Advanced analytics increases the efficiency of tax administrations

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Tax administrations are under pressure like never before. Digitisation, both in the public sector and in society in general, is completely changing how data is moving around – for better and worse. It's not really a viable solution to just allocate more employees to manual tax inspections. Advanced analytics is needed to truly gear up the automation of more trivial processes, and not least, to support the operational and strategic decision-making processes in tax administrations. I work quite a bit on that with the tax administrations in Europe.

Of course, we taxpayers expect that our governments manage our tax money optimally so that our societies can use those taxes to provide citizens with as much welfare as possible. Every tax administration wants to be effective, credible, efficient and transparent.

Tax administrations need to invest in a comprehensive analytics platform that can manage the entire analytical food chain, all the way from ensuring the quality of the data they put into the system to the use of advanced machine learning algorithms and the conversion of data into usable and visual information for the tax inspectors and other users. In 2016, the OECD prepared a report on this very topic called Advanced Analytics for Better Tax Administration: Putting Data to Work. The report emphasizes that tax administrations can benefit from taking advantage of shared knowledge and experience across national borders.

Hidden Insights I Advanced analytics increases the efficiency of tax administrations

It is important to extract useful information from the large amounts of data that one already has access to by using advanced analytical methods because this allows you to gain insights, see things more clearly and also spot new connections. Tax administrations can learn from the experience of others. This applies to both modernization of existing systems and starting to use completely new systems.

 

 

The OECD intended the report to be a practical guide for senior managers in tax administrations who would like to either create or continue to develop an analytical function. The report also touches upon organizational and technical issues that you should take into account when integrating advanced analytical methods.

I have previously worked on this process myself in the OECD, and I think that the OECD has succeeded in creating a report that fulfils its purpose. Advanced analytics can be complicated, but it is necessary for the senior management to ensure a smoothly running organization. There will often be complex answers to simple questions, and also some long processes to go through, before one reaches the goal.

I also think that the report makes a very significant contribution towards helping its readers understand how important it is to be on the cutting edge. It doesn't just recommend disruption. It also helps people to understand why it is important to take new steps towards the use of advanced analytical methods on the same platform, even if there will often be a mix of different methods involved.

When the time comes for tax administrations to choose the right tools and the right technologies, it is not "just" a big decision to make – it is also a large investment. The OECD has examined the tools that are most popular right now, and it was particularly focused on the differences between commercial and open source solutions. The report concludes that SAS®  is the most solid commercial solution on the market, and that it will take quite some time before one can go "all in" with open source solutions. It recommends using hybrid solutions, and the OECD once again recommends using SAS for the commercial part of the solution.

As citizens, we need to be able to trust our tax authorities. Here at SAS, we work to bring welfare to the public by supporting the public sector's digitisation with data and advanced analytics. This is an important social task that I am really glad to be working on.

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About Author

Mads Krogh

Business Advisor

Datamining and explorative analytics thought leader. Targeting the dramatic change in the use of data to explore, detect and prevent fraud, non-compliance and waste in transaction driven organizations as we know it today. Firmly believe that this is one domain where analytics really can do a significant difference. I find it rewarding to support the anti-fraud community’s knowledge through my white papers and blogs, conference speaking engagements and participating in public debates.

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