Global Innovation Index 2021: Innovation Investments Resilient Despite COVID-19 Pandemic; Switzerland, Sweden, U.S., U.K. and the Republic of Korea Lead Ranking; China Edges Closer to Top 10
Published by WIPO, in partnership with the Portulans Institute and our corporate partners: The Brazilian National Confederation of Industry (CNI), Confederation of Indian Industry (CII), Ecopetrol (Colombia) and the Turkish Exporters Assembly (TIM).
Governments and enterprises in many parts of the world scaled up investments in innovation amid the massive human and economic toll of the COVID-19 pandemic, the Global Innovation Index 2021 showed, illustrating a growing acknowledgement that new ideas are critical for overcoming the pandemic and for ensuring post-pandemic economic growth.
Scientific output, expenditures in research and development (R&D), intellectual property filings and venture capital (VC) deals continued to grow in 2020, building on strong pre-crisis performance. Notably, R&D expenditures showed greater resilience during the pandemic-linked economic downturn than in previous slumps.
However, the impact of the crisis has been highly uneven across industries, according to to a new GII feature, the Global Innovation Tracker. Firms with outputs including software, internet and communications technologies, hardware and electrical equipment industry and pharmaceuticals and biotechnology amplified their investments in innovation and increased their R&D efforts. In contrast, firms in sectors heavily hit by the pandemic’s containment measures and whose business models rely on in-person activities – such as transport and travel – cut back their outlays, the tracker showed. The GII 2021 shows that technological progress at the frontier holds substantial promise, with the rapid development of COVID-19 vaccines being the greatest example.
“This year’s Global Innovation Index shows us that in spite of the massive impact of the COVID-19 pandemic on lives and livelihoods, many sectors have shown remarkable resilience – especially those that have embraced digitalization, technology and innovation”, said WIPO Director General Daren Tang. “As the world looks to rebuild from the pandemic, we know that innovation is integral to overcoming the common challenges that we face and to constructing a better future. The Global Innovation Index is a unique tool to guide policy-makers and businesses in charting plans to ensure that we emerge stronger from the pandemic.”
In its annual ranking of the world’s economies on innovation capacity and output, the GII shows that only a few economies, mostly high income, consistently dominate the ranks. However, selected middle income economies, including China, Turkey, Viet Nam, India, the Philippines, are catching up and changing the innovation landscape.
Switzerland, Sweden, U.S., and U.K. continue to lead the innovation ranking, and have all ranked in the top 5 in the past three years. The Republic of Korea joins the top 5 of the GII for the first time in 2021, while four other Asian economies feature in the top 15: Singapore (8), China (12), Japan (13) and Hong Kong, China (14).
The geography of global innovation is changing unevenly
Northern America and Europe continue to lead the global innovation landscape as regions by far. The innovation performance of South East Asia, East Asia, and Oceania has been the most dynamic in the past decade. It is the only region closing the gap with the leaders.
China is still the only middle-income economy that makes it to the top 30. Bulgaria (35), Malaysia (36), Turkey (41), Thailand (43), Viet Nam (44), the Russian Federation (45), India (46), Ukraine (49), and Montenegro (50) make it to the GII top 50.
However, only Turkey, Viet Nam, India and the Philippines, are systematically catching up. Beyond China, these larger economies have the potential to change the global innovation landscape for good.
“The GII shows that although emerging economies often find it challenging to steadily improve their innovation systems, a few middle-income economies have managed to catch up in innovation with their more developed peers”, says Former Dean and Professor of Management at Cornell University, Soumitra Dutta. “These emerging economies, among other things, have been able to successfully complement their domestic innovation with international technology transfer, develop technologically dynamic services that can be traded internationally, and ultimately have shaped more balanced innovation systems”.
New findings for the GII 2021
Investments in innovation reached an all-time high before the pandemic with R&D growing at an exceptional rate of 8.5 percent in 2019.
Government budget allocations for the top R&D spending economies, for which data is available, showed continued growth in 2020. The top global corporate R&D spenders increased their R&D expenditures by around 10 percent in 2020, with 60 percent of these R&D-intensive firms reporting an increase.
The number VC deals grew by 5.8 percent in 2020, exceeding the average growth rate of the past 10 years. Strong growth in the Asia Pacific region more than compensated for declines in North America and Europe. Africa and Latin America and the Caribbean also registered double-digit increases. First quarter figures for 2021 suggest even more vibrant VC activity in 2021.
The publication of scientific articles worldwide grew by 7.6 percent in 2020.
“Among the key findings of GII 2021, changes happening among the top economies are quite remarkable. In addition to Republic of Korea’s spectacular jump (from 10th to 5th), the continuation of progress made last year by France (11) and China (12) are confirmed, as both are now knocking at the door of the GII top 10. Those three examples underline the continued importance of governmental policies and incentives to stimulate innovation. Altogether, COVID did not disrupt the trends identified in 2019-2020, as financing (public and private) continued to remain relatively abundant for innovative firms, even outside the health and bio-sciences fields,” says INSEAD Distinguished Fellow and report co-author Bruno Lanvin.
GII 2021 partners on innovation
“Innovation plays a key role in supporting sustainable growth and overcoming the crisis fueled by the Covid 19 pandemic. An ambitious national strategy, which prioritizes scientific and technological innovation to strengthen the industry, will make the economy more dynamic, promoting greater equity and social welfare.”
— Robson Braga de Andrade, President, National Confederation of Industry CNI)
“Nations need to strategize innovation to be able to face any future pandemic crisis. Investments in novel technologies, which include digital innovations, promoting stronger global collaborations, and pursuing sustainable innovation ecosystems will be key to safe-guard humanity from any similar adverse health crisis scenario. This will also minimise the impact of any future pandemic on our lives and the world economy at large.”
— Chandrajit Banerjee, Director General, Confederation of Indian Industry
“The COVID-19 pandemic exposed the growing need to accelerate digital transformation and to build agile and digitally-enabled business models that can respond to uncertainty and global trends that have accelerated such as energy transition. The GII network will open the possibility of collaborating with leading actors in science, technology and innovation, to contribute in finding flexible, long-term growth models towards a more sustainable future that benefit people and the planet.”
— Felipe Bayón Pardo, Chief Executive Officer, Ecopetrol Group
“The COVID-19 crisis has changed nations’ science, technology and innovation (STI) policies and led to prioritizing resilience, environmental sustainability and boosting innovation with new tools. To overcome the pandemic without lasting damage and reaffirm Turkey’s bright future, the Turkish Exporters Assembly enhanced digitalization, production mobilization, innovation-based development and new technologies”
— İsmail Gülle, Chair, Turkish Exporters Assembly (TİM)
Northern America, composed of the U.S. and Canada, remains the most innovative world region. The U.S. keeps its 3rd place for the third consecutive year, and Canada goes up to reach the 16th rank.
The U.S. leads in key metrics such as patents by origin, the quality of its universities and the impact of its scientific publications and in R&D intensive global companies. It also hosts the largest number (24) of top science and technology clusters in the world, led by the San Jose-San Francisco cluster. Canada tops in venture capital deals and joint ventures and strategic alliance deals.
Sixteen of the GII leaders in the top 25 are European countries, with seven of them ranking in the top 10.
Switzerland remains the world’s leader in innovation for the 11th consecutive year, and together with Sweden (2) has remained in the top three of the innovation ranking for more than a decade. Switzerland, Sweden, and the United Kingdom (4) have ranked in the top five in the past three years.
A total of 10 European economies go up the ranks this year, with France (11) and Estonia (21) progressing notably. Finland (7) leads worldwide in rule of law. Sweden leads in patent families and co-leads in international patent applications filed via WIPO’s Patent Cooperation Treaty (PCT) alongside Switzerland, Norway (20) tops in ICT use and expenditure on education, while the United Kingdom leads in the quality of its univerisities and the impact of its scientific publications. Switzerland is the regional leader in innovation outputs, and in particular in patents by origin, and intellectual property receipts.
South East Asia, East Asia, and Oceania
The innovation performance of the South East Asia, East Asia, and Oceania region has been the most dynamic in the past decade, closing the gap with Northern America and Europe. Five economies are world innovation leaders: the Republic of Korea (5), Singapore (8), China (12), Japan (13), and Hong Kong, China (14).
Since 2013, China has moved steadily up the GII ranking, establishing itself as a global innovation leader while approaching the top 10. It boasts 19 of the top science and technology clusters worldwide – with Shenzhen-Hong Kong-Guangzhou and Beijing in the 2nd and 3rd spots, respectively.
The Republic of Korea went up notably in innovation results and in particular in indicators trademarks, global brand value, and cultural and creative services exports. Malaysia (36) has been hovering close to the top 30 for 11 years but has yet to reach the mark.
Thailand (43), Viet Nam (44), the Philippines (51) and Indonesia (87) have moved up between 5 and 40 GII spots in the past decade. Thailand and Viet Nam rank in the top 30 worldwide for the sophistication of their markets, and the Philippines does so in knowledge and technology outputs. They are now leaders in other key innovation indicators too. Thailand leads in R&D financed by business and Viet Nam and the Philippines are world leaders in high-tech exports.
Central and Southern Asia
India (46) leads the region and has consistently gone up the ranks since 2015, after making it into the top 50 in 2020. The Islamic Republic of Iran (60) and Kazakhstan (79) follow.
India becomes 2nd in the lower middle-income group. It continues to hold world leadership in the ICT services exports indicator, and holds top ranks in other such as domestic industry diversification and graduates in science and engineering. Bengaluru, Delhi and Mumbai are in the top 100 science and technology clusters.
Uzbekistan is among the most notable movers, gaining 7 places to reach the 86th rank. The innovation performance of Kazakhstan (79) and Tajikistan (103) improved in 2021 but has been less steady over the past years. Tajikistan takes the 2nd place among the low-income group economies.
Northern Africa and Western Asia
Israel (15), Cyprus (28), the United Arab Emirates (UAE) (33) and Turkey (41) are leading this region. The UAE has moved up the rankings since 2018. Cyprus leads worldwide in ICT services imports and exports and mobile app creation, while Israel leads in R&D expenditures, venture capital deals and PCT patents. The UAE ranks in the top 5 in the number of researchers in businesses and R&D financed by the private sector. Turkey makes a big jump into the top 50 and continues to systematically catch up. It also hosts two leading science and technology clusters, Istanbul and Ankara.
Eight other economies in the region move up the ranks, including Oman (76), Egypt (94), and Algeria (120).
Latin America and the Caribbean
Chile (53) ranks first in the region, followed by Mexico (55) and Costa Rica (56). Only Chile, Mexico, Costa Rica, and Brazil (57) are in the top 60. Mexico aside, few have consistently upped their ranks over the past 10 years.
Eleven economies in the region go up the ranks, with Argentina (73), Paraguay (88), and Ecuador (91) making the most progress. Brazil goes up 5 spots and achieves its best rank since 2012; and together with Peru (71), it overperforms in innovation for the first time ever. Brazil also hosts the only Latin American science and technology cluster in the top 100, with São Paulo ranked 66th.
Chile has the most-balanced innovation system, ranking well in indicators such as computer software spending, tertiary enrolment and new businesses. Brazil performs well in intellectual property payments and E-participation; Peru leads in microfinance gross loans and Costa Rica in cultural and creative services exports.
Mauritius (52), South Africa (61), Kenya (85), Cabo Verde (89) and the United Republic of Tanzania (90) are leading this region. Only Kenya and the United Republic of Tanzania have been firmly in the top 100 and improved their performance over time.
Cabo Verde reaches the 89th place, a considerable increase from its 103rd place in 2013. Nine other economies in the region move up the ranks, including Namibia (100), Malawi (107), Madagascar (110), Zimbabwe (113) and Burkina Faso (115). Rwanda (102) regains the lead position among low-income economies.
Mauritius leads in venture capital deals. Namibia tops in expenditure on education and South Africa in market capitalization.
Sub-Saharan Africa is the region with the largest number of overperforming economies on innovation (6), with Kenya holding the record of outperformer for eleven consecutive years.
About the Global Innovation Index
The Global Innovation Index 2021 (GII), in its 14th edition this year, is published by WIPO, in partnership with the Portulans Institute and with the support of our corporate partners: the Brazilian National Confederation of Industry (CNI), Confederation of Indian Industry (CII), Ecopetrol (Colombia), and the Turkish Exporters Assembly (TIM). In 2021, an Academic Network was established to engage world-leading universities in GII research and support the dissemination of GII results within the academic community.
Since its inception in 2007, the GII has shaped the innovation measurement agenda and become a cornerstone of economic policymaking, with an increasing number of governments systematically analyzing their annual GII results and designing policy responses to improve their performance. The GII has also been recognized by the UN Economic and Social Council in its 2019 resolution on Science, Technology and Innovation for Development as an authoritative benchmark for measuring innovation in relation to the Sustainable Development Goals (SDGs).
Published anually, the core of the GII provides performance measures and ranks 132 economies on their innovation ecosystems. The Index is built on a rich dataset – the collection of 81 indicators from international public and private sources – going beyond the traditional measures of innovation since the definition of innovation has broadened. It is no longer restricted to research and development (R&D) laboratories and published scientific papers, and rather, is more general and horizontal in nature, including social, business model and technical aspects. For each economy a one-page profile is produced in which that economy’s performance on all indicators is recorded, relative to all other economies in the Index. The economy profiles also highlight an economy’s relative innovation strengths and weaknesses.
The GII 2021 is calculated as the average of two sub-indices. The Innovation Input Sub-Index gauges elements of the economy that enable and facilitate innovative activities and is grouped in five pillars: (1) Institutions, (2) Human capital and research, (3) Infrastructure, (4) Market sophistication, and (5) Business sophistication. The Innovation Output Sub-Index captures the actual result of innovative activities within the economy and is divided in two pillars: (6) Knowledge and technology outputs and (7) Creative outputs.
The index is submitted to an independent statistical audit by the European Commission, Joint Research Centre. To download the full report visit: www.globalinnovationindex.org.
Framework of the Global Innovation Index 2021
Corporate Network partners
Supported by the Portulans Institute, the GII Corporate Network comprises the Confederation of Indian Industry (the longest-standing corporate partner since 2008), the Brazilian National Confederation of Industry (a partner since 2017), as well as the Turkish Exporters Assembly and Ecopetrol Group in Columbia, which both joined this year. Their contribution is an important source of influence for the GII – firms and private sector entities are, after all, at the heart of innovation.
The Brazilian National Confederation of Industry (CNI) is the official organization representing Brazilian industry. Since its founding in 1938, CNI advocates the promotion of public policies in favor of entrepreneurship and national industrial production, besides articulating with the executive, legislative, and judicial branches of government, as well as with various organizations and entities in Brazil and around the world. CNI represents Brazil’s 27 state-level federations of industries, 1,276 sectorial employer’s unions, to which almost 1.2 million companies are affiliated with. In addition, it directly manages Social Service of Industry (Serviço Social da Indústria – SESI), National Service of Industrial Training (Serviço Nacional de Aprendizagem Industrial – SENAI) and Euvaldo Lodi Institute (Instituto Euvaldo Lodi – IEL). CNI also coordinates MEI – the Entrepreneurial Mobilization for Innovation, created in 2008 with the aim of embodying innovation into the strategy of companies operating in Brazil, as well as of improving the effectiveness of innovation policies and the innovation ecosystem in the country.
The Confederation of Indian Industry (CII) works to create and sustain an environment conducive to the development of India, partnering Industry, Government, and civil society through working closely with Government on policy issues, interfacing with thought leaders, and enhancing efficiency, competitiveness and business opportunities for Industry.
For more than 125 years, CII has been engaged in shaping India’s development journey and works proactively on transforming Indian Industry’s engagement in national development. The premier business association has over 9000 members, from the private as well as public sectors, and an indirect membership of over 300,000 enterprises from around 294 national and regional sectoral industry bodies.
With 62 offices, including 10 Centres of Excellence in India, and 8 overseas offices in Australia, Egypt, Germany, Indonesia, Singapore, UAE, UK, and USA, as well as institutional partnerships with 394 counterpart organizations in 133 countries, CII serves as a reference point for Indian Industry and the international business community.
Turkish Exporters Assembly (TİM) is the only umbrella organization of 61 Exporters’ Associations, representing over 100,000 exporters from 27 sectors. Since its establishment in 1993, TİM has aimed to ensure the uninterrupted continuation of the dialogue between the public and private entities to direct the export policy and to increase the competitiveness of Turkish exporters in the international arena. The primary mission of TİM is to establish a positive balance of trade in Turkey – where exports exceed imports – by making Turkey’s top firms ready to compete with the best on a global level. Innovation and entrepreneurship are inseparable from achieving competitive advantage. Understanding these concepts and finding meaning in public and sectoral consciousness, as well as making an effort to have the capacity to export in the fields in which we are competitive, are all essential parts of TIM’s corporate structure and action plans.
Ecopetrol is the largest company in Colombia and one of the main integrated energy companies in the American continent, with more than 17,000 employees. In Colombia, it is the leading company in the hydrocarbons value chain and, at the international level, Ecopetrol focuses on strategic basins in the American continent, with E&P operations in the United States, Brazil and Mexico. Most recently, with the acquisition of Interconexión Eléctrica S.A. (ISA), it has leading positions in the transmission business in Brazil, Chile, Peru and Bolivia, in road concessions in Chile, and telecommunications. We aspire to lead efforts for decarbonization and energy transition in the region, by applying innovation through 4 pillars of energy transition: competitiveness, diversification, decarbonization and TESG (technology, environmental, social, and governance), aligned with our goal of net-zero carbon emissions by 2050. As the leading energy platform in the region, and the first oil and gas company to be a GII corporate network partner, we ratify the conviction of the role of technology as a catalyst of sustainability, energy transition and decarbonization – where innovation is an articulating axis. This partnership will allow us to have a greater position in an international level by being part of the discussion around the development of innovation in the country, the role of the company as the engine of economic reactivation and opening the possibility of collaboration options with leading CT+i actors in the network, all of this, to continue making the impossible possible for the benefit of the company, our stakeholders and Colombia.
Academic Network Partners
In 2021, an Academic Network was established to engage world-leading universities in GII research and support the dissemination of GII results within the academic community, comprising of:
Portulans Institute (PI) is an independent, non-profit, non-partisan think tank based in Washington DC. Founded in 2019, PI aims to develop cross-community knowledge and dialogue on how people, technology and innovation contribute to sustainable and innovative growth, and inform policy-makers by producing independent, rigorous metrics and data-based research.
PI brings together a network of thought leaders from government, international organizations, the private sector, civil society and academia to drive a business agenda that invests in people, technology and innovation for a prosperous future.
In partnership with the Portulans Institute, the Global Innovation Index (GII), founded by Soumitra Dutta and Bruno Lanvin, is published by the World Intellectual Property Organization (WIPO). The GII has evolved into a valuable benchmarking tool that can facilitate public-private dialogue across policymakers, business leaders, and other stakeholders. The Portulans Institute also serves as the home for the GII Academic- and Corporate Network Partners.
Gender equality and digital development are inextricably linked. Yet globally, men are 21 percent more likely to be online than women, a figure that rises to 52 percent in low-income countries. The Web Foundation estimates that barriers that keep women and girls offline — high device and data costs, lower digital skills, and restrictive social norms, to name a few — have cost developing countries about $1 trillion over the last decade.
The Digital Development Global Practice recently launched a new approach to accelerate its work on gender equality, with an ambitious vision that centers women and girls across its financing and analytics. The approach orients solutions to the five foundational pillars of the digital economy: digital infrastructure, digital public platforms, digital financial services, digital businesses, and digital skills. It also emphasizes the need for more and better sex-disaggregated data and to tackle risks, such as algorithmic bias and online gender-based violence.
Within infrastructure, practical solutions that increase access, affordability, and usage are critical. Intentional design that locates public Internet access points in safe spaces (for example, libraries and community centers) is a good start. Other interventions that support the closing of adoption gaps improve the affordability of devices and data plans and tailor digital skills programs for women. Traditionally underutilized universal service and access funds can help. However, only four out of 69 countries have deployed these funds to close the gender digital divide. Device affordability schemes also show promise. The recently approved Uganda Digital Acceleration Project will test some of these innovations.
Digital Public Platforms
Access to digital public platforms often requires digital identification, which women lack compared to men. Barriers that women face often include legal requirements to present additional documents, for example, a marriage certificate. High registration costs and inconveniently located registration points also deter women. The Nigeria Digital Identification for Development Project conducted a qualitative study designed to understand the needs of women and marginalized groups, which surfaced several solutions. These include working through trusted networks and women’s groups to share information; locating registration centers close to communities; and designing registration policies that prioritize vulnerable groups. Other options include women-only registration centers, mobile registration services, and female enrollment agents.
Digital Financial Services
Digital payments, whether to provide wages, social assistance, or agricultural transfers, can save women time and provide added privacy, security, and control, thereby contributing to women’s empowerment. This is a key focus on the G2Px initiative, launched in early 2020 in partnership with the Bill and Melinda Gates Foundation.
In Benin, where an estimated 19 percent of women make or receive digital payments compared to 38 percent of men, another World Bank initiative aims to provide women smallholders with a safe and private place to store their money and connect them with other financial services. Complementary training on digital financial literacy for recipients and promoting a network of women agents can also help, as social norms often limit women’s ability to interact with male agents.
Women entrepreneurs often face a range of barriers, including unequal access to financing, legal discrimination, differences in skills, less access to networks, and more care responsibilities. They are also poorly represented in technology startups. To address these constraints, the Digital Cabo Verde Project aims to support women entrepreneurs with business and entrepreneurial mindset training, access to business networks, peer support, and mentoring.
Beyond comprehensive support for women-led businesses, tackling investor bias is critical. Research suggests that the persistent gender gap in financing cannot easily be explained by differences in education, experience, sector, intellectual property, or geography.
Building digital skills starts early with hands-on exposure to technology to build girls’ interest and confidence. Typically, complementing technical skills training with soft skills, engaging role models, and creating structured linkages to the labor market through internships, apprenticeships, and job placement programs have positive outcomes. The Kosovo Digital Economy Project, which trains rural women in programming and web design to become online freelancers, shows how digital skills training can create pathways to economic prosperity. Women with disabilities, older women, and illiterate adults may require tailored curricula and flexible programs with active outreach to develop their basic digital skills — another key area for engagement.
Cutting across these pillars is the need to address restrictive gender norms that prevent women from fully participating in the digital economy. Solutions to tackle these vary with context but addressing gender stereotypes and engaging men and boys are essential steps in shifting beliefs and behaviors.
Ensuring that women and girls have equal access to and use of digital technologies — mobile phones, computers, and the internet — is central to their economic and social empowerment and inclusive economic recovery. As we accelerate our efforts on the digital inclusion of women and girls, we call on our partners to join us in this ambitious agenda.
Some 2.9 billion people still have never used the internet, and 96 per cent live in developing countries, a new UN report has found. According to the International Telecommunication Union (ITU), the estimated number of people who have gone online this year actually went up, to 4.9 billion, partially because of a “COVID connectivity boost”.
This is good news for global development, but ITU said that people’s ability to connect remains profoundly unequal – as many hundreds of millions might only go online infrequently, using shared devices or facing connection speeds that hamper their internet use.
“While almost two-thirds of the world’s population is now online, there is a lot more to do to get everyone connected to the Internet,” Houlin Zhao, ITU Secretary-General said.
“ITU will work with all parties to make sure that the building blocks are in place to connect the remaining 2.9 billion. We are determined to ensure no one will be left behind.”
The UN agency’s report found that the unusually sharp rise in the number of people online suggests that measures taken during the pandemic contributed to the “COVID connectivity boost.”
There were an estimated 782 million additional people who went online since 2019, an increase of 17 per cent due to measures such as lockdowns, school closures and the need to access services like remote banking.
According to the document, users globally grew by more than 10 per cent in the first year of the COVID crisis, which was the largest annual increase in a decade. But it pointed out that growth has been uneven.
Internet access is often unaffordable in poorer nations and almost three-quarters of people have never been online in the 46 least-developed countries.
A ‘connectivity Grand Canyon’
Speaking in Geneva, Doreen Bogdan-Martin, Director of the ITU said: “The internet divide runs deep between developed and developing countries. Only a third of the population in Africa is using the internet.
“In Europe, the shares are almost 90 per cent, which is the gap between those two regions of almost 60 percentage points. And there is what the UN Secretary-General António Guterres, has called in his Common Agenda blueprint for the future, “a connectivity Grand Canyon”.
The report found that younger people, men and urban dwellers are more likely to use the Internet than older adults, women and those in rural areas, with the gender gap more pronounced in developing nations.
Poverty, illiteracy, limited electricity access and a lack of digital skills continued to hinder “digitally excluded” communities, ITU noted.
That is why tax administrations are undertaking the digital transformation and automation of their systems. The adoption of technology can enable successful and sustainable tax reforms, ensure the proper taxation of the digital economy, and reduce the obstacles to compliance. The COVID-19 pandemic, which led to a boom in the use of digital commerce, made this change especially urgent for tax administrations.
The transformation has progressed increasingly rapidly over the past decade, as the cost of digital technologies has plunged and powerful tools to develop applications have become more user-friendly. One example of the falling cost: Cloud storage is now over 50% cheaper than it was a few years ago.
Digital transformation is also being driven by the rapid growth of e-commerce, which is projected to expand 24% from 2020 to 2025, making it an increasingly important part of the tax base.
The increasing use of cashless payments, through mobile phones and other devices, is also powering the change. Such payments can be easily reviewed by tax administrations and often leave a digital trail that can be audited.
With these changes underway, taxation is likely to look a lot different in the future:
Instead of storing huge amounts of taxpayer data, administrations will have access to encrypted, distributed ledgers that allow them to capture tax information seamlessly and in real time. This has the added benefit of making tax administrations “less visible” to the public.
The decisions of the tax administrations will increasingly be supported and strengthened by artificial intelligence. But the system will need to be closely monitored for errors.
Tax administrations could become warehouses for more and more government data. That will give them a central role in the formulation of economic policy, enabling policymakers to review transactions in the economy and allowing better forecasting.
The tax system could become much more user-friendly. Services could include prefilled tax returns, taxpayers’ access to their own filing information, the sharing of data with banks to expedite credit approval, along with privacy preserving queries on the tax file by researchers and local communities.
Tax administrations will streamline the interface between taxpayers and tax officials, for instance by connecting corporate accounting systems with the tax administrations’ e-filing and e-payment platforms.
Making change work
Despite all the benefits, this transformation is up against major challenges. Research shows that most digital transformation initiatives don’t succeed. Of the $1.3 trillion spent in 2018, an estimated $900 billion was wasted.
The shift should also focus on providing value by simplifying procedures and permanently bringing taxpayers into the e-filing, e-payment, and e-document ecosystem. The value could be provided by reduced compliance costs, increased tax certainty, and higher compliance.
In addition, reform should aim to change the culture from managing processes to managing data, and administrations should focus on getting the right data. One high-income jurisdiction told us that there were errors in 15% of their taxpayer files and that 98% of returns could be prefilled with data from just banks.
The process can be cumbersome, but by providing finance and technical assistance, the World Bank has already supported administrators’ efforts on automation and digitalization in dozens of countries—benefiting governments and citizens alike.
ITU Digital World 2021 SME Awards showcase sustainable digital solutions, helping creative start-ups forge partnerships and attract investment
Inspiring technology solutions hold the potential to change and improve lives across the globe through the drive and dedication of small and medium-sized enterprises (SMEs).
Winning solutions from digital SMEs based in Hong Kong (China), Mexico, Saudi Arabia, Switzerland, South Korea, and the United States were showcased and announced at the ITU Digital World Awards Ceremony, the finale of the ITU Digital World 2021 event and a key SME promotion programme from the United Nations tech agency on Wednesday.
The International Telecommunication Union (ITU) – the UN’s specialized agency for information and communication technologies (ICTs) – has highlighted SMEs as crucial contributors to help harness the world’s ongoing digital transformation to ensure sustainable development.
The latest ITU Digital World Awards recognized outstanding SME contributions to advance connectivity, smart cities and smart living, e-health, digital finance, and education technology.
“Innovative tech SMEs – fast-moving and responsive to the needs of different markets on the ground – have a vital role to play in accelerating digital transformation,” said ITU Secretary-General Houlin Zhao. “Governments and the ICT industry need to act together to foster a climate that supports technology and business innovation, helping companies like our award winners scale up and flourish.”
Six winners emerged this year, spanning the five key categories.
The winners were:
Benefit Vantage Limited – Ipification
Hong Kong, China
URBIT GROUP LLC
United States of America
Baobabooks Education Sàrl
Kingdom of Saudi Arabia
SCE Korea, Inc.
Smart cities, smart living
Republic of Korea
ITU Deputy Secretary-General Malcolm Johnson recognized the winners and presented their certificates in the presence of Viet Nam’s Deputy Minister of Information and Communications, Phan Tam.
This seventh edition of the Awards marked the final event of a three-month online conference and exhibition co-hosted by Viet Nam. Opening in September, ITU Digital World 2021 also marked the 50th anniversary of ITU’s flagship Telecom conference and exhibition series.
During the ceremony, a new partnership for ITU with US technology firm Hewlett Packard Enterprise (HPE) was announced, aimed at accelerating the programme next year and equipping SMEs with access to HPE tools, networks, and mentoring.
Competitive selection The competition was open to all SMEs worldwide, with winning projects ranging from mobile authentication and information accessibility to connectivity for public transport, financial technology (fintech), creative writing, and healthcare powered by artificial intelligence (AI).A jury of experts, representing the fields of business, technology and entrepreneurship, selected the winners from a total of 133 eligible applicants from 53 countries.
Prepping transformative SMEs
The ITU Digital World Awards formed part of an expert-led SME Programme of online masterclasses and pitching for digital SMEs. Maintaining the virtual format, the final awards ceremony celebrated the creativity and innovation behind digital solutions meeting real-world needs.
The special masterclasses explored areas such as sustainable start-ups and SME-corporate collaboration, bidding for government procurement opportunities, customer service and innovation, e-health, designing for disability inclusion and fundraising. The SME Programme and Awards are key components of ITU Digital World 2021, which was co-hosted with the Government of Viet Nam and took place from September-December 2021.