Countries should leverage DPI to enhance tax revenue collection: ICTD

The International Center for Tax and Development (ICTD) has argued that a well‐implemented Digital Public Infrastructure (DPI) system can help governments in lower and middle-income countries (LMICs) boost revenue collection and limit financial losses from the shadow economy.

This is according to an ICTD blog analysis which explores how secure, inclusive and interoperable DPI can serve several purposes and enable countries make more earnings from taxation.

Per the analysis, effective DPI can contribute to better identifying taxpayers through digital ID, facilitating payments and financial transactions through instant payment platforms, enforcing compliance via data‐sharing, and by so doing, reducing corruption and administrative red tape.

The author of the analysis, Seid Yimam who’s a Research Associate at the Institute of Development Studies, states that while many African governments are increasingly making investments in DPI, the aspect of taxation and domestic revenue mobilization doesn’t appear to attract a lot of attention yet.

In his view, African countries that embrace DPI in a thoughtful manner can unlock more efficient, equitable and resilient tax systems that can contribute to their digital economic growth.

Having DPI, Yimam says, is not enough, but fully integrating it in revenue mobilization and collection systems is vital. The author cites the example of Ethiopia’s Fayda ID which is used by the tax administration, but not yet fully leveraged for purposes like enforcement and compliance, or even expansion of the tax base, where the impact on revenue collection can be felt.

The ICDT sees improved revenue collection as one of the benefits which could come from fully integrating the Fayda and Ethiopia’s tax administration.  Other countries such as Rwanda, Ghana, Nigeria and Kenya are cited as some examples where ID systems are proving useful for revenue generation and collection. Nigerian President Bola Ahmed Tinubu and Bill Gates, last year, discussed the benefits which integrating Nigeria’s digital ID with the tax administration could bring for the country.

Another country that’s looking in the direction of using DPI for tax mobilization is Sri Lanka. For such a nation which has faced severe economy challenges in the past half decade, using DPI can prove useful for its economic growth. According to a Deloitte executive, integrating digital ID with the inland revenue office can help the government expand its tax base.

At a time when countries face increasing financial constraints with less financing coming from external sources, the blog believes that leveraging the power of DPI can enable these countries enhance their domestic revenue streams and collect enough funds for critical development projects.

While the ICTD analysis calls for continuous investment in DPI, it at the same time appeals that the process shouldn’t be seen as a mere technology upgrade but as an integral aspect of state‐building, tax governance, fairness, equity, inclusion and a social contract between citizens and state.

Beyond DPI, Yimam also calls on African tax administrations to equip their future workforce with capabilities in the use of new technologies such as Artificial Intelligence and Machine Learning “in reshaping the culture of tax audit and improving the risk matrices of tax assessment and identifying tax fraud and evasion more effectively.”

He also regrets that DPI for taxation and revenue mobilization was not given greater attention at some international digital transformation events he attended this year such as the 2025 ID4Africa AGM in Ethiopia, and the 4th International Conference on Financing for Development in Spain.

Article Topics

digital economy  |  digital government  |  digital ID  |  digital public infrastructure  |  government services