When enforcement goes digital: Balancing revenue and compliance costs

Policy brief Jan 2026 Tax, Sustainable Growth, Tax compliance, SMEs and Tax for Growth

Digital VAT compliance costs are large and highly regressive, threatening small business viability. Small firms spend over 100% of VAT remitted on compliance, while large firms spend only 15-20%. Developing countries need tailored strategies, not technological transplants, to ensure they can balance benefits with compliance costs