Digital transformation of local taxation

Abstract

The article examines the essence and practical aspects of the digital transformation of local taxation in Ukraine and its role in strengthening the financial capacity of territorial communities. The purpose of the study is to substantiate conceptual approaches to the digitalization of local taxation, systematize digital tools, and identify priority areas for their implementation to improve the formation of local budget revenues. The study defines digital transformation of local taxation as a systemic change in the organizational and information model of tax administration based on the integration of digital data, information resources, automated data exchange, geoinformation systems, Big Data, and artificial intelligence. It is substantiated that digital integration improves the identification and registration of taxable objects, eliminates discrepancies between information resources, expands the tax base, reduces the shadow economy, and strengthens tax compliance. The authors systematize promising digital instruments, including municipal geoportals, electronic registers and databases, taxpayer e-cabinets, automated notifications, Big Data analytical modules, artificial intelligence algorithms, and Smart City platforms. Their role in mobilizing local revenues, reducing transaction costs, improving transparency, and strengthening taxpayers’ trust in local self-government bodies is determined. A causal relationship is substantiated as follows: digital data integration → optimization of taxable object registration → expansion of the tax base → reduction of the shadow economy → increased tax compliance → growth of own revenues → resilience and flexibility of local finances → financial self-sufficiency of the territorial community. The institutional model “State Tax Service – territorial community – taxpayer” is proposed, providing digital integration of information while preserving the functional distribution of powers among the participants. Particular attention is paid to the use of GIS, Big Data, and artificial intelligence for risk-oriented tax control, identification of potential tax reserves, and improvement of tax payment discipline. Priority areas for further digital transformation include the integration of land, property, and fiscal data, development of electronic taxpayer services, formation of digital tax profiles of territorial communities, and strengthening of cybersecurity and digital competencies. The results can be used to improve local tax administration and strengthen the financial sustainability, resilience, and self-sufficiency of territorial communities in Ukraine.