The Promise and Limitations of Information Technology for Tax Mobilization

Tax revenue in many low- and middle-income countries is inadequate for fundinginvestments in public goods and human capital. With high levels of informality and limited state capacity, many taxauthorities have difficulty determining the true tax base and collecting taxes efficiently and equitably. Taxauthorities are increasingly adopting new technologies to improve administrative processes, reduce taxpayer compliancecosts, and enhance their overall effectiveness. This paper reviews the recent literature on the use of technology fortax administration. It highlights the potential of technology to improve tax collection by helping to identifythe tax base, monitor compliance and facilitate compliance. It also identifies possible limitations to the use oftechnology arising from inadequate infrastructure and connectivity, lack of adoption or resistance by taxpayersand tax collectors, lack of institutional mainstreaming, and an unsupportive regulatory environment.