Tackling Fraud, Error and Non-Compliance with Digital Solutions

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The fight back begins. Tackling fraud, error and non-compliance with digital solutions With contributions from Jan-Jaap Harkema Enforcing tax compliance 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. For instance, the IRS paid out […]

The fight back begins. Tackling fraud, error and non-compliance with digital solutions

With contributions from Jan-Jaap Harkema

Enforcing tax compliance 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. For instance, the IRS paid out more than $110 billion in tax credits over the past decade to people who didn’t qualify for them, according to a Treasury report.

It’s a huge sum that is echoed in tax and benefit administrations across the world. So it’s no wonder that government agencies are looking for ways to outsmart the fraudsters, evaders and late payers. And they’ve got a valuable tool in their arsenal: digital. It is transforming the way in which government, citizens and businesses interact. Digital makes it harder for the fraudsters and evaders to hide. It helps to push defaulters to pay their dues. How? Because tax and benefit agencies can now bring together the mass of citizen and business information previously sitting in different information silos across government departments and in multiple communications channels. Digital offers the opportunity to analyze and interpret this information and use it to drive tax compliance. 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, generate a risk alert and prioritize and refer the electronic case file to the best available team.

Digital tools and analytical techniques, such as predictive analytics, can help agencies spot mismatches between a taxpayer’s economic activity and his reported taxable income. So a taxpayer paying tax on an income of just $40,000, yet with lifestyle indicators suggesting he possesses multiple properties and a high-spec car will be flagged before he cheats the system.

Thus, digital has the potential to return millions, even billions of dollars to government. Capgemini and SAS are already making this a reality for a number of agencies. Capgemini’s Trouve solution for tax and benefit agencies enables predictive analytics and the cross-matching of data. And it features new approaches to managing risk, such as upstream risking using deterministic and predictive models. 

HM Revenue & Customs, the UK tax authority, is a leading example of using digital to tackle fraud. They use Connect, their analytics solution, to cross-match one billion internal and third party data items to uncover hidden relationships across organizations, customers and their associated data links. HMRC has so far recovered £2.6bn ($4.2 billion) additional tax as a result of Connect

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