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Ethiopia’s integration of digital ID and tax system could yield many benefits, ICTD says

Ethiopia’s integration of digital ID and tax system could yield many benefits, ICTD says

Integrating Ethiopia’s national ID Fayda with its tax system could improve the quality of tax data, taxpayer experience, and compliance monitoring and enforcement while broadening the country’s tax base, according to an independent analysis.

The International Centre for Tax & Development (ICTD) has identified five potential benefits to Ethiopia is based on a recent analysis of tax reforms in Uganda and Ghana, published by the Institute of Development Studies. Both countries integrated their national digital ID with their tax systems as part of broader digitization initiatives, which have had early success. Nigeria’s President has also been discussing an integration between the country’s national ID and taxation systems.

The Fayda integration was completed in December, with all taxpayer identification numbers (TINs) linked with the individual’s Fayda number. TIN registration already included biometrics collection, leading to the credential’s use for the delivery of other public services. Shifting the biometrics collection responsibility to the national ID system, with its support from international development partners, makes the system more affordable.

The changes could assist Ethiopian tax authorities in shifting to data-centric operations.

Misconceptions creating mistrust of the system could pose a barrier to adoption too high for the tax system to realize the potential benefits ICTD calls out, the report warns. The establishment of a strong data protection regime could help.

The Conversation considered the prospects for a similar move by Kenya last year.

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