This final lesson examines the IT infrastructure requirements for digital transformation, the changing skillsets needed by tax administrations, and the future developments that will shape the evolution of digital tax administration.

Detailed Notes:

  • IT Infrastructure Requirements: Digital transformation requires robust IT infrastructure that can support real-time data processing, secure data storage, and integration with external systems. Tax administrations are increasingly moving toward cloud-based solutions and developing APIs to enable integration with third-party systems .

  • Changing Skillsets for Tax Administrations: The skillsets required by tax administrations are changing, with a greater need for digitally literate staff and people with technical expertise in data management, new technologies, and cybersecurity. Project management skills to deliver technical projects and change management skills will also be valuable. The core message is that at the heart of the digital transformation process is the staff of the tax administration .

  • New Skills Development: Most tax administrations have begun identifying and mapping the skills needed for digital transformation. More than 25% of tax administrations have identified the skills needed for successful digital transformation across their entire system, while 45% have done so for specific departments . Seventy-five percent of tax administrations collaborate with other government organisations and external partners to enhance their tax officials’ digital transformation skills .

  • Future Developments in Digital Tax Administration:

    • Pillar Two Data Demands: The rollout of the OECD’s Pillar Two framework, establishing a 15% global minimum corporate tax rate, will require granular data collection and reconciliation. Multinational groups exceeding €750 million in revenue must comply with GloBE reporting demands and reconcile local statutory and tax compliance requirements with global corporate tax obligations .

    • Continuous Transaction Controls (CTC): E-reporting is maturing into Continuous Transaction Controls, transforming how tax compliance operates. Tax authorities increasingly require instant or near-instant access to transactional data rather than periodic submissions .

    • Generative AI: Generative AI is beginning to be used in tax departments, from drafting memos to monitoring legislation and enhancing transfer pricing analysis. The OECD’s recent work shows that many tax administrations are exploring how generative AI can improve efficiency .

    • ERP Integration: Integrated enterprise resource planning systems are becoming essential for data readiness and compliance, as fragmented tax data becomes a serious liability. Companies must implement well-planned ERP localisation projects that deliver desired benefits in every jurisdiction where they operate .

  • Key Principles for AI Governance: As tax administrations become more data-rich, legitimate public concern about privacy, surveillance, and misuse of information increases. Key principles for responsible AI adoption include :

    • Strong legal frameworks specifying purpose, scope, and retention

    • Process-based interfaces with narrow, logged API calls and jurisdictional access limits

    • Model-explainability tools so decisions can be audited

    • Human-in-the-loop review for automated high-stakes actions

    • Transparency about how algorithms are developed and used

    • Regular fairness audits and independent oversight

  • Building Public Trust: Building public trust requires transparency about how algorithms are developed and used. Explainable risk scores, clear redress mechanisms, regular fairness audits, and independent oversight help to ensure AI tools support equitable enforcement rather than opaque profiling

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