4 minute read

By Oliver Petzold (Oliver.PETZOLD@oecd.org), Paul Marsh (Paul.MARSH@oecd.org) and Peter Green (Peter.GREEN@oecd.org), Centre for Tax Policy and Administration (OECD)

It’s easy to imagine tax administrations as big administrative beasts, slow to adapt to the challenges of an increasingly digital world, like cumbersome ocean liners requiring space and time to adjust their heading.

But the reality for a modern tax administration is very different. We saw this front and centre during the COVID-19 pandemic, with tax administrations delivering rapid and complex citizen support policies on an unprecedented scale. Less visible is the pace of digitalisation in tax administrations, which has only accelerated following the pandemic. We are seeing fundamental changes, integrating digital more and more into their core operating models and implementing world-leading practices. The results are lasting benefits for tax administrations and, ultimately, taxpayers.

These are the types of practices and changes showcased in the OECD’s Tax Administration 2023. With 10 chapters, 135 data tables and more than 100 country examples, Tax Administration 2023 provides real insight into the operations of a key government agency and the direction of travel.

From digitalisation to digital transformation

For many years, tax administrations have worked hard to improve the tax compliance of citizens and businesses to meet their primary objective of raising revenue to fund public services. This has frequently been driven by the increased use of technology to digitalise existing processes and make it easier and less costly for taxpayers to comply. For example, tax administrations were rapid adopters of e-administration, making it possible to file tax returns online as well as make online payments. Many have also smoothed the process for taxpayers, particularly personal income taxpayers and small businesses, through the full or partial prefilling of tax returns. Currently, more than 85% of individuals and 95% of companies file their returns electronically, around 90% of payments are made online, and close to 90% of tax administrations prefill personal income tax returns.

As the use of technology grows, tax administrations are taking a next step and investigating how their operating models can be digitally transformed. This vision of digital transformation is described in the OECD’s Tax Administration 3.0 report. The latest analysis in Tax Administration 2023 highlights the significant progress that tax administrations have made to deliver these benefits, for example:

Creating a 24/7 tax administration: More than 60% of administrations offer virtual or digital assistants – a change of almost 30 percentage points compared to 2018 (see Table 1). These can increasingly respond to taxpayer enquiries and support self-service at times that suit the taxpayer.

Decentralising tax administration services: Embedding tax services and processes in the systems used by taxpayers in their daily lives and businesses is a growing trend among tax administrations, something we see in our everyday lives with our phones, tablets and computers. As seen in Table 1, your tax administration is now highly likely to offer and support the use of apps, freeing up taxpayers’ time for other activities, including growing their businesses.

Improving risk management: Digital techniques are allowing tax administrations to take a more upfront approach to risk management, supporting honest taxpayers and taking action against the dishonest few. Around 95% of tax administrations report using data science and analytical tools to manipulate electronic data from third parties, including other tax administrations, as well as internally generated electronic data to guide their work. This is an increase of more than 20 percentage points compared to 2018.

Freeing up resources through leading-edge technologies: More than 80% of tax administrations report that they are using or that they are in the implementation phase of leading-edge techniques to exploit data in ways that reduce the need for human intervention. Artificial intelligence and machine learning are already creating efficiencies, freeing up resources and improving the taxpayer experience (see Table 1). Also, more than 50% of administrations report using or planning to use robotic process automation allowing staff to focus on more complex tasks. (see Figure 1).

Table 1: Evolution of the use of virtual assistants, artificial intelligence and application
programming interfaces between 2018 and 2021
Percent of administrations that use this technology

Source: OECD (2023), Tax Administration 2023: Comparative Information on OECD and other Advanced and Emerging Economies, OECD Publishing, Paris, https://doi.org/10.1787/900b6382-en.

Figure 1: Evolution of the implementation and use of Robotic Process Automation, 2018 to 2021

Source: OECD (2023), Tax Administration 2023: Comparative Information on OECD and other Advanced and Emerging Economies, OECD Publishing, Paris, https://doi.org/10.1787/900b6382-en.

So, what next?

Tax administrations are not just digitalising. They are digitally transforming, creating systems where processes are increasingly built into the natural systems used by taxpayers on a daily basis. This will make tax administration more seamless and frictionless over time and bring potentially significant reductions in administrative burdens. Watch out for future editions of the Tax Administration Series and see how the ocean liner continues its voyage into these new waters.

More on the data

Since 2004, the OECD has been publishing internationally comparable data on aspects of tax systems and their administration through the Tax Administration Series. But the Tax Administration Series is only one of the OECD’s Forum on Tax Administration (FTA) outputs. The FTA brings together Commissioners and tax administration officials from over 50 OECD and non-OECD countries. It provides governments with internationally recognised expertise, comparable data, and analysis to improve tax administration, compliance, and certainty.

What started as a biennial publication with information on 30 OECD members turned into an annual report using an extensive data set to highlight key trends, recent innovations and best-practices in 58 advanced and emerging tax administrations. The underlying data for this report comes from the International Survey on Revenue Administration (ISORA) – a multi-organisation survey governed by the OECD, IMF, ADB, CIAT, and IOTA – as well as from the OECD’s Inventory of Tax Technology Initiatives developed by the FTA and eight partner organisations. As tax administrations around the world adapt to an ever-changing digital environment, the OECD stands ready to  help them identify opportunities to improve the design and operation of their tax systems.

For more information on the FTA, its publications and database, visit https://oe.cd/fta