrations indicated that some data can be uploaded manually onto the administration’s systems, and for 77% some data can be sent to the administration automatically from machine-to-machine without human involvement.

Additionally, 89% of administrations reporting receiving data directly from third parties. Again, nearly all administrations reported that some of this data can be uploaded manually onto the administration’s systems via dedicated interfaces, and for 79% some data can be sent to the administration automatically from machine-to-machine.

Finally, a small number of administrations (15%) indicated that they can routinely access data stored in taxpayer natural systems, underlining the importance of trust between taxpayers and the tax administration.

Table 4.2. Receiving data from taxpayer business systems and third parties, 2024

Percent of administrations that have the respective process in place

Administration receives data directly from taxpayer business systems (beyond PAYE systems)	If yes, …		Administration receives data directly from third parties	If yes, …		Administration’s IT system can routinely access data stored in taxpayer natural systems
	Some data can be sent to the administration automatically from machine-to-machine without human involvement	Some data can be uploaded manually onto the administration’s systems via dedicated interfaces		Some data can be sent to the administration automatically from machine-to-machine without human involvement	Some data can be uploaded manually onto the administration’s systems via dedicated interfaces
81.5	77.3	93.2	88.9	79.2	95.8	14.8

Source: (OECD et al., 2024[2]), 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 OECD report Tax Administration 3.0 and Connecting with Natural Systems: Initial Findings (OECD, 2022[3]) examines the issues and challenges related to moving towards connected data systems, and explores the issues that stem from managing the availability, quality and accuracy of data that is drawn remotely from taxpayers’ natural systems.

Use of data for return prefilling

One of the most significant evolutions in the tax return process in recent years has been the development of prefilled tax returns reducing compliance burdens and costs for taxpayers. The prefilled approach entails administrations ‘prepopulating’ the taxpayer’s return with information from third parties. This can then be reviewed by the taxpayer and either filed electronically or in paper format. What started in relation to personal income tax (PIT) returns has now, thanks to the availability of technology solutions such as electronic invoicing systems,1 also become available for other taxes, such as value-added tax (VAT) and corporate income tax (CIT).

Prefilled returns are particularly common for PIT, as shown in Table 4.3., where 85% of administrations prefill PIT returns with the data that they have collected. Of those that do, 75% indicated that they are able to prefill PIT returns with all necessary data so that taxpayers do not need to make any changes.

With more data being available, close to 40% of tax administrations reported being able to prefill VAT returns and around 25% reported being able to prefill CIT returns. Around 30% of those are in a position to provide VAT and CIT taxpayers with returns that are totally prefilled with no need for taxpayers to make changes.

The OECD Tax Administration publications, such as the 2024 edition (OECD, 2024[4]), contain more detailed information on this topic, including a large number of examples of prefilling developments in jurisdictions.

Table 4.3. Prefilling tax returns by tax type, 2024

Percent of administrations that have the respective process in place

Prefilling approach		Personal income tax	Corporate income tax	Value added tax
Administration automatically prefills tax returns with data that it has collected		84.6	25.9	38.0
If yes, …	Returns are automatically prefilled with income information (For VAT: with information on sales transactions and output VAT)	97.7	78.6	89.5
	Returns are automatically prefilled with expense/allowance information (For VAT: with information on purchase transactions and input VAT)	77.3	71.4	89.5
	For certain taxpayers, the administration prefills tax returns with all necessary data so that they do not need to change the return	75.0	28.6	31.6

Source: (OECD et al., 2024[2]), 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).

To enable the prefilling of information, some jurisdictions are simplifying their tax rules. Table 4.4. shows that 46% of jurisdictions currently do this, with a variation of approaches taken to simplify the rules. For example, over half have simplified or reduced the number of taxable deductions/allowances, and 47% have created special tax regimes with simplified rules for calculating income.

Table 4.4. Simplified tax rules to allow for the prefilling of returns with all necessary data, 2024

Percent of jurisdictions that have taken the respective approach

Jurisdiction simplified tax rules to allow for the prefilling of returns with all necessary data	Approach taken to simplify the tax rule
	Simplification or reduction of number of taxable deductions / allowances	Creation of special tax regimes with simplified rules for calculating income	Other approaches
45.5	53.3	46.7	53.3

Source: (OECD et al., 2024[2]), 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 extent to which a return can be prefilled is generally determined by the range of electronic data available to the administration, which comes from a variety of third-party data providers. Table 4.5. highlights that other government entities are the most common source of data (80%), closely followed by banks and insurance companies (76%).

Table 4.5. Providers of data used to prefill tax returns, 2024

Percent of administrations that receive the respective data

Online marketplaces (incl. sharing and gig economy)	Other online platforms, e.g. stock trading, currencies (incl. crypto)	Taxpayer accounting systems	E-invoicing systems	Online cash registers	Other government entities	Private entities such as banks and insurance companies	Other jurisdictions (beyond data received under CRS, FATCA and DAC)
42.2	40.0	48.9	37.8	24.4	80.0	75.6	31.1

Source: (OECD et al., 2024[2]), 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).

Data sharing

Data sharing internally, within government, and with third parties is an important aspect of digital transformation, reducing burdens on taxpayers and citizens and allowing both taxation processes and other government processes to become more seamless over time.

Many governments are moving towards implementing the once-only principle, meaning that stakeholders supply data only once to one public administration body from where it can then be shared among other government agencies and reused for multiple purposes. Tax administrations have a crucial role to play within government in this regard, as they tend to hold up-to-date information on identity and accounts, are involved in payments, and have mechanisms in place to exchange significant amounts of information with third parties.

Data sharing internally and within government

For many tax administrations the ‘collect once, use many times’ approach starts internally with close to 90% of them having an enterprise data management system that allows taxpayer information to be viewed across the administration. Table 4.6. also shows that nearly all administrations share bulk information with other government agencies (or even provide them with direct access to information), and receive bulk information from other government agencies or have direct access.

Moving away from data silos both within and across government agencies will significantly reduce burdens and will enable taxation processes and other government procedures to become more seamless for citizens and businesses.

Table 4.6. Data sharing internally and within government, 2024

Percent of administrations that have the respective process in place

Enterprise data management system that allows taxpayer information to be viewed across the administration exists	Sharing data with other parts of government
	Administration shares bulk information with other government agencies or provides them with direct access to information	Administration receives bulk information from other government agencies or has direct access to information other government agencies hold
88.9	96.3	96.3

Source: (OECD et al., 2024[2]), 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).

Beyond information sharing among public agencies, three quarters of jurisdictions have started developing common cross government databases (see Table 4.7.). This simplifies data access and ensures that public agencies have up-to-date information, with citizens and businesses only needing to provide the data once. As can be seen in Table 4.7., the most common databases are population register, property register, business register and motor vehicle register.

Table 4.7. Common cross government databases, 2024

Percent of jurisdictions that have the respective process in place

Common cross government databases exist	If yes, types of databases
	Population register	Property register	Business register	Motor vehicle register	Other
75.9	82.9	80.5	85.4	75.6	46.3

Source: (OECD et al., 2024[2]), 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).

Data sharing with non-government third parties

In addition to sharing data within government, administrations are also increasingly sharing individual taxpayer data with non-government third parties, for example, to improve the collection of withholding taxes. As set out in Table 4.8., nearly half of the administrations share data with tax intermediaries, and close to 40% share information with financial institutions. The table also shows that it varies on the third-party type as to whether this data sharing is done automatically, or if data sharing is initiated by the taxpayer.

Table 4.8. Data sharing with non-government third parties, 2024

Percent of administrations that have the respective process in place

Third-party type	Individual taxpayer data shared	If yes, …
		Data sharing is done automatically	Data sharing is initiated by the taxpayer
Employers	29.6	81.3	56.3
Withholding agents	29.6	68.8	31.3
Tax intermediaries	48.1	34.6	76.9
Financial institutions	38.9	71.4	61.9
Other third parties	22.2	75.0	41.7

Source: (OECD et al., 2024[2]), 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).

With tax administrations holding vast amounts of structured data, it is no surprise that certain stakeholders have an interest to access such information for analytical purposes, such as for research and statistical projects. To protect taxpayer privacy and confidentiality such data is anonymised.

As illustrated in Table 4.9., around two thirds of administrations share anonymised taxpayer data on a confidential basis with third parties for analytical purposes. In terms of the type of third party that this data is shared with, statistics offices are the most common at 86%, while 60% share with academic/research institutions. In addition, 29% of administrations share with the central/national bank, and 26% share with international organisations.

Table 4.9. Data sharing with third parties for analytical purposes, 2024

Percent of administrations that have the respective process in place

Anonymised taxpayer data shared on a confidential basis with third parties for analytical purposes	If yes, types of third parties that received anonymised taxpayer data
	Statistics office(s)	Central / national bank	International organisations	Academic / research institutions	Other
64.8	85.7	28.6	25.7	60.0	31.4

Source: (OECD et al., 2024[2]), 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).

Data analytics

Data analytics has become an essential and integrated part of tax administration, supporting both operational functions and the discovery of new opportunities for enhanced efficiency and effectiveness in helping the administration to fulfil its objectives. It can help detect and prevent tax fraud by identifying patterns or anomalies in taxpayer behaviour and, as can be seen in Table 4.10., slightly more than half of the administrations use the analytics function to do those things in real-time.

Table 4.10. Data analytics: Selected features, 2024

Percent of administrations that have the respective process in place

Big data capabilities with the necessary people, skills and infrastructure exist	An enterprise-wide Business Intelligence and Visualisation tool is used	Analytics used for real-time tax fraud detection and prevention
85.2	88.9	51.9

Source: (OECD et al., 2024[2]), 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).

With vast amounts of structured and unstructured information in the hands of tax administrations, an important element for success is the availability of the necessary capabilities. Around 85% of administrations indicated that they have the required people, skills and infrastructure to analyse big data (see Table 4.10.).

Having such capabilities at their disposal, tax administrations that use big data for analytical purposes reported using it, for example, to improve compliance (89%), identify trends (79%) and forecast revenue (64%). Around 70% of tax administrations also indicated using artificial intelligence as part of this analysis. (See Table 4.11.)

Table 4.11. Use of big data for analytical purposes, 2024

Percent of administrations that have the respective process in place

Big data used for analytical purposes	If yes, …
	Big data use cases						Artificial intelligence / machine learning used as part of the big data analysis
	Improve compliance	Identify trends	Policy forecasting	Revenue forecasting	Provide new services	Other purposes
87.0	89.4	78.7	51.1	63.8	55.3	23.4	72.3

Source: (OECD et al., 2024[2]), 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).

Understanding the importance of the use of analytics, the OECD’s Forum on Tax Administration developed the Analytics Maturity Model (OECD, 2022[5]) to help tax administrations self-assess their current level of maturity in their analytics usage and capability. This provides insight into their current status by identifying areas of weaknesses as well as strengths. As Figure 4.1. shows, it has been completed by over 40 tax administrations, and the results of this are guiding and supporting administrations in their analytics strategies.

Figure 4.1. Analytics Maturity Model self-assessments results

Source: OECD (2022), Analytics Maturity Model, https://www.oecd.org/content/dam/oecd/en/topics/policy-issues/tax-administration/analytics-maturity-model.pdf (accessed on 12 February 2025).

Innovations

Given the increasing importance of the role of data in tax administration and the importance of keeping up with technological advancements, tax administrations are also looking at new and innovative approaches as to how they store, manage and use data.

Table 4.12. illustrates some of those approaches, including the use of network analysis (72%), machine learning (61%), robotic process automation (54%), and cloud storage (52%).

Table 4.12. Innovative approaches used as part of data management activities, 2024

Percent of administrations that have the respective process in place

Cloud storage	Robotic process automation	Machine learning	Network analysis	DataOps approach
51.9	53.7	61.1	72.2	35.2

Source: (OECD et al., 2024[2]), 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).

References

[4] OECD (2024), Tax Administration 2024: Comparative Information on OECD and other Advanced and Emerging Economies, OECD Publishing, Paris, https://doi.org/10.1787/2d5fba9c-en.

[5] OECD (2022), Anaytics Maturity Model, OECD, Paris, https://www.oecd.org/content/dam/oecd/en/topics/policy-issues/tax-administration/analytics-maturity-model.pdf (accessed on 12 February 2025).

[3] OECD (2022), Tax Administration 3.0 and Connecting with Natural Systems: Initial Findings, OECD Publishing, Paris, https://doi.org/10.1787/53b8dade-en.

[6] OECD (2022), Tax Administration 3.0 and Electronic Invoicing: Initial Findings, OECD Publishing, Paris, https://doi.org/10.1787/2ffc88ed-en.

[1] OECD (2020), Tax Administration 3.0: The Digital Transformation of Tax Administration, OECD Publishing, Paris, https://doi.org/10.1787/ca274cc5-en.

[2] 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.  The OECD report Tax Administration 3.0 and Electronic Invoicing: Initial Findings (OECD, 2022[6]) contains information on electronic invoicing systems and some considerations that administrations exploring possible implementation or reform of such systems may wish to take into account.