Digital Financial Services and Digital IDs: What Potential do They Have for Better Taxation in Africa?

Abstract

New digital technologies, such as Digital Financial Services (DFS) and digital IDs, are gaining momentum in Africa and lower income countries (LICs) more broadly. These technologies could have an impact on an increasingly digitised and IT-driven tax administration, since they hold potential to improve a number of core functions of a revenue authority. Yet, increasing evidence on existing technology in tax administration indicates a number of barriers, which are likely to mute these gains. Against this background, this paper summarises critical questions relevant to research and policy to make more effective use of digital technology in contexts of weak fiscal capacity and IT development:

• What is the nature and potential of DFS and digital IDs in the specific context of LICs? • Given the scarce evidence relating to DFS, digital IDs and taxation, what can be learned from how existing data and technology is used in LICs’ revenue authorities? • How can tax administrations make the best use of DFS and digital IDs in the future?

This Research in Brief is a summary of ICTD Working Paper 137.