03 OCT,2023 | MEDC
Digitalization is the future of the global economy and done right, it can equip governments to improve revenue collection and boost the efficiency of public spending. In India, GST is a classic example of how far digitalization can take us in the fiscal realm. GST is still in its nascent stages in our socioeconomic history, but even in its relatively short lifespan, it has shown its potential as a key instrument of revenue generation as well as an effective tool for business transformation.
A double-engine policy approach is required in this regard … connecting unconnected households to the Internet and simultaneously accelerating and strengthening the adoption of digital solutions throughout the public sector. An adequate risk-management system needs to be simultaneously put in place, as technology frequently produces surprises – both positive and negative – that no one can anticipate.
Emerging economies like India have the most potential to leapfrog their development trajectories by espousing digitalization. Government support can be crucial in achieving universal online connectivity by incentivizing or directly investing in building digital public infrastructure (DPI), especially in regions of challenging profitability.
Digitalization enables governments to leverage technology to enhance revenue generation, plug loopholes in the system, and streamline rules and regulations leading to improved efficiency of public spending, as well as strengthening fiscal transparency and accountability. These can be achieved through better decision-making processes, adoption of global best practices, transformation of public financial management processes and systems, and improved taxpayer and trade services to enhance compliance.
Adopting technology in fiscal operations can strengthen public finances on both revenue and expenditure sides. In India itself, e-filing, e-invoicing and electronic fiscal conveniences are already leading to a significant increase in tax revenues from the more modest levels recorded just recently. Of course, the smarter the system, the more sophisticated the delinquents. But that is a path we have to take to move in the direction of modernity and progress.
All these benefits from digitalization can accrue only if it is conducted strategically. Implementing large digital programs is a complex undertaking requiring careful planning, adequate resources (both physical and financial), and political support at all levels. Digitalization may necessitate changes in regulation and established processes, which could ruffle some feathers and provoke vested interests. Without adequate regulatory safeguards, implementing complex digital solutions could be not just unproductive but even counterproductive and create more problems than they resolve. By adopting an approach wherein ease of doing business (as well as social justice) remains a top policy priority, digitalization can help overcome these multifaceted challenges.
We may all be understandably wary when it comes to the idea of the intrusion of large-scale digitalization into our personal lives, but today’s world gives us little choice. Digitalization will enable us to seize the untouched opportunity of working on improving the regulations and standards throughout our economy and boosting the efficacy of our entire fiscal system in the process.
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