Nirmala Sitharaman Flags Digitalisation Tax Challenges, Calls for Global Coordination

Finance Minister Nirmala Sitharaman has warned that rapid digitalisation, new-age financial products, and complex ownership structures are creating unprecedented challenges for global tax systems. Speaking at the 18th Global Forum Plenary on Transparency and Exchange of Information for Tax Purposes, hosted by the OECD in New Delhi, she emphasised that tax transparency must be treated as a “foundation for sustainable development and fiscal resilience.”

In her address, the minister highlighted that the global tax environment is evolving rapidly, making international cooperation more critical than ever. “These are not challenges that any one country can address alone,” she said.

Digitalisation and New-Age Financial Products Creating Tax Vulnerabilities

Sitharaman pointed out that the digitalisation of economies, the growth of innovative financial products, and the emergence of evolving beneficial ownership structures are reshaping tax policy challenges across jurisdictions.

She said these developments are generating both opportunities and vulnerabilities. While the digital shift expands economic scope, it also pushes tax authorities to rethink governance frameworks to protect fiscal stability.

The finance minister stressed that issues around confidentiality and cybersecurity are becoming central concerns, as the exchange of tax information between countries becomes more integrated. With sensitive financial data being shared globally, maintaining security standards is vital to safeguarding the system.

Need for Global Cooperation to Prevent Illicit Financial Flows

Sitharaman underscored that without strong cross-border coordination, it becomes harder to tackle illicit financial flows, tax evasion, and leakage of national wealth.

“When national wealth escapes legislative taxation, it creates both revenue and development gaps, particularly for emerging economies,” she said.

She argued that transparency mechanisms are crucial for countries trying to mobilise domestic resources, especially those dealing with widening development expectations.

Also Read: RBI Imposes ₹91 Lakh Penalty on HDFC Bank for Compliance Lapses

Transparency as a Driver of Sustainable Development

Reiterating the importance of tax transparency, Sitharaman said it must be seen as more than just a compliance requirement. Rather, it is a key enabler of sustainable development, as transparent systems ensure better revenue mobilisation, stronger public services, and improved welfare outcomes.

“Public infrastructure, education, health services and welfare programmes all depend on domestic resources,” she said.
She noted that, particularly for developing nations, every rupee or dollar recovered through transparency helps bridge development gaps.

The finance minister reminded that fairness, credibility and trust are central to improving tax morale among citizens. “Citizens are more willing to participate when they are certain that the system rewards honesty and acts firmly against evasion,” she added.

She emphasised that improved tax morale in India did not come from enforcement alone but from simplification, parity and sustained trust-building efforts.

India’s Experience: Stronger Voluntary Compliance

Highlighting India’s progress, Sitharaman said voluntary tax compliance has strengthened significantly over the past decade.

She said India’s laws addressing illicit financial assets and undisclosed foreign holdings reflect the government’s commitment to transparency. India also actively participates in both information exchange on request and automatic exchange of information frameworks.

These mechanisms have played a critical role in enabling tax authorities to track financial activity across borders and reduce evasion.

Digital Economy Taxation and Crypto Reporting Need Technical Innovation

Revenue Secretary Arvind Shrivastava also addressed the session, noting that new-age tax challenges require advanced tools and global coordination.

He highlighted two emerging concerns:

• Taxation of the digital economy, where cross-border, intangible transactions complicate revenue attribution.

• The growing need for a crypto assets reporting framework, as cryptocurrencies and digital tokens blur traditional financial boundaries.

Shrivastava said these shifts demand “both technical innovation and coordinated action,” adding that the evolving financial landscape requires flexible and modern tax frameworks.

Global Momentum for a More Accountable Tax Future

Sitharaman and Shrivastava’s remarks reflect the wider global push for transparency as countries grapple with evolving financial structures, expanding digital markets, and rising expectations for fiscal accountability.

The finance minister stressed that transparency is central to maintaining fiscal resilience and ensuring long-term economic development.
She said the connection between transparency and public trust has deepened, both domestically and internationally.

“Fairness and credibility, when demonstrated in practice, encourage participation far more effectively than coercion,” she noted. She added that this lesson holds relevance beyond national borders and is crucial for building a stable financial ecosystem globally.

Key Takeaway

Sitharaman’s address highlighted a clear message:
As digitalisation accelerates and financial systems evolve, the world must collaborate to build stronger, safer, and more transparent tax frameworks.

For emerging economies, the stakes are even higher — every unit of revenue mobilised through transparency strengthens development efforts and boosts future resilience.

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