Digital transformation of tax administration, a crucial source of government fiscal revenue, enhances tax collection efficiency and compliance, reduces tax evasion, and increases fiscal revenue, thereby providing more stable funding sources for local governments. This study examines the relationship between digital tax administration and local government debt, using data from Chinese prefecture-level cities from 2009 to 2021. The findings indicate that digital tax administration significantly reduces the level of local government debt. Furthermore, heterogeneity analysis reveals that the impact is more pronounced in the eastern regions and areas with higher levels of informatization. This study aims to provide new perspectives and approaches for the digitalization of tax administration and local government debt management, thereby promoting the modernization of tax governance and the healthy development of local finances.