Ethiopia’s integration of digital ID and tax system could yield many benefits – ICTD

Addis Ababa, May 11, 2024 (FBC) – According to an independent analysis, integrating Ethiopia’s national ID system with its tax system could enhance the quality of tax data, improve the taxpayer experience, strengthen compliance monitoring and enforcement, and expand the country’s tax base.

The International Centre for Tax & Development (ICTD) has identified five potential benefits to Ethiopia based on a recent analysis of tax reforms in Uganda and Ghana, published by the Institute of Development Studies. Both countries integrated their national digital ID with their tax systems as part of broader digitization initiatives, which have shown early success. Nigeria’s President has also been discussing an integration between the country’s national ID and taxation systems.

The Fayda integration was completed in December, with all taxpayer identification numbers (TINs) linked with the individual’s Fayda number. TIN registration already included biometrics collection, leading to the credential’s use for the delivery of other public services. Shifting the biometrics collection responsibility to the national ID system, with its support from international development partners, makes the system more affordable.

The changes could assist Ethiopian tax authorities in shifting to data-centric operations.

Misconceptions creating mistrust of the system could pose a barrier to adoption too high for the tax system to realize the potential benefits ICTD calls out, the report warns. The establishment of a strong data protection regime could help.