The technical development, involving digitalization, artificial intelligence, automation, and machine learning, can challenge the current tax system and consequently the means to finance public sector activities in several ways. If technology replaces labor, a tax base that is taxed relatively hard will be replaced by a tax base (capital) that generates less tax revenue, and consequently, less total tax revenue will be collected. Maybe more importantly, digitalization weakens the link between economic activity and physical presence which challenges the very principles of taxation. Our tax systems rely on the ability to tie value or income to a physical location as well as being able to measure the value or income to be able to tax. Thanks to digitalization and globalization, firms can operate and make profits in countries without being physically present. Many individuals can now work from home, or even work-from-anywhere, partly, or entirely which gives them more freedom to choose where to reside, and possibly take the tax/public services bundle into account in the location decision. This chapter discusses the consequences of digitalization on nations’ ability to collect tax revenue and finance the public sector. In addition, possible changes and new ways to tax are discussed to mitigate the erosion of tax revenue due to digitalization. The chapter focuses on Sweden, a country with a tax system that may be extra vulnerable to digitalization and a country that is highly digitalized.