Enforcing compliance with tax regimes should be easy. People and businesses declare their earnings, dues are calculated, and payments received. That’s the ideal. But, of course, in the real world it’s not like that. In fact one estimate suggests that tax avoidance and error is costing 145 of the world’s economies US$3.1 trillion annually.
It’s a huge sum, but there is evidence that the worm is turning. Indeed, I believe a revolution is underway. It’s one that has the potential to transform the ability of tax agencies worldwide to enforce compliance. Serial tax evaders and late payers are in for a surprise. And the driving force of this revolution? Digital.
Digital is putting more information in the hands of tax agencies than ever before. But even more than that, digital offers the opportunity to analyze and interpret this information and use it to drive tax compliance. Tax agencies can leverage new data sources and analytical techniques both to provide a more personalized service and to nudge people to be more compliant in real time.
With a better understanding of why a taxpayer isn’t complying – or is likely to become a defaulter – an agency can manage risk by customer across multiple taxes (personal, inheritance, VAT, corporation etc), generate a risk alert and prioritize and refer the electronic case file to the best available team.
Digital communication channels, methods and campaigns are already being used to drive up voluntary compliance via targeted and tailored services. So, for example, a tax agency might personalize its intervention with a taxpayer by connecting it to a transaction, such as filing a tax return. This intervention could be a simple reminder or pro-active service bundling and content tailoring – all depending on customer need.
Digital is truly changing the game. To find out how Capgemini is helping tax agencies close the tax gap by tapping into the digital economy, read our paper to learn more.