Tax authorities face a growing challenge: vast volumes of disconnected data that hinder fraud detection, risk assessment, and global compliance. Integration offers a strategic path forward.
Tax administrations today are inundated with data. From corporate filings and tax returns to country-by-country reports, bank statements, and registry documents, the volume is unprecedented. Yet instead of enabling clarity, this data often creates confusion. It sits in silos governed by incompatible formats, restrictive rules, and legacy systems that don’t talk to each other.
This fragmentation isn’t only a technical issue; it’s a strategic one. Such incompatibility limits visibility across jurisdictions, slows investigations, and undermines compliance efforts. In a world where agility and data integrity are non-negotiable, tax authorities need more than modernization – they need connection.
The hidden costs of data fragmentation
Disconnected systems create blind spots. Without a unified view of taxpayer behavior, critical patterns of evasion can go unnoticed. Schemes leveraging circular ownerships and tower structure – where funds cycle through multiple jurisdictions to obscure their final destination – may slip past investigators. Complex corporate structures can conceal beneficial ownership, making enforcement difficult since the final recipient or destination is hidden.
Even when data is available, inconsistencies in formats, identifiers, and standards complicate integration. And, despite significant progress in digitalization, many administrations remain constrained by small teams and outdated infrastructure or lack the capacity to build custom integrations or invest in advanced analytics.
The result? Operational inefficiencies, reduced accuracy, and missed opportunities. Manual processes and slow audits. Analysts spend more time reconciling records than assessing risk. And fraud goes undetected—not because the data isn’t there, but because it isn’t connected.
What’s at stake for tax authorities?
The risks of failing to modernize are significant. The most immediate consequence is revenue loss: Tax authorities risk missing billions in uncollected taxes due to undetected evasion.
And the impacts extend beyond revenue. Disconnected systems make it harder for tax authorities to respond to the obligations presented by international frameworks, such as Base Erosion and Profit Shifting (BEPS)and Pillar Two, which demand cross-jurisdictional visibility. Then there’s reputational risk: When enforcement feels inconsistent, public confidence is compromised. Taxpayers expect fairness and transparency–and authorities without the right tools risk falling behind.
Building a data integration strategy for tax authorities
The path forward begins with data integration. This isn’t about centralizing every dataset. It’s about linking internal and external data using shared identifiers and standards. It’s about creating a reference layer that allows systems to match records efficiently and securely with a view to create a more complete and consistent perspective of the taxpayer across the administration.
The keyring model offers a flexible framework. It connects internal tax identifiers–such as taxpayer IDs and filing references–with external identifiers like LEIs, registry IDs, and corporate entity codes. Technically, it relies on schema alignment, probabilistic entity resolution, API-based data feeds, and open standards.
Importantly, it doesn’t require a full infrastructure overhaul. Authorities can start small–linking priority datasets–and scale as resources allow. Over time, this foundation supports more advanced applications:
- AI-driven fraud detection that identifies suspicious patterns in real time
- Cross-border collaboration that enables verified data sharing
- Predictive risk profiling that prioritizes audits and investigations
- Evaluation of the impact of certain policies thanks to historical data
Broader strategies for transformation
Integration is critical, but it’s only one part of the roadmap. Tax authorities can also:
- Build master data registries to consolidate taxpayer records and improve accuracy
- Adopt open data standards to facilitate seamless exchange across departments and jurisdictions
- Use middleware to connect legacy systems with modern APIs, avoiding costly overhauls
- Share verified datasets with other governments to enhance cross-border compliance
These strategies allow for incremental modernization. They reduce operational disruption and align with resource constraints, making transformation achievable even for smaller tax administrations.
How Moody’s can help
Moody’s provides structured data and tailored delivery options designed to respond to the needs of tax authorities. Our solutions support tax risk analysis, uncover hidden ownership structures, and automate risk assessments and case selection. We specialize in integrating internal systems with external data sources, helping authorities build a foundation for interoperability, while aligning with international standards.
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To learn more about how Moody’s can support your digital transformation journey, please get in touch with our team.
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