Digitalization of Business – Implications on Tax Evasion Dimensions

Abstract

Abstract Digitalization and technological advancements have changed how taxes are reported, controlled, and audited globally, as well as the speed, quality, and accuracy of the data used in those procedures. The prospects of digitization have been recognized by tax authorities, accountants, policymakers, regulators, and taxpayers, who have begun to reap the advantages of e-services, software, applications, websites, etc. This study explores the impact of business digitization on many facets of tax evasion. The amount of digitalization adoption is gauged using the World Bank's digitalization adoption index, and tax evasion is represented by the shadow economy. The study is based on a vast dataset that contains information from 155 nations. A regression model was employed to assess the relationship between digital adoption and tax evasion. The analysis shows that inflation, unemployment, and economic freedom did not have a significant effect on tax evasion. The findings show a negative and significant relationship between business adoption of digitalization and tax evasion, suggesting that digitalization aids in lowering tax evasion. The results may help authorities see digitization as a powerful tool for preventing financial crimes. Investment in technology may increase tax collections and help governments allocate resources more effectively. To increase the effectiveness of tax collection and monitoring, governments should focus on accelerating the digitization process, particularly in emerging nations. The advantages of investing in digitization will outweigh the expenditures, even though it may result in higher startup costs for emerging economies.