This lesson examines digital identity as the foundational element for delivering online tax services. It covers the adoption rates, key features, authentication methods, and integration with other government and private sector systems, drawing on OECD survey data from 54 member jurisdictions.

• The Importance of Digital Identity: As tax administrations increasingly deliver their services online, secure digital identity has become the cornerstone of tax administration work. Without secure digital identities, it is not possible to move fully to machine-to-machine interactions or to provide seamless digital services to taxpayers .

• Widespread Adoption of Digital Identity: The use of digital identity for accessing tax services has become the norm in most jurisdictions. Approximately 66% of administrations report that between 81% and 100% of individuals use a digital identity to access secure digital services offered by the tax administration. For businesses, the figure is even higher, with close to 90% of administrations reporting digital identity usage by more than 80% of businesses .

• Key Features of Digital Identity Solutions: The OECD survey reveals that digital identity solutions offered by tax administrations typically have several key features:

  • Underlying Infrastructure: For both individuals and businesses, the majority (approximately 75-80%) of digital identity solutions are built upon existing domestic identity systems rather than being completely new .

  • Cross-Border Connectivity: Nearly two-fifths of digital identity solutions can connect with foreign identity systems, although only 65% of these are already operational in practice .

  • Creation Process: In the vast majority of cases (approximately 83%), the digital identity is created on request rather than automatically assigned .

• Authentication Methods: With the significant uptake in digital identity usage, enhanced security systems are essential. All administrations report that they apply authentication methods to verify digital identity when used online. The most common methods include :

  • Password-based authentication (77% of administrations)

  • Multi-factor authentication (70% of administrations)

  • Mobile app (42%)

  • ID card (40%)

  • Facial recognition (17%)

  • Fingerprint recognition (17%)

  • Two-thirds of administrations base their authentication methods on the level of security required for specific types of interactions .

• Integration with Other Systems: Over 80% of tax authorities are developing Application Programming Interfaces (APIs) to enable integration with third-party systems, reflecting the trend toward interoperable digital ecosystems .