{
  "title": "The Digital Gamble: New Technology Transforms Fiscal Policy",
  "publication": "IMF Blog, April 12, 2018",
  "sourceUrl": "https://www.imf.org/en/blogs/articles/2018/04/12/the-digital-gamble-new-technology-transforms-fiscal-policy",
  "canonical": "https://www.imf.org/en/blogs/articles/2018/04/12/the-digital-gamble-new-technology-transforms-fiscal-policy",
  "overlayPath": "/en/blogs/articles/2018/04/12/the-digital-gamble-new-technology-transforms-fiscal-policy/index.md",
  "summary": "Authors: Vitor Gaspar, Geneviève Verdier",
  "sections": [
    {
      "heading": "Overview",
      "content": "- Authors: Vitor Gaspar, Geneviève Verdier\n- Publication date: April 12, 2018\n- Digital tools are being used for tax and expenditure policy, public financial management, and public service delivery.\n- Examples highlighted:\n  - Rwanda: digitally-monitored drones deliver blood supplies to hospitals.\n  - Estonia: it takes five minutes to file taxes and 99 percent of government services are available online.\n  - Singapore: first city to implement electronic road pricing to manage congestion.\n  - Photo credit: Traffic congestion along Scotts Road on 15 January 2015. (Newscom TagID: sphphotos000206.jpg) [Photo via Newscom]"
    },
    {
      "heading": "The gamble: potential payoffs and risks",
      "content": "- Opportunities from better, timely, and accurate information:\n  - Governments can build better systems and design and implement better policies.\n  - Digital tools facilitate citizens’ lives: effortless tax filing (examples: Kenyans pay taxes on their smart phones; Norwegians have their tax returns prepopulated by their government).\n  - Delivery of social benefits via electronic transfers linked to biometric identification (example: India).\n- Fiscal gains from digital enforcement:\n  - British customs use big data to detect fraudulent behavior of importers at the border.\n  - Estimated potential increase in annual indirect tax collection at the border: up to 1-2 percent of GDP.\n- Cross-border information exchange:\n  - The Panama and the Paradise papers exposed substantial wealth sheltered in low-tax jurisdictions—an average of 10 percent of world GDP.\n  - Digital cross-country information exchange about taxpayers offers prospects for more effective tracking of such wealth."
    },
    {
      "heading": "Avoid the gamble? Constraints and risks",
      "content": "- Trust and privacy:\n  - Citizens may not trust governments to safeguard personal information (example: in the United States, less than a third of people believe the government can keep their digital records secure).\n- Inclusion and access:\n  - Many poor households lack access to digital tools; digitalization can leave people behind (example: fewer than half of the population of Africa subscribes to a mobile phone).\n- New fraud and enforcement challenges:\n  - New fraud opportunities arise (example: authorities in Korea recently raided the country’s largest cryptocurrency exchanges for alleged tax evasion).\n  - Cash-strapped governments with low capacity face greater challenges managing these risks."
    },
    {
      "heading": "Digital firms and taxation challenges",
      "content": "- Characteristics of digital firms:\n  - Firms like Google, Apple, Facebook and Amazon generate sales with little physical presence and benefit from value created by users.\n  - User-generated activity on apps produces free yet valuable information.\n- Policy questions:\n  - Can and should governments tax value where the consumer resides even when the firm’s physical home is elsewhere?\n  - The scale of digital activities raises concerns about fairness in the allocation of international taxing rights.\n- Current uncoordinated responses:\n  - Some countries (example: Israel, Italy) have introduced specialized tax measures targeting digital firms.\n  - Such uncoordinated solutions cannot provide the answer; global solutions are required as the whole economy becomes digital."
    },
    {
      "heading": "The way forward: recommended actions",
      "content": "- Overcoming challenges will require:\n  - A proactive and comprehensive reform agenda that addresses political and institutional weaknesses to manage digital risks and ensure inclusion.\n    - Example: India combined biometric identification with reforming program design to deliver income support to the right beneficiaries.\n  - Adequate resources in the budget.\n    - Example: Korea secured budget resources for multi-year plans early on in its digitalization process.\n  - International cooperation.\n    - Example: Reducing evasion to low-tax jurisdictions or forming a consensus on the taxation of the digital economy will require multilateral efforts.\n- Cautionary note:\n  - Digitalization will not solve all policymaker problems and may create new ones.\n  - Governments cannot ignore the trend: \"Resist at your peril, or embark on a journey to shape the way forward.\"\n\nSource: The Digital Gamble: New Technology Transforms Fiscal Policy, Vitor Gaspar and Geneviève Verdier, April 12, 2018.\n\n---\n\n\n References\n\n- Fiscal Monitor\n- https://www.imf.org/wp-content/uploads/2018/04/copy-eng-april-5-fiscalch2-1.jpg\n- https://www.imf.org/wp-content/uploads/2018/04/copy-eng-april-5-fmch2-2-1.jpg\n\nSource: https://www.imf.org/en/blogs/articles/2018/04/12/the-digital-gamble-new-technology-transforms-fiscal-policy"
    }
  ],
  "bullets": [
    "[Markdown version](/en/blogs/articles/2018/04/12/the-digital-gamble-new-technology-transforms-fiscal-policy/index.md)",
    "[Structured JSON version](/en/blogs/articles/2018/04/12/the-digital-gamble-new-technology-transforms-fiscal-policy/index.json)",
    "[Bundle manifest](/en/blogs/articles/2018/04/12/the-digital-gamble-new-technology-transforms-fiscal-policy/bundle-manifest.json)",
    "Authors: Vitor Gaspar, Genevive Verdier",
    "Published: April 12, 2018",
    "Authors: Vitor Gaspar, Geneviève Verdier",
    "Publication date: April 12, 2018",
    "Digital tools are being used for tax and expenditure policy, public financial management, and public service delivery.",
    "Examples highlighted:",
    "Opportunities from better, timely, and accurate information:",
    "Fiscal gains from digital enforcement:",
    "Cross-border information exchange:",
    "Trust and privacy:",
    "Inclusion and access:",
    "New fraud and enforcement challenges:",
    "Characteristics of digital firms:",
    "Policy questions:",
    "Current uncoordinated responses:",
    "Overcoming challenges will require:",
    "Cautionary note:",
    "[Fiscal Monitor](http://www.imf.org/en/Publications/FM/Issues/2018/04/06/fiscal-monitor-april-2018)",
    "[https://www.imf.org/wp-content/uploads/2018/04/copy-eng-april-5-fiscalch2-1.jpg](https://www.imf.org/wp-content/uploads/2018/04/copy-eng-april-5-fiscalch2-1.jpg)",
    "[https://www.imf.org/wp-content/uploads/2018/04/copy-eng-april-5-fmch2-2-1.jpg](https://www.imf.org/wp-content/uploads/2018/04/copy-eng-april-5-fmch2-2-1.jpg)"
  ],
  "alternates": {
    "markdown": "/en/blogs/articles/2018/04/12/the-digital-gamble-new-technology-transforms-fiscal-policy/index.md",
    "json": "/en/blogs/articles/2018/04/12/the-digital-gamble-new-technology-transforms-fiscal-policy/index.json",
    "bundleManifest": "/en/blogs/articles/2018/04/12/the-digital-gamble-new-technology-transforms-fiscal-policy/bundle-manifest.json"
  },
  "generatedAtUtc": "2026-08-27T18:37:41.370Z"
}