The importance of digital transformation and technological innovation in tax administrations

The recent publication Overview of Tax Administrations in CIAT Countries[1] is based on data from the latest version of the International Survey on Tax Administration (ISORA), compiled during 2023 and referring to the situation of the administrations in 2022, in which the tax administrations (TAs) of 179 countries participated.

The publication gathers information on multiple aspects of TA, but this time we summarize the topic of innovative techniques and information and communication technologies (ICT) applied to tax management and the improvement of tax compliance.

Other important topics covered in the publication include the following:

• Instruments administered, collection and budget;
• Human resources available;
• Organization and operational functioning (segmentation and registration of taxpayers, attention and assistance to the taxpayer, presentation of tax returns and payment of obligations, enforced collection of debts and audit and tax control audits);

In each of these blocks, we have sought to identify general trends and stylized facts, presenting the average results for: I) all countries in ISORA; II) CIAT members [2]; III) Latin American and Caribbean countries; and IV) the four income levels defined by the World Bank.

For the CIAT member countries that have participated in this edition of ISORA, their results are also presented individually.

1. Digital transformation and technological innovation

The document states that the need to accelerate the digital transformation of TAs, in order to make more efficient use of available resources, has become clear in recent years.

2. Advanced techniques and strategies to improve compliance

In recent years, progress has been made in the development of pre-filled tax declarations systems.

44.1% of the ISORA countries carry out these procedures for some of the main tax            es, with an even higher percentage among the CIAT countries (55.3%).

The use of this technique shows a clear pattern of increasing with the income level of the countries.

Regarding electronic invoicing, it is said that of the total number of countries in ISORA, 38% have a mandatory electronic invoicing system for some or all taxpayers.

CIAT countries lead in the degree of adoption of this tool, with 57.9% of the total, while in LAC that percentage reaches 44.1%.

Unlike most technological innovations for tax management, high-income countries do not lead in the implementation of electronic invoicing, but middle-income countries do.

Cooperative compliance is another of the topics analyzed in the report. In 55.9%, 65.8% and 52.9 of ISORA, CIAT and LAC countries, respectively, cooperative compliance mechanisms are applied to large taxpayers, also consolidating the increase observed in the previous edition of ISORA.

There are also these mechanisms for “other taxpayers” (in 37.4% of the countries of ISORA; 47.4% of CIAT and 26.5% of LAC) and, more recently and more limited, for high-net-worth individuals (in 19.6% of the total countries, 28.9% of CIAT and 17.6% of LAC).

3. Innovative technologies and instruments for tax management

Innovations in data processing and statistical information, together with other ICT solutions, open wide possibilities to strengthen tax management.

“Data science/analytical tools” are implemented or in process in 65.4% of the countries of ISORA, 84.2% of CIAT members and 72.6% of LAC.

Cloud Computing” presents percentages of use/implementation of 43% in ISORA, 57.9% in CIAT and 44.1% in LAC, while “Artificial Intelligence” is installed or close to it in 36.9% of the countries of ISORA, 50% of CIAT and 23.5% of LAC.

“Distributed ledger technology or blockchain” is present in 10.1% of the countries in ISORA, 13.2% of those in CIAT and 11.8% of those in LAC.

In all these tools, although less clearly in the last of them, increasing values are observed with the income level of the countries.

“Application Programming Interfaces”  (APIs) allow secure digital interaction between revenue systems and external applications in banks, accounting software providers and other government agencies, and can be used to send and receive information, validate activities and facilitate operations.

73.2% of the ISORA countries have APIs (in use or in the implementation phase), continuing the growing trend observed in previous editions, while in CIAT this percentage reaches 84.2% and in LAC 67.6%.

Digital identification technologies (biometrics; voice identification) have also had an acceptable diffusion, 33.5% in the total of ISORA, below the proportion observed for CIAT (44.7%) and for LAC (38.2%).

“Virtual Assistants” are already used or are in the implementation phase in 43.6% of all countries, in 60.5% of CIAT members and in 38.2% of Lac countries.

“Government or government identification systems as a whole” are present in 50,3% of the countries in ISORA, in 55.3% of the CIAT countries and in 41.2% in LAC.

“Robotic process automation” is less widespread than previous tools both among the countries of ISORA (29.1% of the total), CIAT (39.5%) and Lac (23.5%), but also in deep expansion.

These three elements of innovation, in general, have greater penetration as the income level of countries grows

4 . Concluding comments

I understand that the ongoing digital transformation allows TAs to implement new measures on a daily basis in order to be more efficient in their work.

The digital transformation of the TAs must be approached in a holistic manner, redefining processes, orienting services to the citizen, and, of course, establishing a strategy that combines the citizen-centric approach with a more efficient, interconnected, collaborative model adapted to the social reality.

All digital transformation should be part of an integral process of Digital Government that is being established in different countries.

It seems vital to me that digitalization collaborates in the simplification of tax systems and of the rules and procedures within the Tax Administrations.

Therefore, the recently published document is of utmost relevance since it presents multiple topics related to TA beyond the one synthesized in the present.

As a general idea of the topic analyzed, it is concluded that the digital transformation continues to consolidate in the TAs, through innovative technological solutions.

In addition, it seems that the gap that exists in this area is closing depending on the income level of the countries. Digital transformation is progressing faster among CIAT countries than in the ISORA average.

In short, the recently published document is understood as especially useful for analyzing trends and best practices among TA.

References:

[1] https://biblioteca.ciat.org/opac/book/5890  Garcimartin, C. and Díaz de Sarralde Míguez, S. (2025). Overview of tax administrations in CIAT countries. Results of the 2023 ISORA Survey. Volume I (annual questionnaire). Inter-American Center of Tax Administrations CIAT

[2] CIAT member countries are the following: Argentina,  Bahamas, Barbados, Belize, Bolivia, Brazil, Canada, Chile, Colombia, Costa Rica, Cuba, Dominica,Dominican Republic, Ecuador, El Salvador, Guatemala, Guyana, Haiti, Honduras, Jamaica, Mexico, Nicaragua, Panama, Paraguay, Peru, Saint Kitts and Nevis, Suriname, Trinidad and Tobago, Uruguay and Venezuela. Europe Germany, Belgium, Spain, France, Netherlands. For Africa Angola, Morocco, Nigeria, South Africa. For Asia India.