A taxing situation
Government agencies analyze big data to fight tax fraud and improve revenue collection
Today, governments bear a heavy responsibility. With aging populations, rising unemployment (particularly among the young) and spiraling deficits, we have a toxic mix of challenges. As the size of our problems increases and the amount of data grows, delivering useful analytics on time and on budget is crucial.
In the following stories you'll see how three government agencies applied analytics to increase efficiencies, detect and prevent fraud and improve revenue collection.
Speeding tax collection in Wisconsin
Dramatic gains in efficiencies and revenue collection – all from a data warehouse
Like many US states, Wisconsin is dealing with a dramatic reduction in revenue as a result of the lagging economy. To complicate matters, tax collection is slowed because the data driving tax collections is spread across multiple, isolated systems. So, Wisconsin’s Department of Revenue (DOR) implemented a data warehouse solution based on SAS Business Analytics.
The warehouse is populated with about 2 terabytes of data from a dozen data sources – expected to grow to 30. The state can now:
- Collect more tax dollars more efficiently – an estimated 1,500 personnel hours saved and $5 million in recovered revenue in the first six months.
- Select more appropriate returns to audit and prioritize those audits: $32 million was quickly collected; before, it would have taken more than a year.
- Process federal audit reports more efficiently and more quickly. These audit reports help the DOR adjust state taxes and find potential targets for audits.
- Respond more quickly to taxpayer inquiries, such as when a refund will be processed.
- Provide easy access to the data, so the auditor needs less frequent contact with a taxpayer undergoing an audit.
"With this data warehouse, we've been able to keep our costs low and our productivity high. It's what people expect from us and what we expect from ourselves,'' says Roger Ervin, Secretary of Revenue for Wisconsin.
£7 billion in additional tax revenues in the UK
Scientific fraud detection and prevention lead to big results
Like other tax authorities around the world, the UK's HM Revenue & Customs (HMRC) must deal with significant tax evasion and fraud, increased criminal activity, and the onslaught of big data.
With the UK government allocating £917 million (US$1.18 billion) to support HMRC's efforts – anticipating a major return on investment in the form of £7 billion (US$9 billion) additional tax revenues – high-performance analytics plays a vital role.
HMRC's Connect system, of which SAS has been a part for several years, brings together numerous internal and external data sources to reveal hidden relationships. Able to search a billion records at the touch of a button, Connect has revolutionized how HMRC deals with fraud detection and prevention.
Bill Cockerill, Data Analyst at HMRC, says access to an extensive repertoire of analytics is required to tackle the huge variety of fraud and evasion, including segmentation and profiling, clustering, predictive models, anomaly detection, and more.
HMRC's analytics and the Connect system – working faster and smarter, improving detection rates and finding new opportunities for prevention and deterrence – will do more than help the government simply avoid significant financial losses; it will ensure that the government receives greater tax revenues.
Reporting faster with greater reliability in Malaysia
Big data analysis in hours, not weeks
Malaysia's Inland Revenue Board (IRB) needed to perform faster and better analysis on tax collections and simulate the impact on revenue of proposed tax changes. Before using SAS, it took two weeks to prepare complex reports, and there were no drill-down capabilities. The IRB also had no solution for handling big data.
With SAS, the board can handle complex reporting in as few as three days. Formerly, that work took two weeks. Simpler reports that used to take 11 hours to produce are now completed in three hours. These reports help the board get a picture of taxpayers who might be under-reporting or learn why those who overpaid didn't claim a refund.
Accurate, timely information is critical. The board has now cleared its backlog, and departments such as the Ministry of Finance, the Economic Planning Unit and the Central Bank appreciate the accuracy of the information IRB produces.
"If it takes too long to provide information, we can't respond to our stakeholders' requests. We are using SAS to calculate tax-rate impacts on rebates, reliefs and income to the government as well as the taxpayer,'' says Puan Mariam Bt Mohd, Director of IRB's IT Department.
What can you do with the SAS® Fraud Framework?
- Easily eliminate duplicate identifying information from your data to reduce erroneous payments and duplicate billing.
- Predict the likelihood that a transaction is fraudulent and flag suspicious activity for further investigation to prevent fraudulent payments.
- Access the reports that measure your efforts toward reducing fraudulent payments and drill down for department-level details.
- Ensure that everyone in your organization works together collectively and collaboratively to achieve common goals for preventing or correcting improper payments.
Read more about SAS Fraud Framework.