This chapter examines how tax administrations are addressing the challenges presented by digital transformation, and how technology is changing their operating models.
Tax Administration 2023
Comparative Information on OECD and other Advanced and Emerging Economies
Tax Administration
10. Digital transformation journeys
Abstract
Introduction
Over the past decade, tax administrations have invested resources in the digitalisation of tax administrations. This has seen tax administrations across the world moving away from paper based, or in person based systems to ones that embrace the digital revolution that has happened in wider society.
In parallel, digital services in the wider economy have transformed the way citizens and business complete transactions, or access services. These wider changes bring both challenges and opportunities for tax administrations, and the future of tax administration is transforming their operating models so they can take full advantage of the opportunities widespread digital technology can offer.
This is digital transformation, and it is the vision of Tax Administration 3.0 (OECD, 2020[1]), the landmark report published by the OECD in 2020. It urges tax administrations to think about how their existing processes can be reformed to become truly digital. Without fulfilling this vision, tax administration will not keep pace with the digital transformation of wider society, will find it harder to reduce burdens, create new policy approaches, and reduce compliance gaps. Tax Administration 3.0 is an ambitious vision and achieving it is an evolutionary journey, where progress will be more rapidly in some areas, and more slowly in others. Over time though this combines to form a more fully digitally transformed tax administration.
Tax Administration 3.0 identifies 6 core building blocks in digital transformation. These building blocks will provide benefits in their own right, but it is the fitting together of the building blocks over time that will achieve the more significant benefits of seamless and frictionless tax administration.
This chapter is not intended to make judgements on individual jurisdictions and the progress they are making as each digital transformation journey is unique and depends on the unique circumstances and priorities of each jurisdiction. Instead, it aims to highlight the trends in the digital transformation journeys that are being undertaken by tax administrations, against those 6 building blocks:
Building block 1: Digital Identity
Building block 2: Taxpayer touchpoints
Building block 3: Data management and standards
Building block 4: Tax rule management and application
Building block 5: New skill sets
Building block 6: Governance frameworks
As well as using examples of leading practice to highlight progress, this chapter draws on data from the Inventory of Tax Technology Initiatives (ITTI) (OECD et al., 2023[2]) which contains data on technology tools and digital solutions implemented by tax administrations globally. Going forward as new ITTI data becomes available, progress on these complex journeys can be revisited.
Building block 1: Digital Identity
As tax administrations deliver more and more of their services online, digital security, digital verification and digital identity is becoming the cornerstone of tax administrations’ work. Tax administrations are leveraging their expertise and data sets to not only give taxpayers greater self-service access to tax administration services, but also to third parties and to wider government systems. Common digital identities are critical to these programmes. As Table 10.1 shows below, all administrations now have some sort of digital identity system in place for individuals, and almost all for businesses, laying a good foundation for digital transformation. The growing trend is for these digital identity systems to provide access to services from other parts of government or third parties.
Table 10.1. Use of digital identities, 2022
Percent of administrations that have the respective process in place
Note: The table is based on data from 52 jurisdictions that are covered in this report and that are included in the ITTI database. For the purpose of the ITTI survey, digital identity is defined as 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.
Source: OECD et al. (2023), Inventory of Tax Technology Initiatives, https://www.oecd.org/tax/forum-on-tax-administration/tax-technology-tools-and-digital-solutions/, Tables DI1 and DI2 (accessed on 22 May 2023).
With the digital identity becoming more common place and more useful, Chapter 3 of this report highlights some of the recent work that has been done by tax administrations to add greater security to digital identity systems such as multi factor authentication and biometric information. However, as Table 10.2 shows all administrations use some type of authentication method to verify the digital identity when used online. The type of verification method varies, however, as can be seen in Table 10.2. password-based authentication is used by 87% of administrations, followed by multi-factor authentication and mobile app. A few administrations are also using facial recognition or finger print to authenticate the digital identity of a taxpayer. Half 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 10.2. Digital identity authentication and authorisation, 2022
Percent of administrations that have the respective process in place
Note: The figure is based on data from 52 jurisdictions that are covered in this report and that are included in the ITTI database.
Source: OECD et al. (2023), Inventory of Tax Technology Initiatives, https://www.oecd.org/tax/forum-on-tax-administration/tax-technology-tools-and-digital-solutions/, Tables DI5 and DI6 (accessed on 22 May 2023).
Box 10.1. Thailand: National Digital Identity Project
In Thailand, the National Digital Identity Platform (NDID) aims to provide a flexible and highly secure method of self-identification for any Thai citizen, and will be designed to leverage any reliable identity the user currently holds. By adopting NDID, the Thailand Revenue Department (TRD) expects to deliver a trustworthy and transparent solution which gives new users an adequate level of confidence in the security. In addition, NDID will provide users with safe and secure ways to manage and protect their ID online, including on their mobile devices. NDID can also improve the convenience and effectiveness of both government and private sector services.
In collaboration with the Bank of Thailand, the commercial banks and the National Digital ID Company Limited, TRD is developing a digital identification system via the NDID Platform to facilitate and safeguard online transactions and prevent fraud, starting with a pilot project on Personal Income Tax e-filing. Many taxpayers have logged in via the NDID Platform since 18th March 2021, but the pilot project has also uncovered some challenges, such as a lack of awareness of the opportunities offered by digital ID and the NDID Platform. Following up the results of the pilot, TRD and partner banks continue to encourage enhanced user adoption of the service. Furthermore, the banks will allow for self-identification via bank applications for access to the TRD’s website, enabling user access to further services in the future. Some of the benefits of TRD Digital ID Authentication via the NDID Platform include:
Improved authentication and verification standard
High levels of accuracy
Enhanced security
Lower operational costs
A better customer experience
Integrated government agency services
Source: Thailand (2023).
Building block 2: Taxpayer touchpoints
Embedding services and processes in the natural systems used by taxpayers in their daily lives and businesses is at the heart of the Tax Administration 3.0 vision. While this helps to improve tax compliance, it also reduces administrative burdens and frees up time that owners can use to grow their businesses.
To drive these collaborations and open up new services, Figure 10.1. shows that the vast majority of tax administrations are now creating Application Programming Interfaces (APIs) and that 75% of them are making the APIs available to third party developers. Further, as part of the process of developing APIs, close to 60% of tax administrations are engaging in co-creation with third parties.
The growth of APIs is facilitating connectivity between systems without providing direct access. The example in Box 10.2 highlights how APIs can be used to transform functions across an administration. Table 10.3 highlights the wide range of uses across tax types, which is expected to grow as the digital transformation journey continues, and Table 10.4 highlights how tax administrations are increasingly connected on a machine-to-machine basis with third parties.
Figure 10.1. APIs: Development for third party use and co-creation, 2022
Note: The figure is based on data from 52 jurisdictions that are covered in this report and that are included in the ITTI database.
Source: OECD et al. (2023), Inventory of Tax Technology Initiatives, https://www.oecd.org/tax/forum-on-tax-administration/tax-technology-tools-and-digital-solutions/, Table TT7 (accessed on 22 May 2023).
Box 10.2. China (People’s Republic of): The Natural Systems Project
In 2022, the Natural Systems Project was proposed as an innovation based on "fully digitised e-invoice" and direct connection between tax authorities and enterprises. In line with the concept of "taxpayer touch-points" in the Digital Transformation Maturity Model of the OECD, the State Taxation Administration of China (STA) set up a Natural Systems pilot to explore the practice and effects of seamless taxation administration.
As a result, STA now publishes tax-related business rules and application programme interfaces (APIs), for taxpayers to embed in their own business systems (natural systems), independent of third-party service providers, and tax authorities conduct compliance audit using business data uploaded by taxpayers. In addition, the unified business rules help to reduce gaps in the administration among provincial STA offices, offering greater consistency and certainty to taxpayers.
Taxpayers can now become co-issuer of invoices, whereas previously, STA was the issuer of invoices. In the case of "fully digitised e-invoice", taxpayers can have solely issue invoices in line with the relevant rules.
The Natural Systems Project integrates business, finance and taxation through an invoice data model with "additional elements", and taxpayers can determine those additional invoice elements for themselves. For example, an e-commerce platform can add order and logistics information as additional elements to the invoice data model by itself, so it can meet its own need of enhanced order management.
Source: China (People’s Republic of) (2023).
Table 10.3. Interactions for which administrations have published APIs by tax type, 2022
Percent of administrations that have published the respective APIs
Note: The table is based on data from 52 jurisdictions that are covered in this report and that are included in the ITTI database.
Source: OECD et al. (2023), Inventory of Tax Technology Initiatives, https://www.oecd.org/tax/forum-on-tax-administration/tax-technology-tools-and-digital-solutions/, Tables TT8, TT9 and TT10 (accessed on 22 May 2023).
Table 10.4. Receiving data from taxpayer business systems and third parties, 2022
Percent of administrations that have the respective process in place
Note: The table is based on data from 52 jurisdictions that are covered in this report and that are included in the ITTI database.
Source: OECD et al. (2023), Inventory of Tax Technology Initiatives, https://www.oecd.org/tax/forum-on-tax-administration/tax-technology-tools-and-digital-solutions/, Tables DM1 (accessed on 22 May 2023).
As the services delivered through APIs become more sophisticated, and play a greater role in delivering a quality service to taxpayers, tax administrations are having to invest more in the management and oversight of their APIs. Chapter 5 considers this in more detail, but at the heart of this work is effective collaboration with third parties to ensure that the systems work smoothly, are accurate and secure and continue to deliver for taxpayers.
Furthermore, as the data received from tax administrations is just part of the wider flow of data within the ecosystem that Tax Administration 3.0 envisages, underpinning the digital transformation journey is the utilisation of data sciences techniques and use analytical tools, and this is explored in more detail later in this report. However, it is worth highlighting that tax administrations now routinely:
Use of large and integrated data sets. Manipulating and managing data is now a core part of a tax administration’s functions, with the use of analytics tools and techniques being incorporated into all areas of tax administrations. Around 90% of tax administrations report using data science and analytical tools, and this is facilitating the use of data in all aspects of an administration’s work.
Use of artificial intelligence and machine learning. As tax administrations become more comfortable with managing large data sets and computing power increases, the use of artificial intelligence and machine learning is opening up new approaches in risk management. Figure 10.3 (see the section on building block 4) highlights that around 50% of tax administrations report that they are already using artificial intelligence in their compliance risk assessment work.
This sophisticated use of data from an increasingly connected system is allowing the development of new platforms and services that can bring significant changes to the operating models of a tax administration as illustrated in Box 10.3.
Box 10.3. Singapore: Digital transformation of IRAS' core tax administration system
The Inland Revenue Interactive Network (IRIN) is the Inland Revenue Authority of Singapore’s (IRAS) core tax administration ICT system. IRIN provides taxpayers with access to eServices via MyTaxPortal which caters to all individuals and business, allowing taxpayers to make payments, electronically file their taxes and manage their account. IRIN also facilitates core processing, enforcement and analytics capabilities for IRAS officers.
In line with IRAS’ digital transformation plan to redefine tax officers’ and taxpayers’ experience, the refresh of the core tax administration system, via the implementation of IRIN 3, was identified as a key technology enabler for IRAS’s business transformation.
IRIN 3 is a multi-year programme that has been designed and planned for implementation over 3 Phases. Phase 1 has seen the implementation of a Document Management System and Digital Notice Platform. Phase 2 has introduced the foundation of IRIN 3 with the implementation of microservices architecture on Government Commercial Cloud for Stamp Duty. Phase 3 will progressively extend the implementation across Individual Income Tax, Property Tax, Corporate Tax, Goods and Services Tax, and all other tax types.
With IRIN 3 Phase 2, IRAS revamped its Integrated Stamp Duty System and migrated it to cloud for better scalability and availability of commercial capabilities, building on microservice architecture to enable agility and speed to market. Taxpayers can now manage Stamp Duty matters anytime, anywhere with a mobile-friendly portal. e-Stamping is now made simple with quick overview access to statuses of documents, records and digital services. The system has also been enhanced to enable payment of multiple records at once. Since the launch of the IRIN 3 Phase 2 up till Feb 2023, more than 120 000 stamp certificates have been generated.
Source: Singapore (2023).
Building block 3 Data management and standards
As this use of data grows, information confidentiality and security is even more essential to the relationship between tax administrations and taxpayers. It also underpins the exchange of information in tax matters between governments, as in a system where sensitive data is moving on an automatic basis, and in real time, all parties need to be confident in the frameworks that ensure data is managed correctly, securely and to the relevant standards.
These frameworks are also essential for defining how the administration manages data most effectively to maximise compliance and minimise burdens. In particular, this concerns the choices around where data is processed for different tax functions (within the administration, within the taxpayers’ natural systems or both), and the requirements for quality, availability and reporting of tax relevant data as well as metadata on the operation of taxpayers’ systems. As Box 10.4 highlights these changes can require structural shifts in the way a tax administration manages its IT systems, but doing so creates a solid foundation for new digital projects and services.
Box 10.4. China (People’s Republic of): Improved management of IT systems
With the wider development of "digital China", the digital transformation of tax administration has been growing. To support this, the State Taxation Administration of China (STA) built a platform for the management and control of its whole IT systems, managing all the components in the systems including software, hardware and data. There are four building blocks, namely software, hardware, data and internal control. In the software part, each of the thousands of pieces of software in the system is given a unique ID. In the hardware part, all the equipment and assets are registered and matched with relevant software. In the data part, trillions of data entries are recorded and a so-called data dictionary is compiled. In the internal control part, rules and regulations are put in place to supervise the interaction among systems, tax officials, suppliers and other stakeholders.
This uses the following technological approaches.
Artificial intelligence, including natural language processing is utilised for comparison and de-duplication analysis
Rules and regulations are integrated into the business process in the platform with full automatic flow, operation marks and task reminders, which significantly improves the quality and efficiency of information management. For example, with the launch of "data dictionary", means tasks can be completed in hours from 2 days previously.
The classification and gathering, of analysis and the visual presentation of key information are realised in the platform laying a solid foundation for evidence based decision-making. In asset management and control, resource gaps and redundancies can be discovered via association and matching of hardware and software.
Source: China (People’s Republic of) (2023).
Table 10.5. Data governance, 2022
Percent of administrations that have the respective process in place
Note: The table is based on data from 52 jurisdictions that are covered in this report and that are included in the ITTI database.
Source: OECD et al. (2023), Inventory of Tax Technology Initiatives, https://www.oecd.org/tax/forum-on-tax-administration/tax-technology-tools-and-digital-solutions/, Table DM4 (accessed on 22 May 2023).
As Table 10.5 illustrates, the implementation of mechanisms to protect and manage data is now commonplace across administrations, and is a critical function of tax administrations. These support wider data governance processes, and in turn help maintain the taxpayer trust in the system as well as meet legal obligations. It is worth noting that as data systems become more connected, so the importance of cyber security is growing, and Box 10.5 shows some of the latest practices from tax administrations in this space.
Box 10.5. Examples: New cybersecurity strategies
Australia
The Australian Taxation Office (ATO) remains committed to improving its cyber security resilience by investing in new technologies and initiatives through the Cyber Security Program. The ATO Cyber Program focuses on modernising and maturing cyber security capabilities and applying sufficient mitigations to the overall cyber risk profile to ensure confidentiality, integrity, and availability of ATO systems. The Program is in the process of deploying new technologies that uplift the ATOs cyber capabilities including:
Recording of endpoint activities across the ATO, providing a view of threats and alerts in real time and intelligence of trending activities across the digital ecosystem.
Ability to scan all IT assets for vulnerabilities providing regular reporting to application and infrastructure support teams and partners of exposures including out of support software.
Deployment of an enterprise solution to centrally manage privileged accounts and access across the ATO’s environment.
Strengthening network security by segmenting the flow of traffic.
Implementing initiatives to protect against malicious code by only allowing approved interactions to execute on ATO applications.
The ATO employs a ‘defence in depth’ approach to mitigate cyber security incidents by utilising security technologies layered across the ecosystem. In 2022 the ATO migrated to a contemporary Secure Internet Gateway (SIG) capability protecting the ATO’s perimeter.
The ATO is also involved in carrier level SMS blocking, and regular international intelligence sharing to discuss tax impersonation scam observations, emerging methodologies, awareness, and scam disruption and prevention on a global scale.
Hungary
The 24/7 security operation centre (SOC) is essential for the Hungarian National Tax and Customs Administration (NTCA) because it provides an opportunity not only to implement IT security-oriented system supervision in addition, but also it makes it possible to detect and prevent new, previously unknown or unrecognised attacks as well. Through SOC the NTCA is able to detect incidents as soon as possible and provide an immediate solution to them.
This increases the administration’s resilience to cyber threats. and performs significant preventive work. The core pillar of this work is the interconnection of automated cyber-threat detection, vulnerabilities detection systems and traditional border protection systems in the NTCA. With these, the firewall rules are modified, clarified and filtered without human intervention using threat indicators from the vulnerability detection tool.
Security awareness plays a strategic role in the life of the NTCA but security can only be maintained if the employees are aware of it. Despite continuous IT security improvements, the user is still the weakest link in the chain, so users should not be left out when designing and implementing systems protection solutions.
Social engineering techniques and the increasingly sophisticated forms of psychological manipulation pose a significant threat to NTCA, therefore more and more attention needs to be paid to the security awareness training of users. To this end, the IT security department of the NTCA conducts regular training, safety awareness assessment and evaluation. Theoretical and practical tests are also included in the assessments, which are already showing a continuous improvement.
See Annex 10.A. for supporting material.
Mexico
The Mexican Tax Administration Service (SAT) adopts a layered security approach that enhances protection against and detection of advanced threats. One of these measures involves the automated analysis of emails to identify ransomware threats and command and control codes embedded within downloaded files. For instance, if an attack commences with an email containing a zero-day ransomware threat, which is specifically designed to bypass traditional security techniques, the SAT's security approach promptly sends the attached file to a controlled sandbox environment.
Within this environment, the file's behaviour undergoes analysis, enabling the identification of the attack's nature. In real-time, a response is generated with a flagged identification of the file, leading to automatic blocking should it be encountered elsewhere in the future. This proactive approach significantly strengthens the Administration's ability to mitigate potential threats and swiftly neutralise them.
Sources: Australia (2023, Hungary (2023) and Mexico (2023).
As Figure 10.2 highlights data management is now evolving towards a “collect once, use many times” across government approach which is part of the Tax Administration 3.0 vision. Tax administrations (together with social security agencies) have a special place within government in this respect since they will often hold up-to-date verified information on identity, will be involved in both receiving and making payments and will receive and send information to third parties (such as financial institutions and employers). This adds a further dimension to the data management and governance given multiple agencies may be involved.
Figure 10.2. Data sharing with other parts of the government, 2022
Note: The figure is based on data from 52 jurisdictions that are covered in this report and that are included in the ITTI database.
Source: OECD et al. (2023), Inventory of Tax Technology Initiatives, https://www.oecd.org/tax/forum-on-tax-administration/tax-technology-tools-and-digital-solutions/, Table DM3 (accessed on 22 May 2023).
Building block 4: Tax rule management and application
In the Tax Administration 3.0 vision, instead of rules being contained within the tax administration system, and instructions issued to taxpayers through guidance on how to comply through forms, the technical rules and information needed for elements of tax processing are provided so that they can take place within taxpayers’ natural systems. This could be, for example automatic registration and deregistration of the taxpayer at specified points, the incorporation of tax law rules and computations into accounting software or the use of applications to withhold tax or to automatically send information to the administration.
To start on this process Tax administration 3.0 sets out how administrations may wish to consider:
Implementing systems-independent tax rule specification for integration into taxpayers’ own business management systems (for example, in regards to digital identification, e-invoicing and reporting or withholding by digital platforms).
Piloting the development of tax rule specification, in co-operation with developers, alongside the development of new tax legislation.
Piloting the implementation of artificial intelligence in tax administration advisory and assessment processes aimed at minimising tax uncertainty
This is a challenging undertaking. However, there are areas of progress, for example, the Netherlands Tax Administration has been working on a new method of software development, that makes certain elements of law machine readable, and this is also tracked so that when the law changes, the update can be made quickly and easily. These rules are opening up possibilities for automated decision making.
Table 10.6. Software packages: (Co-)creation, assurance frameworks, and approved products, 2022
Percent of administrations that have the respective process in place
Note: The table is based on data from 52 jurisdictions that are covered in this report and that are included in the ITTI database.
Source: OECD et al. (2023), Inventory of Tax Technology Initiatives, https://www.oecd.org/tax/forum-on-tax-administration/tax-technology-tools-and-digital-solutions/, Tables TT7 and TRM2 (accessed on 22 May 2023).
Tax administrations have however been making significant progress on artificial intelligence. As Figure 10.3 highlights, around 50% of administrations are using it for risk assessment and also fraud detection. These services are opening up opportunities for innovative approaches, such as filing through completing a questionnaire or helping to automate taxpayer enquiries. This is making chatbots, which have been a feature of previous editions of this series ‘smart’. See Chapter 5 of this report for more detail.
Figure 10.3. Use of artificial intelligence, 2022
Note: The figure is based on data from 52 jurisdictions that are covered in this report and that are included in the ITTI database.
Source: OECD et al. (2023), Inventory of Tax Technology Initiatives, https://www.oecd.org/tax/forum-on-tax-administration/tax-technology-tools-and-digital-solutions/, Table TRM3 (accessed on 22 May 2023).
It is expected that the use of artificial intelligence will be a growing feature of this series. However, as the example in Box 10.6 highlights, the use of this technology also brings governance questions which need to be considered.
Box 10.6. Canada: Embedding artificial intelligence into a tax projects
To support its experimentation with and responsible deployment of artificial intelligence (AI) solutions, the Canada Revenue Agency (CRA) continues to strengthen AI governance and oversight. As part of the governance suite, the CRA put in place the Directive on Artificial Intelligence in January 2021.
This Directive sets out the roles and responsibilities within the CRA and is supported by the mandatory use of the Algorithmic Impact and Alignment Assessment (AIAA) Tool. The AIAA has a three-fold purpose. The AIAA is open by design, it serves as a central repository of AI projects at the CRA that all users can view to enhance horizontality. To assess alignment and to potentially focus our resources, the AIAA categorises AI projects based on CRA’s core business priorities.
Finally, the AIAA tool evaluates and calculates an associated risk score to AI projects in the development and production phases, including mitigations and ethical considerations. Through the metric collected, the AIAA allows for the CRA to report on what is happening where. As AI governance continues to mature and respond to the rapidly evolving AI context, so will the AIAA tool evolve to support informed oversight and promote transparency.
Source: OECD (2021), Tax Administration 2021: Comparative Information on OECD and other Advanced and Emerging Economies, https://doi.org/10.1787/cef472b9-en.
Building block 5: New skill sets
Digital transformation brings a fundamental shift to the operating models of tax administration, which means that not only will new staff need to be hired, but the skills of existing staff may need to be developed. HR management, and change processes are a core building block of Tax Administration 3.0. Figures 10.4. and 10.5. highlight how tax administrations are preparing the ground for digital transformation by mapping the skills needed for digital transformation, and investing in staff training to build capability.
Figure 10.4. Skills for digital transformation: Identification and mapping, 2022
Note: The figure is based on data from 52 jurisdictions that are covered in this report and that are included in the ITTI database.
Source: OECD et al. (2023), Inventory of Tax Technology Initiatives, https://www.oecd.org/tax/forum-on-tax-administration/tax-technology-tools-and-digital-solutions/, Table SG3 (accessed on 22 May 2023).
As highlighted earlier in this chapter, the digital transformation of tax administrations has wider impacts across the ecosystem. It is for this reason that many tax administrations have invested in the collaborative development of skills as shown in Figure 10.5., reflective of the wide impacts that digital transformation brings, and the need for shared approaches.
Figure 10.5. Skills for digital transformation: Collaboration with government organisations or external partners, 2022
Note: The figure shows information for those administrations that have identified the future skills needed for a successful digital transformation either for the whole administrations or for parts of it (see Figure 10.4.). It is based on data from 52 jurisdictions that are covered in this report and that are included in the ITTI database.
Source: OECD et al. (2022), Inventory of Tax Technology Initiatives, https://www.oecd.org/tax/forum-on-tax-administration/tax-technology-tools-and-digital-solutions/, Table SG3 (accessed on 22 May 2023).
Digital culture
In addition to the skills required to deliver digital transformation, tax administrations are also having to consider the mindset shifts that it requires. This ensures the digital needs of taxpayers and other stakeholders are understood and embraced by staff; new services are demand driven, innovative, and created considering potential cross-functional synergies; and projects are managed in an agile fashion. As Table 10.7. highlights, this is an area of work becoming common in tax administrations.
Table 10.7. Digital culture, communication and engagement, 2022
Percent of administrations that have the respective process in place
Note: The table is based on data from 52 jurisdictions that are covered in this report and that are included in the ITTI database.
Source: OECD et al. (2023), Inventory of Tax Technology Initiatives, https://www.oecd.org/tax/forum-on-tax-administration/tax-technology-tools-and-digital-solutions/, Tables SG4 (accessed on 22 May 2023).
Delivering this mindset shift is no small undertaking, and in parallel, one of the challenges of remote or hybrid working arrangements is maintaining staff training and organisational culture. As a result of all these factors, tax administrations have been reconsidering their approaches to delivering general training. Tax administrations report moving their training programmes into a virtual environment, using live online training sessions or pre-recorded videos/webinars.
While moving to a virtual training environment may have some up-front costs, it may save costs in the longer term as once produced, pre-recorded training material can be viewed at any time, from anywhere. Remote training can reduce travel expenses and can allow staff to learn at their own pace and convenience as well as increasing the number of staff members that can follow a course. New technologies are also helping facilitate the collaborative learning aspects, increasing the quality of the training experience.
Building block 6: Governance frameworks
Digital transformation has seen tax administrations throughout the world adopt new digital transformation strategies that address the fundamental shifts in operating models that it requires. There is no one size fits all approach to this work, and to support it the Forum on Tax Administration has created a Digital Transformation Maturity Model, which allows self-assessment by tax administrations of the current level of maturity and to facilitate consideration of future strategy, depending on a tax administration's unique circumstances and priorities. (OECD, 2022[3])
As Figure 10.6. shows, the model has been completed by over 50 tax administrations, and the results of this are guiding and supporting those jurisdiction strategies.
Figure 10.6. Digital Transformation Maturity Model self-assessment results
Source: OECD (2022), Digital Transformation Maturity Model, www.oecd.org/tax/forum-on-tax-administration/publications-and-products/digital-transformation-maturity-model.htm (accessed on 22 May 2023).
As highlighted earlier, the strategy that guides digital transformation is a key building block and Figure 10.7. highlights that already around 75% of administrations have a digital transformation strategy in place. Tax administrations report that these strategies are driving their services to become ‘smarter’, allowing taxpayers to complete increasingly complex tasks digitally, more efficiently and 24/7. This is also helping to bring important improvements in taxpayer compliance.
Figure 10.7. Existence of a strategy for digital transformation in tax administrations, 2022
Note: The figure is based on data from 52 jurisdictions that are covered in this report and that are included in the ITTI database.
Source: (OECD et al. (2023), Inventory of Tax Technology Initiatives, https://www.oecd.org/tax/forum-on-tax-administration/tax-technology-tools-and-digital-solutions/, Table SG1 (accessed on 22 May 2023).
Central to the Tax Administration 3.0 vision is collaboration and co-creation. This is because as tax systems and processes become embedded in the wider ecosystems of taxpayers, it is therefore essential for an effective strategy that stakeholders have a role in the development of any digital transformation strategy. As a result, and as Figure 10.8. and the example in Box 10.7. highlight, this collaboration is becoming a common feature of strategies.
Box 10.7. Finland: Citizen involvement in digital strategies
The Finnish Tax Administration has included citizen feedback as part of the process of digitising its internal processes and pursuing data-driven management. Non-technical officials have used a no code / low code platform to create a fully-fledged app for processing stakeholders' formal complaints that may arise in case of alleged inadequate or unlawful procedures or misconduct/negligence of duty by the tax officials. The app takes each complaint through all the steps along the case workflow across all parties concerned.
The app is connected to the Tax Administration's comprehensive digital data room which gathers a wide array of information and indicators on the organisational performance. The data room reporting shows the statuses, subject areas, evaluations and other attributes of the complaints in real-time, thus feeding evidence-based continuous improvement. The creation of the app showcases the potential of internal crowdsourcing within the Tax Administration to speed up digitalisation in a flexible and agile way.
Source: Finland (2023).
Figure 10.8. Digital transformation strategy: Stakeholder involvement, use of data analysis and monitoring, 2022
Note: The figure is based on data from 52 jurisdictions that are covered in this report and that are included in the ITTI database.
Source: OECD et al. (2023), Inventory of Tax Technology Initiatives, https://www.oecd.org/tax/forum-on-tax-administration/tax-technology-tools-and-digital-solutions/, Table SG1 (accessed on 22 May 2023).
These stakeholder insights can help provide the qualitative feedback that can complement the data analytics that some tax administrations are using to support their strategy development (see Figure 10.8.) Box 10.8. illustrates how this is done in practice.
Box 10.8. Digital transformation strategies
Australia
In August 2022 the Australian Taxation Office (ATO) delivered its refreshed Digital Strategy (2023-2025) which outlines critical next steps in the digital transformation journey of the ATO. The ATO vision is to become a leading digital business shaping trusted and effective digital services and ecosystems. The strategy is based on the concept of ‘digitalisation rather than digitisation’ and provides the opportunity to reflect on ATO’s progress, seek ways to maximise the investment in existing technologies and identifies critical priorities over the next three years.
Framed by four pillars and underpinned by five principles, the strategy aims to continue the digitalisation of processes and services to improve the client and staff experience, drive improved tax performance and reduce administration costs. The refresh was initiated in response to the rapidly evolving digital landscape, increased demand for quality digital experiences and services from government, and the need to adapt quickly and effectively to changing environments.
While the ATO is considered globally as a digitally mature organisation, it recognised the need to develop a consistent approach across the organisation to build on the existing robust foundations and prioritise the right initiatives towards Tax Administration 3.0.
To achieve this, extensive stakeholder consultation was undertaken (internally and externally) throughout the development of the strategy. This included:
Establishing a reference group made up of key senior executives in the ATO to shape the strategy;
Holding focus groups with technical experts, project officers and other staff to gather insights and feedback;
Engaging key ATO business areas, technical teams and segment owners to ensure alignment and inclusion of respective priorities and aspirations; and
Engaging external forums (for example, Digital Software Providers working group) to test the ATO approach and direction.
Proactively engaging and involving stakeholders early in the development process allowed the ATO to strike a balance between setting shorter term, practical targets and building up the foundations required to achieve ATO’s future aspirations.
Canada
The Strategic Planning Framework (Framework) was developed to guide decision-making and investments as the CRA pursues its vision of being a world-class tax and benefits administration that is trusted, fair and helpful by putting people first.
The Framework links the strategic priorities and guiding principles to the CRA’s mission, vision, values, and ultimate outcomes. The strategic priorities state what the CRA will do over the near, medium and longer-term planning horizons to better realize its ultimate outcomes, and the guiding principles articulate how it will do it.
Over the planning horizons, the CRA will prioritize delivering a seamless client experience that is digital first; combatting aggressive tax planning and evasion; strengthening security and privacy; and nurturing a high performing diverse workforce. In delivering these priorities, the CRA is committed to applying a user-centric lens to its programs and services; leveraging an enterprise and data-driven approach and promoting effective collaboration with existing and new partners.
Annually, the CRA deliberately takes stock of drivers of change in its external environment, Government of Canada priorities, and in its performance, including in the comparative context of the International Survey on Revenue Administration (ISORA) data, to determine its planning objectives according to this framework over multiple planning horizons.
Leveraging the stock take to inform how the CRA advances both the priorities and applies the guiding principles ensures synergies in what it is doing today and what it needs to do tomorrow to achieve its vision.
See Annex 10.A. for supporting material.
Sources: Australia (2023) and Canada (2023).
The implementation of digital transformation strategies is very resource intensive both from a personnel and financial perspective. Given that it is a multi-year process it requires a solid funding structure, which is ideally ring-fenced, so it is guaranteed that the tax administration can plan and support the transitioning from start to end. Without this certainty of funding, an already difficult process can be made even harder not only for the tax administration but also for taxpayers. As Figure 10.9. highlights, in this respect, only about half of the tax administration have ring-fenced funding to support the transitioning to a digital tax administration.
Figure 10.9. Digital transformation governance, 2022
Note: The figure is based on data from 52 jurisdictions that are covered in this report and that are included in the ITTI database.
Source: OECD et al. (2022), Inventory of Tax Technology Initiatives, https://www.oecd.org/tax/forum-on-tax-administration/tax-technology-tools-and-digital-solutions/, Table SG2 (accessed on 22 May 2023).
References
[3] OECD (2022), Digital Transformation Maturity Model, OECD, Paris, https://www.oecd.org/tax/forum-on-tax-administration/publications-and-products/digital-transformation-maturity-model.htm (accessed on 22 May 2023).
[4] OECD (2021), Tax Administration 2021: Comparative Information on OECD and other Advanced and Emerging Economies, OECD Publishing, Paris, https://doi.org/10.1787/cef472b9-en.
[1] OECD (2020), Tax Administration 3.0: The Digital Transformation of Tax Administration, OECD, Paris, https://www.oecd.org/tax/forum-on-tax-administration/publications-and-products/tax-administration-3-0-the-digital-transformation-of-tax-administration.htm (accessed on 22 May 2023).
[2] OECD et al. (2023), Inventory of Tax Technology Initiatives, https://www.oecd.org/tax/forum-on-tax-administration/tax-technology-tools-and-digital-solutions/ (accessed on 22 May 2023).
Annex 10.A. Links to supporting material (accessed on 26 May 2023)
Box 10.5. – Hungary: Link to a video with more detail on the security operation centre of the NTCA: https://youtu.be/-qULPb7267U
Box 10.8. – Canada: Link to an overview slide on the CRA’s Strategic Planning Framework: https://www.oecd.org/tax/forum-on-tax-administration/database/b.10.8-canada-strategic-planning-framework.pdf