Public Finance Goes Digital

Author:Sanjeev Gupta, Michael Keen, Alpa Shah, and Geneviève Verdier

Technology is reshaping how governments raise and spend money

n Kenya, people can pay their ta xes on their
mobile phones. In India, they receive subsidies
and welfare payments directly into their bank
accounts, which are li nked to unique biometric
identifiers. In several adva nced and emerging market
economies, tax authorities collec t information on
sales and wage s in real time, which give s them
immediate insight into the state of the economy.
Public finance, like so much else, is undergoing a
digit al revolution.
Public finance is the ar t of raising and spending
money to deliver services and benefit s, redistribut-
ing income, and smoothing the ups a nd downs of
the business cycle. How effectively governments
do these things depend s crucially on their ability
to collect, process, and act on a va st array of infor-
mation: how much companies and workers earn,
how many people are unemployed, who qualifies
for government benefits.
Digitalization is starting to reshape this informa-
tional core of the way tax and spending policies are
designed and carried out. It offers tools not only to
improve the effectiveness of existing policies but also
to introduce entirely new ones. But there’s a dark side:
digitalization has intensified concerns about privacy,
confidentiality, and cybersecurity while adding to
the larger debate over inequality and redistribution.
Rich troves of information
rough digital s ystems, standardized reporting
formats, and electronic interfac es, tax authorities
are better able to access t he rich troves of informa-
tion collected by the private sector on such thi ngs as
bank transa ctions and interest income. Authorities
in Australia a nd the United Kingdom, for example,
receive real-time data on wage s paid by employers.
In Brazil and Rus sia, electronic invoicing systems
allow immediate acc ess to data on firm sales.
Technology is reshaping how governments raise and spend money
Sanjeev Gupta, Michael Keen, Alpa Shah, and Geneviève Verdier
Public Finance
Goes Digital

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