Digital Transformation of Tax Administration episode 5 - Tax Compliance
If there is a hot topic today for Tax administration this is Cooperative Compliance that will drive reduction or error, fraud and generate additional public revenue to the budget.
This blogpost focuses on the context and data points to support a discussion with your Tax administration and also includes some sales/pre-sales materials you can leverage to prepare for this discusssion.
I would have 2 questions for you, please share your answers reply to this post or to firstname.lastname@example.org, are:
1. What could we jointly do to help Tax administration design the journey to Cooperative compliance/Compliance
2. Should we engage jointly the Tax agencies on the topic of fraud detection and prevention ? ( you will find attached a partner demo for a VAT Fraud detection that leveragest Azure ML and PowerBI)
Thank you and good selling!
With an ongoing economic downturn, the challenge to bring in more revenue and protect tax systems from fraud and error becomes more compelling. Physical mobility and open EU borders increase the challenge of combating fraud and error. eCommerce’s exponential growth also raise challenges in terms of tax evasion, this sector being identified as a high-risk sector from 2011 by World Bank. The difficulties regarding the taxation and fraud management in this sector consists in defining tax jurisdiction, attributing value to data created by users free of charge and the dilemma on whether e-commerce transactions fall under the category of royalties (different tax regime vs. VAT) Risk-Based Tax Audits – World Bank 2011
We also see a trend whereby, anti-fraud sophistication in private sector financial institutions is leading organized criminals to target the public sector. Here are a few data points on the extent of this phenomenon and how countries are reacting to it:
- Earlier this year (2017) theK. National Audit Office says national coffers were short £1 billion in tax revenue because of VAT fraud and errors between 2015 and 2016, according to a published report.
- Due to 2008’s bailout, and the need to make more on taxes, Portugal implemented the tax receipt machines obligation in all stores, and now this standard, and they are successfully reducing tax fraud.
- Poland, Austria, Luxembourg, Lithuania, France and Singapore are following the example and have decided to implement it as well. All other OECD countries will do the same in the next years.
- Slovakia, Anti-fraud initiative enabled collection of Euro 600M additional taxes, representing 0.9% increase in GDP.
- Ireland, using a self-service tax e-system for home-owners moved Euro700m into legitimate economy.
- China focuses on Tax evasion coming from trade intermediation and works on data exchange in real time and single window for trade actors to be able to check goods origin and prices.
- Developing countries: Moving towards E-Filing solutions, makes it easier to comply as well as spot errors and anomalies from tax form submission moment via intelligent checks embedded into the solutions, all this leading to reduced compliance costs.
Microsoft Tax compliance solutions provide a set of capabilities – based upon our technology and our partners’ – to enable Tax Agencies to improve their compliance and revenue collection, by leveraging e-services (portals, forms and workflows), the power of analytics, predictive models and machine learning for taxpayer segmentation and risk analysis as well as leveraging CRM for case management once fraud/error is flagged for a specific taxpayer.
Typical projects include:
- obtaining tax information electronically (e-Invoicing for example)
- integration with other data sources internal and/or external to the Tax agency, in order to build a 360-degree view of the taxpayer (for example: taxpayer registry, land registry, social services, employment registries as well social media information)
- integrating with advanced analytics can be applied for detection of anomalies to all data collected
- case selection and case management are also key within the process: the solutions use predictive analytics to identify defaulters based upon different data sources (e.g. current or historical tax data, debt analysis); it also enables to improve Tax Agencies processing time of such cases and improve citizen compliance and transparency by providing E-reporting, tracking, and warnings etc.