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Transcript of Digital Government - wiiw.ac.at · Digital Government. 2 Digital government. 3 The digital...
Geneviève VerdierFiscal Affairs Department
International Monetary Fund
Chapter 2 of the April 2018 Fiscal MonitorApril 2018
Digital Government
2
Digital government
3
The digital transformation is underway
The rapid growth of the digital transformation is outpacing the
provision of basic public services
Digital technologies are spreading across governments, with some
regional leaders
NA EUR MENA CIS LAC AP SSA
KOR SGPKAZ
RUSEST ESP
CHL URY
ARE ISRUSA
CAN RWA ZAF
TUV MHL
CAF GNQ
KNA FSM
CYP SMR
SYR LBY
TJK TKM
International Digital Adoption by Governments(Digital adoption index for governments, latest available year)
Source:World Bank 2016.
Access to Public and Digital Services in Developing Countries(Percent of population)
0
20
40
60
80
100
1990 95 2000 05 10Improved water access InternetImproved sanitation Mobile phoneElectricity Mobile broadband
4
What governments are doing
Tax policy and administration• Digital tax administration systemsE-filling, e-invoicingPre-populated tax returnsMobile paymentsBig data analysis
• Cross-border exchange of informationPublic spending and financial management• Public service delivery: Information dissemination (health, agriculture)Biometric identification and digital payment
systemsDigital monitoring (education)
• Governance:Transparency portals
0
20
40
60
80
100
120
140
160
180
200
Acce
ss to
nat
iona
l web
site
s
Crea
te p
erso
nal o
nlin
e go
v. a
ccou
nts
File
inco
me
tax
Regi
ster
a b
usin
ess
Auto
mat
ed fi
nanc
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anag
emen
t
Cust
oms
proc
essi
ng
Tax
man
agem
ent
Digi
tal i
dent
ifica
tion
Citizens Government administrativefunctions
Number of countries with selected digital services
1. What governments can do now
– Reducing tax evasion from cross-border fraud
– Lowering revenue losses from personal income and wealth sheltered in tax havens
– Reducing leakage and take-up problems in social protection
2. Challenges, obstacles and risks
– Fiscal policy and digital businesses—A new challenge
– Digitalizing public finances—Obstacles and risks
5
Outline
What governments can do now
7
Improving tax compliance: Customs
Trade misreporting is non-trivial, particularly in LIDCs…
…but VAT-related fraud is also a concern in Europe
Could digitalization help reduce fraud in cross-border transactions?
AEs EMEs LIDCs
Difference between importer and exporter reported values in percent of GDP
French company A exports VAT
zero-rated goods to B in another
member country (United
Kingdom).
Pays no VAT on purchase, charges VAT on sale to company C, and disappears without
remitting the VAT.
Buys goods at VAT inclusive
price, and exports goods to France,
reclaiming the VAT not paid by
B.
United Kingdom: Company B "Missing trader"
France: Company A
United Kingdom: Company C
The Missing Trader and Carousel Fraud
The EC estimates that EUR 45-60 billion are lostannually
8
Improving tax compliance: customs
Median revenue potential is between 1 to 2 percent of GDP. In Europe, total gains of 0.5 percent of European GDP in VAT collection.
The link between evasion and digitalization is significant and potential revenue gains are substantial
AEs EMEs LIDCs
Potential Tariff Revenue Gains
AEs EMEs LIDCs
Potential VAT Revenue Gains
9
Improving tax compliance: Tax havens
Wealth sheltered in tax havens is large
Could digitalization help reduce evasion to tax havens?
0
2
4
6
8
10
1910 1940 1970 2000 2013
Estimated Wealth of Europeans in Low-Tax Jurisdictions(Percent of the financial holdings of European households)
AEs EMEs LIDCs
Offshore Wealth
The share of European financial wealth held in tax havens has grown
dramatically
• Revenue gains on existing wealth are low.
• But increased taxpayer information could facilitateCollect taxes before income is
transferred to tax havens
• Design and success of automatic exchange of Information on taxpayers
10
Improving tax compliance: Tax havens
11
Improving social protection coverage
Sources: EUROMOD; World Bank, Atlas of Social Protection Indicators of Resilience and Equity (ASPIRE); and IMF staff calculations.1/ EU-28 = European Union group of 28 countries (Austria, Belgium, Bulgaria, Croatia, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Italy, Ireland, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Sweden, Spain and United Kingdom).
Inclusion (leakages) and exclusion (non take-up) errors are sizeableIn developing economies, coverage of the poor is far
from completeIn Europe, 1/3 of total spending on means-tested programs is
going to the top 6 income deciles
0
10
20
30
40
50
60
70
Upper-middle-income countries
Lower-middle-income countries
Low-incomecountries
Poorestquintile
Household Coverage by Social Assistance Programs in Developing Countries(percent of households in income quintile)
0
10
20
30
40
1 2 3 4 5 6 7 8 9 10Income deciles
Average Share of Total Spending on Means-Tested Social Assistance Programs in EU 28(percent of total spending across income deciles)
12
Improving social protection coverage
13
Improving social protection coverage
IndiaLPG
subsidies
IndiaLPG
subsidies
FranceSocial
benefits
FranceSocial
benefits
IndiaLPG subsidies
FranceSocial benefits
Digitalization can help … … but is only part of the solution
• Comprehensive reforms (India)
• Privacy and security controls are essential (India and South Africa)
• Digital exclusion can put program objectives at risk (India)
• Digital outreach tools are not sufficient (France)
14
Improving social protection coverage
Challenges, obstacles and risks
Tech giants are increasingly dominant
High profitability
Heavy reliance on intangible assets
Sales with little or no physical presence
User-generated value16
Taxation and the digital economy
0
200
400
600
800
1000
Nes
tleW
alm
art
Roy
al D
utch
She
llV
isa
Wel
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argo
CC
BE
xxon
Mob
ilB
ank
of A
mer
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Sam
sung
John
son
& J
ohns
onIC
BC
JP M
orga
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Alib
aba
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atha
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Face
book
Tenc
ent
Mic
roso
ftA
maz
onA
lpha
bet (
Goo
gle)
App
le
Technology companiesOther companies
The Race to a TrillionGlobal Top 20 Firms By Stock Market Capitalization(Billions of US dollars, March 7, 2018)
17
Taxation and the digital economy
• What is different? The scale of operations.
• But they should not be singled-out for taxation purposes
• Measures should be internationally coordinated and consistent with a long-term vision for international corporate taxation
18
Obstacles and risks
Digital exclusion
Resources
Institutional capacity
19
Obstacles and risks
Fraud
Privacy and cybersecurity
• Digitalization is transforming how we live and the conduct of policy
• Governments cannot stay on the sidelines of this transformation
• Overcoming challenges will require:– A comprehensive reform agenda– Risk mitigation– Adequate resources– International cooperation
20
Policy implications
Thank you!