Paper copies cost much more money and time.
Many tests given on the computer can be graded by the computer. Before you jump to laziness on the part of teachers, students learn better when given immediate feedback because incorrect methods don't have time to get locked in. I have marked 100+ paper exams over a weekend so students got their results back on Monday for a test taken on Friday. It left me wiped out starting the next week and the students only glance at the total score rather than checking the problems they missed and finding their errors.
The computer can individualize instruction. So students must demonstrate a skill multiple times correctly before moving to the next skill. Which means the teacher can more quickly see where students are struggling and work on that skill with that student.
We need to continue to improve the quality of the screens to better match paper, but other factors come into play.