Leveraging Digital Technologies in Boosting Tax Collection

Manabu Nose, Nicola Pierri and Jiro Honda

No 2025/089, IMF Working Papers from International Monetary Fund

Abstract: This paper explores how digitalization in the corporate sector can boost tax revenue collection,. finding that stronger firm digitalization is associated with higher tax revenues across countries and also higher tax paid across firms. The cross-country estimates illustrate that a one-standard-deviation increase in firm digitalization is associated with an increase in tax revenues-to-GDP by up to 3 percentage points, conditional upon the level of digitalization of tax administration (GovTech). A firm-level analsis reveals that firm digitalization significantly improves tax compliance among high-risk taxpayers, such as small and informal enterprises, particularly in the service sector. This indicates that digitalization not only broadens the corporate tax base but also plays a crucial role in improving tax compliance. Moreover, both country and firm-level analyses reveal a significant synergy between firm digitalization and GovTech, undescoring the importance of promoting both to enhance tax collection. These analyses also suggest that, in developing countries, it is essential to create enabling environments for firm digitalization and GovTech and address any constraints to achieve their synergy effects.

Keywords: Tax compliance; Public-Private digitalization; GovTech; firm digitalization; tax payment; business digitalization; digitalization of tax administration; Oaxaca-blinder Decomposition; digitalized firm; Digitalization; Tax collection; Information technology in revenue administration; Global (search for similar items in EconPapers)
Pages: 31
Date: 2025-05-09
New Economics Papers: this item is included in nep-iue
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