The move to a digital economy is often promoted as having benefits for business. These can vary from improvements in efficiency and productivity to a better understanding of customers. But a report by the IMF suggests that digitalisation can also bring benefits for governments.
The report highlights how government can use digital tools to design and implement policies, including by improving tax policy administration, increasing spending efficiency and enhancing fiscal management.
However, it also warns that the move to digital brings the threat of fraud and manipulation of data, and suggests that governments need to ensure that the changes don’t bring a disproportionate burden on small businesses and vulnerable households with limited access to technology.
Examples of benefits from digitalisation of government highlighted in the IMF report include Estonia where it takes five minutes to file taxes and 99% of government services are available online.
Countries can now tackle tax evasion with digital solutions. The report notes that British customs are using big data to detect fraudulent behaviour of importers at the border. The IMF estimates that adopting such methods could increase annual indirect tax collection at the border by up to 1-2% of GDP.
While the benefits are many, the IMF also warns that digital government does bring risks and can raise problems. Many citizens don’t trust their government to safeguard their personal information. The report notes that, in the United States, less than a third of people believe the government can keep their digital records secure.
There are also concerns around equity. Many poor households lack access to digital tools and could be left behind.
The digitalisation of government offers many of the benefits that it brings for business, including increased efficiency and better data on customers. Governments just need to ensure that they can safeguard information and ensure access for all who need it.
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