Using Analytics to Close the Tax Gap
Timothy Powers 270003F3FN firstname.lastname@example.org | | Tags:  smarter-analytics business-rules-management analytics business-analytics business_analytics fraud big-data government tax
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We tend to look at government tax collection agencies as bad guys. Sure, they “take” our hard-earned money, but that money often goes to fund vital public service programs.
Here in the United States, those that plan to file and pay their personal income tax returns by Tuesday, April 17 are among the 86 percent of people that are typically compliant.
The real “bad guys” are actually those 14 percent who continually add to the growing “tax gap,” the difference between the annual amount of taxes owed and the amount voluntarily paid on time, which is now averaging more than $350 billion annually.
It’s the focus on these individuals where the work of tax collectors will kick into high gear with the use of Business Analytics. This software makes it easier for tax collection agencies worldwide to pursue and maximize returns on habitually delinquent accounts, and minimize the financial burden on compliant taxpayers.
Tax agencies primarily use audits to ensure compliance with tax laws and maintain associated revenue streams. By using Business Analytics, tax agencies can now quickly risk-assess accounts and accurately identify those with a high probability of delinquency. It also helps determine the most profitable collection strategies and saves funds by focusing limited audit resources on the most productive cases.
For example, The New York State Department of Taxation and Finance has saved more than $889 million in tax revenue that would have been lost to the state and made up with more taxes on honest taxpayers or cuts in state services.
With a combination of business rules and analytics from IBM, New York has transformed its approach from “pay and chase” to “next best case” that results in the highest rate of return.
Government agencies are becoming more efficient by reducing the number of audits performed on compliant accounts, and more effective by supporting federal, state and city programs with recovered tax dollars.
Business Analytics allows tax organizations to analyze and identify patterns in multiple data sources, such as taxpayer profiles, previous filings, call center notes and audit history; and share these findings visually across geographic and jurisdictional boundaries.
Prioritizing delinquent accounts based on debt size and likelihood to pay allows agencies to anticipate taxpayer behaviors and events to identify next best action to take with each account as well as optimize staff resources.
For instance, sometimes a phone call or a letter is the best strategy for certain accounts, while audits on accounts that yielded high returns can be focused on new returns with similar attributes.
As more and more tax revenue is lost due to fraud, tax evasion and various forms of tax cheating, it’s time for governments to turn a little investment in analytics technology into a tax return everyone can appreciate.
For more information:
For more information:
· Watch the Business Analytics Tax Fraud demo
· Read the case study on the New York State Department of Taxation and Finance