1. The Tax Gap
The tax gap -- or the gap between taxes owed to the government and those actually collected -- is an ever-present factor driving all tax administrations. Closing the tax gap would both increase revenue and positively impact the trust in the tax system on the part of those who voluntarily pay what they owe.
2. The Need to Reduce Costs
Tax administration agencies collect the money coming into government, but they still must compete with other departments for funds to operate. They, like all other agencies, must find ways to reduce operational expenses while maintaining the same -- or higher levels -- of productivity.
3. The Aging Population
Citizens are living longer and requiring services for longer periods of time, while the number of young people entering the workforce to pay for those services is not keeping pace.
4. Citizen Expectations
Citizens are used to having any product or service available to them anywhere, anytime, on any device. Tax agencies are grappling with how to meet these expectations in a way that drives business value with legacy systems not designed to support such services.
5. Globalization of Tax
Tax agencies are just beginning to scratch the surface on the impact of globalization on their operations. This reality is not only driven by multinational corporations finding ways to reduce taxes through relocating revenue, but also by global citizens who have financial considerations in multiple countries and who may be working consciously to hide income and are willing to switch their citizenship to reduce individual taxes
We’ve identified the challenges and new realities tax management agencies face -- what are the solutions? In a word: Technology. Modern technology provides tools which can be of substantial assistance to tax administrators seeking to make the progress expected of them.
Applying Analytics
The use of analytics helps tax revenue agencies prevent and better detect fraud. For one, analytics can help administrators make better selections to reduce no change audits and increase revenue. This is particularly true if the agency has access to multiple sources of internal and external data. The sophisticated technology used to select better audit cases can also be used for more refined up front screening of filings as they come into the system, stopping questionable refunds from going out the door and helping taxpayers to correct errors without the need for an audit.
Another new wave of analytical technology is beginning to provide tools for the tax compliance officer actually working the audits or other cases. These tools provide visualization and data modeling for the auditor to analyze taxpayer behavior, audit results or criminal fraud detection.
Better Use of Mobile Technology
Many tax administrations have at least begun the journey toward providing mobile services to taxpayers with smartphones and tablet PCs. However, much more remains to be done to match the services taxpayers get from their banks and other service providers. For example, tax agencies need to apply a coherent business and technical strategy that produces the optimal experience for taxpayers in the most efficient way for the tax agency. The absence of a consistent, user-tested look and feel across all applications and a common technical way of providing the applications can cause issues.
Acquiring the right platform for this service’s effective deployment is key. One best practice is for the deployment to include API standards which help external stakeholders such as accountants or payroll service providers build interfaces with their own value-added apps for their clients. It would be best for each government to have a common look and feel and technical approach across departments.
Tax administrations could also be doing more to use mobile technology with their own employees -- especially those who spend much time in the field. Easy, real-time access to office systems could reduce trips back to the office while promoting faster case resolution, increased caseloads and faster collections through mobile payment systems.
Leveraging Social Media
Tax agencies need to learn how to utilize social media to better understand taxpayers as well as put forward their own messages. A good number of tax administrations are already using websites like LinkedIn and Monster for recruiting, and are posting recruiting or educational messages on YouTube. But this is just a small part of the potential. There will be a steep learning curve in how to get business value from these channels.
One of the first steps begins with the acquisition of analytical tools that can be used to gather and analyze content from social media so that impact can be assessed. Additionally, it is almost certain social media is being used by some percentage of employees inside the tax administration -- specially younger employees. Tax administrations need to understand this reality to gain business value inside the organization -- for education, broader knowledge management, team activities and community building.
Learn more about how tax agencies can leverage technology to create needed changes.
