2 minute read 1 Jul 2017
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Six ways tax authorities can drive value through analytics

By

George Atalla

EY Global Government & Public Sector Leader

Working with governments to address complex issues and build a better working world.

2 minute read 1 Jul 2017

We’ve identified key factors to help tax authorities align their people, processes and technology.

Many tax authorities have invested in digitalization, data integration and analytics. Several have already improved service, administration and compliance. However, much still needs to be done to leverage analytics as a standard practice across tax-related activities.

A number of challenges remain, from technical, organizational and financial issues to legal and cultural concerns.

How are tax authorities seeking to overcome these challenges and realize value through advanced analytics? In our discussions with progressive tax authorities, we have observed a number of steps being taken to transform into an analytics-driven tax authority.

An important starting point is having a clear vision of desired business outcomes and an analytics strategy that aligns with the broader organizational goals.

Once the strategy has been defined, the leading tax authorities are selecting the most appropriate operating model for their analytics program.

As with any transformation driven by new or emerging technologies, writing the algorithms that can detect risk is not the greatest challenge. It is far harder to establish — and sustain — an organizational model that allows analytics to not only flourish but also become embedded in a tax authority’s day-to-day operations.

An important starting point is an analytics strategy that aligns with the broader organizational goals.

We have identified six key factors adopted by leading tax authorities that underpin a successful analytics operating model by effectively aligning people, processes and technology:

  1. Fostering senior, board-level support within the tax authority, and appointing an influential executive to lead the analytics program across the enterprise
  2. Creating a talent management strategy that builds the right mix of skills and experience — IT, statistical, analytical and tax domain knowledge — needed to drive informed decision-making
  3. Tackling cultural barriers by promoting the use of analytics through formal change management programs, centers of excellence or dedicated teams that spread initiatives across the organization
  4. Experimenting with small-scale pilots to develop the proof of concept before rolling out analytics more widely
  5. Developing a single view of the taxpayer by creating an integrated information and communications technology (ICT) infrastructure that combines, transforms and consolidates data from a wide range of sources
  6. Actively managing data, including quality monitoring and correction processes, to verify that it is fit for purpose and, crucially, relevant to the business questions posed

By focusing holistically on these factors, leading tax authorities are better placed to realize value from their analytics programs. They can reduce losses from criminal attacks, tax evasion and avoidance; make it easier for taxpayers to comply; develop strategies to “nudge” taxpayers toward compliant behaviors; allocate their resources more efficiently; and maximize returns from their debt management activities.

Summary

We explore the essentials of an effective analytics program, describe the key techniques for data analytics and demonstrate how they are being used to drive value across the tax authority’s business.

About this article

By

George Atalla

EY Global Government & Public Sector Leader

Working with governments to address complex issues and build a better working world.