Problem Driven Digitalization of Tax Administration

Over the past decade there has been a rapid acceleration of efforts to digitize tax administration in lower income countries. A large body of research has developed in order to assess the impact of those efforts. On one hand, research makes clear that digitalization has achieved significant successes and help to support significant improvements in outcomes. On the other hand, it is equally clear that digitalization programs have almost universally fallen short of their objectives, sometimes significantly so. This paper explores possible explanations for the underperformance efforts, and possible strategies to support improved outcomes. Specifically, the paper argues that the underperformance of digitalization efforts can often be tracked, alongside technical challenges, to a combination of (a) administrative resistance, (b) political resistance and (c) the absence of holistic reform strategies, and clear reform targets, in which digitalization reforms are embedded. In response, it proposes the potential benefits of a more “problem driven approach to digitalization”. Such an approach entails identifying clear expected reform outcomes, conducting detailed diagnostic assessment of the technical and non-technical barriers to achievement of key reform goals, and then developing holistic reform strategies of which new technologies are only one part. The potential benefits of such an approach with reference to evidence from studies of data sharing across government, and of reforming IT systems for property tax administration.

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