Digitalization of the Tax System and Its Legal Requirements: A Comparative Study of Iran and the European Union

Abstract

The digitalization of tax administration has transformed the mechanisms through which tax authorities identify taxpayers, collect information, assess liabilities, monitor compliance, and resolve disputes. Electronic registration, digital invoicing, integrated databases, automated reporting, algorithmic risk assessment, and artificial intelligence have increased administrative efficiency and enhanced the capacity of governments to combat tax evasion. At the same time, these developments have generated important legal concerns relating to legality, transparency, data protection, cybersecurity, procedural fairness, accountability, and effective taxpayer remedies. This study examines the legal requirements of tax-system digitalization through a comparative analysis of Iran and the European Union. Using a descriptive-analytical and comparative legal method, the study evaluates the legal foundations of digital tax administration, the Iranian framework governing electronic tax procedures and taxpayer information, and the European approach to digital taxation, administrative cooperation, data governance, and taxpayer rights. The findings indicate that Iran has made significant progress in developing digital tax infrastructure, particularly through electronic taxpayer systems, sales terminals, remote tax services, and increasingly integrated information mechanisms. However, the legal regulation accompanying this technological transformation remains comparatively fragmented, particularly in relation to personal-data protection, automated decision-making, algorithmic transparency, cybersecurity obligations, inter-agency data sharing, and procedural safeguards. The European framework demonstrates a more integrated approach in which tax digitalization operates alongside broader principles of proportionality, purpose limitation, transparency, good administration, human oversight, and effective judicial protection. The study concludes that Iran should move from a predominantly technology-centered model toward a rights-based model of digital tax governance. Such reform requires clearer statutory rules governing taxpayer data, automated decisions, electronic evidence, cybersecurity, notification procedures, administrative accountability, and meaningful human review, while ensuring that technological efficiency does not undermine tax justice or taxpayer rights.