How do we–as citizens, govern-ments and businesses–shape digital trans-formation so that it benefits society and leaves no one behind. This is a key question as digital techno-logies and data become increasingly present in our lives. From the government perspective, a key to unleashing the promise of digital transformation is to develop an integrated and coherent policy response across all areas. It also requires policies that seize the opportunities and maximise the benefits while addressing the challenges and minimising the costs. Now is the time to act. We are at the beginning of the digital age where computing and data are ubiquitous. Designing and implementing an integrated policy framework fit for the digital age is a complex challenge, but one that we must all embrace given the many potential benefits. Digital technologies and data spur innovation, generate efficiencies, and improve many goods and services. They enable more trade and investment, and facilitate technology transfer. They help push out the productivity frontier, leading to more growth and economic opportunities. It is essential to realise this potential and ensure that it is broadly shared. 

Addressing the seeming digital productivity paradox is important in this regard because productivity gains are essential for improved standards of living. As digital transformation has progressed, aggregate productivity growth has slowed, raising questions about the ability of digital technologies to raise productivity growth. But the aggregate productivity slowdown masks a widening performance gap between more and less productive firms, with the gap especially strong in information and communication technology services sectors. Frontier firms continue to increase productivity and benefit from digital transformation, but laggard firms do not always have the capabilities and incentives to adopt state-of-the-art technologies and best practices.

This paper was designed to prepare a background information document for digital transformation of ID and revenue management system of Bangladesh for economic growth which is the ultimate objective to achieve country’s target for a developed country in 2041. Given the objective, the process of unlocking the benefits of digital ID to enhance revenue collection and running the economic machine under a digitized technology for the inclusive growth of Bangladesh. 

Based on the objective and structure of the paper at the outset attempts to establish the economic rationale of digital ID and revenue collection using digital technology for growth of a country in general referring to economic and societal effects of digitalization. The digital ID has been found easy to authenticate unambiguously through digital channel, unlocking access to banking, government benefits, education, taxation, and other revenue collections and expenditure disbursements by transforming the prevailing analog system into digital one. Experience of different countries are shared in the paper to arrive at a basis to chalk out a roadmap for Bangladesh in this regard. Economic benefits digital ID for individuals and corporates who have ID and who do not, needs to identified to bring uniformity, for confirmation. Enabling improved user control of digital foot prints, the digital ID facilitated institutional adoption of compliance with data privacy regulation. Status of national digital ID working among countries are documented and reviewed. It clearly demonstrates that the technology to expand digital ID exists and growing ever more affordable. Examples digital systems operating in the World have been reported. Risks value creation, individuals and institutional benefits from increased access to financial services, employment, productivity from formalized land ownership, economic value of time savings, reduced fraud, increased sale of goods and services, greater employment and labor productivity, unlocking the value of GDP growth from 3-13 percent by 2030.Creation of shared value among stakeholders and service providers are ensured. Individuals stand to gain about 50 percent of potential value digital ID by addressable share and potential value creation. Digital ID helps crate economic value for both emerging and mature economies, governments, business, civil society institutions can take action registering parties, users and regulators. Potentials varies by country based on addressable share economy, digital ID can affect and opportunity for value creation. The digital ID can improve efficiency and experience for the billions of peoples who already participate in the digital ecosystem. The digital ID opportunity grows as technology improves, cost decreases, and access to the internet and smart-phone rises. 

Economics of digital ID matters tax rates, tax administration and paying taxes. For all governments, the administration of tax is a priority. Paying tax is one of the most universal, frequent and potentially continuous interaction that the citizens have with their government. If paying tax is seen as easy, straightforward, fair and robust, then individuals and businesses may associate those traits with their government more broadly. If citizens can see how their taxes are used and if they recognize the corresponding value generated for society, they may be mor likely to comply with their tax obligations. Ease of filling and paying tax, the digital technologies have led substantial improvements. Example have been presented on taxing digital economy which indicated positive significance of changes in the countries and regional averages paying taxes indicators like time to comply, number of payments, total tax and contribution rate, post filing index, electronic payments for tax are increasing in popularity. The number of payment indicators seems to improve under digital payment flatform. The improved digital tax payment system reduces time to comply under appropriate digital technology. Experience of digital tax return and tax compliances proven to improved significantly among countries and region have been scrutinized. All administrations of OECD high-income group, South Asia, Europe, and Central America make use of online tax portals. Governments around the World experience urgent issues like, meeting budget deficits, fighting informal economy, and increase voluntary compliance, or more long term and strategic goals, such as, addressing trends in the digital economy and the way people work. Country experience of the impact of policy changes are were explained by keeping the tax simple, on established principles for creating a tax system in line with the shifting  shape of employment. Country experience of changes took place in post filling index been documented under digital tax payment environment are presented                 

The design and implementation of fiscal policy. It is therefore fundamentally shaped by the reliability, timeliness, and detail of the information available to the government about the economy and its actors. This includes taxpayers’ incomes and assets, the identity and circumstances of social program beneficiaries, the employment status of workers, the size of the output gap, and the magnitude and timing of government transactions. Through digitalization, government can potentially conduct current fiscal policy more effectively—doing what we do now, but better—and perhaps before too long, design policy in new ways—doing things, that is, that we do not, and cannot, do now, by better systems,  tax administration. Abolishing cash and relying only on electronic consumer transactions make barter exchange more profitable. This form of tax evasion needs to be taken into account when designing tax systems in cashless economies.

New Challenges-and old ones that won’t go away. The implementation of new technology by governments must be appropriate to their capacity. Countries have absorbed new innovations at differing paces, reflecting the challenges of adopting technology in the public sector. Political, institutional, and human capacity constraints will continue to hinder government innovation and uptake of advanced technological solutions. 

Digital Inclusion.  In order to digitally administer tax payment and spending systems, governments must ensure that as many individuals and businesses as possible are able to access the digital world and are taking up digital technology. Complementary Institutional Reforms. Getting the Information, Privacy, Fundamental Limits, Looking Forward, Digitization and Tax Design, Digitalization and Commodity Taxation, Taxation of Corporate Income, Optimal Taxation of Capital Income, Jointness in Tax Systems, Taxation of Lifetime Income, Joint Taxation of Labor and Capital Income, Joint Taxation of Individual and Household Income,  Tagging in Nonlinear Tax Schedules,  Interactions between Tax Complexity and Costs of Tax Enforcement, improve the tax enforcement technology of the government, Country experiences, Kenya, India, Mexico, Estonia, Ghana have been shared.   

The Value of Digitalizing Government Payments in Developing Economies. Cash is common in government revenues and expenditures in the developing countries. Reducing leakage in government payments and tax receipts. Reducing fraudulent payments and tax evasion. Cost savings to government operations from digitalizing payment processing. Leakage and Fraudulent Payments Can Reach Half of Government Transfers to a Particular Group of Individuals. Fraudulent Payments for Ghost Workers, Leakage in Government- to-Government Payments,  Leakage in Household Subsidies, Improving Government Service Delivery have been presented. 

Increased digitalisation and the development of new analytical tools has significantly increased the efficiency and effectiveness of tax administration and has helped to reduce burdens to a greater or lesser extent for different taxpayer segments. Developments include: the introduction of greater verified reporting through third parties (for example, the integration of information into administration processes coming from financial intermediaries, other parts of government, other taxpayers and other tax administrations); the adoption of more reliable reporting systems (for example, the digitalisation of VAT invoices, online cash registers, the building of basic tax rules into accounting software etc.); the improved detection of possible non-compliance through better risk assessment modelling, using increasingly large amounts of digital data and advanced analytical techniques; improvements in services for taxpayers, including through e-filing, e-payment, online self- service tools and targeted help such as online live chats.

Factors for reaching the limits of current service and enforcement instruments, and the  impact of compliance burden, accessing and using information, changing work patterns, changing business models, changing societal expectation, privacy, security and transparency concerns, privacy and data ownership, data usage and transparency, tax administration in practice, setting the scene for a dynamic individual- multinational enterprise in transition needs to be considered in case of digitalizing the successful revenue system have been discussed.

Building Blocks of Digital Tax Administration needs sketch out about the end of the journey along the pathway. These include, digital identity, taxpayer touchpoints, Data management and standards, tax rule management and application, New-skill sets, and Governance frameworks have been detailed for doable digital tax administration in cooperation with other actors both domestically and internationally.  Examples of National digital identity Singapore, Norway–Consent-based loan application, Kenya–Digital tax payments, Australia-Single Touch Point (STP), Spain–Virtual Assistant tool for VAT, Finland–Skill set development, Russia–Tax monitoring are presented.

Vectors of digital transformation have been identified as going digital, scale without mass, dynamics of time, intangible capital and the new sources of value creation, transformation of space, empowerment of the edges, platforms and ecosystems. Criteria for technology trends in the data era for digital transformation have been considered as faster and cheaper, global data infrastructure, data at the centre, cloud and software, transforming the world of work, mind the gap and always-on lifestyle.

The Economics of Tax Evasion in Europe is detailed. The economic crisis has given governments the impetus to take on Europe’s massive shadow economy. Electronic payments can help tackle the problem. Change is coming fast these days. Globalisation and digitalisation have dramatically altered the way in which we live, work, and communicate. The shadow economy in Europe today is worth more than €2.1 trillion. It is facing increased scrutiny as national governments seek to balance budgets while avoiding the tax increases and benefit cuts that can hamper economic recovery. It is nurtured by several interlocking factors: the predominance of cash, a lack of transparency surrounding transactions, and limited enforcement of laws. The shadow economy offers questionable individual benefits at the expense of many, resisting the world’s increasing digitalisation and connectivity and hampering the public good. The size of the shadow economy in Europe reached a 10-year low in 2013, and is now estimated at €2.15 trillion. On average across Europe, the shadow economy is as large as 18.5 percent of economic activity (Friedrich Schneider, (2013). Friedrich Schneider (2013) reported  almost two-thirds of the shadow economy is concentrated in Europe’s five largest economic powers—Germany, France, Italy, Spain, and the United Kingdom. However, in Eastern Europe the shadow economy is much larger in relation to the size of the official economy than in Western Europe. In Austria and Switzerland, the shadow economy equals roughly 7 to 8 per cent of the size of those countries’ official GDP, compared to Poland, which has a shadow economy of €95 billion, compared to an estimated GDP of €400 billion, or 24 per cent. In Eastern European nations such as Bulgaria, Croatia, Lithuania, and Estonia, the shadow economy is almost 30 per cent the size of the official economy. 

Confronting the Shadow Economy can be addressed by smart focus to increased benefit.  Promoting digital payment payments and a secret weapon for remedy and breaking the cycle of shadow economy. The general measures to address the shadow economy directly. Fostering financial inclusion, and cash displacement.The shadow economy is nurtured by several interlocking factors. The predominance of cash, a lack of transparency surrounding transactions, and limited enforcement. Discourage cash circulation. Easy access to cash, particularly with no-fee automated teller machines (ATMs), slows down the transition to electronic transactions. Typically, the absence of ATM fees leads to uninhibited cash withdrawals and subsequent cash payment at the point-of-sale. Increased electronic payments can help countries increase revenues while reducing cash, the shadow economy’s key enabler. Public mandates to increase the use of electronic payments have proven to reduce the size and scope of the shadow economy. Banks and payment system companies can do their part through innovation in the area of low-value payments and by encouraging small merchants and public officials to use payment systems.

Tax structure in Bengal has been under continuous modification since independence after the Moghul, British and Pakistani colonial rule. The tax system being administered today is in many ways quite similar to what was described by Chanakya. The modern taxation system in India was introduced in the year 1860 by James Wilson during the British rule. Further codification was introduced in the year 1922. Further codification was introduced in the year 1922. This system continued and in 1961 a new attempt was made towards this, when Income Tax Act 1961 was brought into effect, which is more or less continuing with some modifications. The authority of the government to levy taxes in India is legitimized in the Constitution of Bangladesh, allocating the powers to levy taxes to the  Government and Local Governments, as per the scheme laid down in the constitution of Bangladesh (1973).

Digitalizing the Tax Collection and Ending Cash Transaction to Increase Revenue has become talk of the day. Tax compliance software has made it easier for professional tax preparers and taxpayers alike to prepare and file tax returns and information statements. Technology has also made it easier for taxpayers to substantiate their activities; the proverbial shoebox full of receipts is disappearing. All of these changes have undoubtedly facilitated the evolution of the in-come tax from its original class tax to the mass tax it is today. These changes have also facilitated the exponential growth of the tax expenditure budget, which is now the primary way in which the federal government engages in non-military discretionary spending. The technology has certainly affected the income tax, it has not affected its core elements. The income tax remains a selfreported, annually calculated tax. And the tax problems resulting from the cash economy—namely, that cash income is rarely reported accurately—continue to plague the income tax. 

Cash and the Income Tax Gap- the difference between the amount of income tax revenue that is by law supposed to be paid and the amount of income tax revenue actually collected—is attributable to cash income that is not reported. The lost tax revenue means that tax rates are higher than they otherwise would need to be to raise the same amount of revenue. The higher tax rates result in greater tax-induced distortions, including the adoption of tax planning strategies to reduce the tax burden. Cash is subject to counterfeit, and counterfeiters are becoming increasingly sophisticated. Cash is more easily stolen than electronic money. Cash must be secured during transit and where stored. Cash must be physically delivered to where it will be stored, resulting in transportation costs. Academic commentators have argued that governments should discourage cash transactions.The digital payment system technology ease transition to consumption tax. Technological innovations in payment systems should fortify the income tax by dramatically reducing the income tax gap as well as cash-induced distortions. It should be noted that it is possible to adopt a consumption tax system and still retain an income tax for high income taxpayers. A number of countries have done that.examples are UK, Germany, and France. One argument in favor of a consumption tax is the philosophical one that the private withdrawal of goods and services from the economy ought to be taxed, rather than the production of goods and services. Another is that an income tax discourages saving in favor of immediate consumption, while a consumption tax is neutral as to the timing of consumption. However, it is politically unlikely in the extreme that there would be no taxes imposed on corporate entities. 

We also must keep in mind that attitudes towards privacy and technology will certainly evolve as we inevitably move towards a paperless society. For example, the idea of electronic stock registration would surely have been a non-starter over much of the stock market’s history, yet physical shares are now nearly obsolete. And the information now voluntarily shared by Facebook users would have been considered extremely private in years past. Privacy concerns might also ensure that at least some cash transactions will continue to occur. People who place a high value on anonymous purchasing may continue to use cash. Even without cash, anonymous electronic currencies, such as bit coins, may be available. Other people might choose to use cash only when they are making purchases that they consider particularly private or sensitive. 

The persistence of cash transactions would pose a problem for a progressive retail sales tax. Ideally, the same amount of tax ought to be imposed whether payments are made in cash or electronically. The increasing prevalence of electronic payment systems should bolster the income tax by substantially reducing the tax gap and mitigating the distortions caused by the cash economy. On the other hand, technological innovation and the corresponding evolution of attitudes towards privacy could make a progressive retail sales tax quite feasible, which might spell the end of the income tax.