Simplification and Digitisation of Tax Systems for the Commonwealth

The second Commonwealth tax dialogue at Wilton Park on 10 – 12 February 2025, explored various aspects of tax simplification and digitisation led by tax practitioners, academia and private sector experts from the UK, India and other Commonwealth countries including Australia, Barbados, Jamaica, Kenya, Malaysia, Maldives, Mauritius, Nigeria, and Sri Lanka. It builds upon the first Commonwealth Wilton Park Dialogue in 2023 which focused on digitisation to improve the efficiency of tax administration amongst Commonwealth countries, most of whom have adopted and adapted the Common Law system over the years.

The dialogue was organised in association with the British High Commission India, His Majesty’s Revenue and Customs (HMRC), the Central Board of Direct Taxes (CBDT) and the Commonwealth Association of Tax Administrators (CATA). The programme was developed collaboratively between these organisations and Wilton Park to ensure alignment with tax authority demand, and complementarity with existing multilateral fora.

This report summarises the key points discussed at the dialogue. To encourage open and candid dialogue, discussions occurred under the Wilton Park protocol of non-attributability.

Executive Summary

Taxation is fundamental to build a state’s economic stability and enables spending on public goods. Building efficient and digitised tax systems is crucial to maximise tax revenues to foster sustained economic growth in a country. Going forward, it is important for countries to augment resources for the inevitable green transition to build a resilient state. A well-functioning public finance system will boost private finance overall and provide confidence to taxpayers.

Tax systems of the Commonwealth, including devolved administrations, have been transforming their operations over the last few years and are in various stages of tax simplification and digitisation.

Tax simplification is not a goal, but a means of raising monies for re-distribution, to help incentivise flow of money into the right sectors of the economy. A tax administrator’s goal in addition to augment revenue collections is to do so in the easiest and most efficient manner, leveraging technology and data effectively whilst keeping the taxpayer at the centre of this relationship built on trust.

“Collect taxes from the citizens as honeybees collect nectar from the flowers, gently and without inflicting pain.” – Chanakya’s advice to rulers

The building blocks of tax simplification include the language of tax code, digitisation, data, research, and taxpayer engagement are largely common for all systems.

Furthermore, all tax authorities have common objectives – increase revenue, improve voluntary compliance, lower administrative costs and disputes, provide transparency in dealing with taxpayers. However, tax simplification exercises require localisation depending on the country context, size of the economy and volume of taxpayers. Commonwealth countries can use their shared heritage backed by the Common Law system to come together and deliberate on the way forward.

This dialogue aimed to bring together likeminded authorities to discuss shared challenges and find ways of devising solutions together. The aim was to leverage the wealth of experience in the Commonwealth on approaches to tax simplification and digitisation.

This report summarises the experience and lessons learnt by tax authorities on their respective journey towards simplification of the language of tax, digitisation of tax systems and role of research in a data-driven decision-making environment.

A holistic approach to the entire architecture of the tax system that integrates digitisation, data analytics, policymaking and voluntary compliance by design was emphasised. Design of tax systems should embed a degree of flexibility that can adapt to changing stakeholder needs and economic environment. Trust of the taxpayer and consistent political support were highlighted to be crucial for the success of any tax reform initiative.

Countries acknowledged that establishing best practices, cross-learning between peers is the way forward rather than doing it alone, often with limited resources, in this global environment. Practitioners in the dialogue established good peer-to-peer relationships and are keen to forge partnerships for collective problem solving and capability development of their tax jurisdictions in future.

Themes of discussion

All deliberations over the 48-hour period have been categorised into the following five thematic areas, each with recommendations for participants to pursue in the long run:

• Theme 1: Language and communication with taxpayers
• Theme 2: A holistic approach to the architecture of tax administration – Digitisation, Data, and Technology
• Theme 3: The role of research
• Theme 4: Trust between the taxpayer and tax authority
• Theme 5: Stakeholder collaboration and expectation management