g510-6079-increasing-tax-rev-through-imrpov-audit-compliance

IBM Global Business ServicesIBM Global Business ServicesCenter for Business OptimizationIncreasing tax revenues through improved auditing and complianceIBM Tax Audit and Compliance SystemToday’s tax agencies typically lose 10–15 percent of total revenues to tax evasion and other types of noncompliance 1— known as the “tax gap.” At a time when tax evasion techniques have grown more sophisticated, agencies have simultaneously been hit with a cascade of budgetary and staffing restrictions, continually changing tax statutes and more rigorous requirements for privacy. As a result of these pressures, many agencies continue to rely on audit selec-tion, tax collection and enforcement methods they know to be outdated. These include traditional “pay-and-chase” strategies, in which taxpayers suspected of underreport-ing their tax liability are pursued and investigated several years after the first incidence of suspicious behavior. And often case priority is assigned on the basis of dollar value alone. When there is a focus on high-value cases for a relatively small number of taxpayers, agencies can lose significant revenue opportunities. Using broad criteria for audit selection has also led to almost 20 percent of all audits resulting in no change to 2the amount of tax due. “No-change” audits expend valu-able staff time and resources to investigate taxpayers who are ultimately found to be compliant. Additionally, audi-tors often are unaware of the ...