The Impact of Tax Administration Digitalization on Tax Systems in Latin America

The relevance of tax transformation in Latin America is driven by the chronically high tax gap, particularly in the area of indirect taxation, and the significant scale of informal economic activity. The study investigates the impact of tax administration digitalization on tax system performance over the period 2000–2023. The study examines two primary outcome indicators, namely tax revenue as a percentage of GDP and value-added tax (VAT) evasion rate. Digitalization is captured through the introduction of mandatory electronic invoicing and complementary digital tax instruments. Panel data techniques with fixed effects are employed to estimate the relationship between digital reforms and tax outcomes, controlling for macroeconomic conditions, economic development, and structural factors. The empirical results show that the adoption of digital tax administration tools has a positive and statistically significant effect on tax revenue and a substantial negative effect on VAT evasion in the long run. Countries implementing comprehensive digital reforms experience notable improvements in tax compliance, with particularly pronounced effects observed in Argentina following major digitalization milestones. The findings suggest that digitalization represents an effective policy instrument for strengthening tax systems in developing economies. Policymakers are encouraged to pursue comprehensive digital tax strategies that combine electronic reporting, data integration, and risk-based enforcement to achieve sustainable improvements in tax collection and fiscal governance.