Envisioning a Modern State Tax Collection System: The Power of Analytics and Automation

Envisioning a Modern State Tax Collection System: The Power of Analytics and Automation

It’s safe to say that no one likes taxes. Taxpayers don’t enjoy paying them. Revenue departments, for their part, don’t relish the budget, staffing, and effort required to collect them.

Yet tax revenue is the fuel that powers the government engine and makes resident services possible. It’s in the best interest of both the government and the public that tax collection be efficient and effective, and that interactions between residents and revenue departments are simple and painless.

That’s not the reality for revenue departments in most states, however. State governments have invested hundreds of millions of dollars in tax collection systems. Yet they – and their constituencies – still grapple with the same problems: lower-than-desired tax compliance, long processing times, and poor customer experience (CX).

That’s no longer acceptable. Residents now expect Amazon-like interactions with government. State leaders are mandating that CX become a competency across agencies, including revenue departments. By making informed investments in effective digital technologies, revenue departments can improve compliance, accelerate workflows, serve taxpayers more effectively, and build trust in government.

Five Capabilities for Modern Tax Collection

What should a modern state tax collection system look like? It should take full advantage of these five digital capabilities – all of which are available and affordable now:

1. Data-enabled self-services

Imagine that—as a taxpayer—you could log into your state department of revenue (DOR) portal and instantly view all your tax payments for the past 10 years. You could see details across categories, including when you made payments, the amounts, a record of any past issues, and the up-to-date status.

Very few states offer that capability today, but there’s no reason every state can’t. Revenue departments already have this data. With the right integration solution, like RevHub, and integration with resident-facing portals, they can consolidate, analyze, and display this information. Doing so would reduce the burden on DOR contact centers while improving taxpayer experiences.

2. Mobile apps

Interactions between revenue departments and taxpayers often occur through the Postal Service. Tax forms, late-payment notifications, payment confirmations: Many of these files are printed on paper and sent through the mail. Taxpayer responses are likewise manual. They mail back completed forms and payments, or they call the contact center, straining DOR budgets and slowing workflows.

DORs can leverage existing technologies to digitize many of these interactions. They can also integrate interaction channels to achieve a single view of each taxpayer and provide taxpayers with a streamlined experience. Residents should be able to begin an interaction on the DOR portal, seamlessly shift to a DOR mobile app, and continue in the contact center if necessary. Retail brands have offered customers these conveniences for years. DORs and their customers can benefit from the same capabilities.

3. Robotic process automation (RPA)

Many DOR workflows are still highly manual. Processing overdue tax payments, identifying past-due accounts that will result in the highest amount of money collected at the lowest cost, separating out taxpayers that are likely to “self-cure” and don’t need further contact: all these processes require a high degree of human intervention.

RPA offers an effective solution. RPA uses artificial intelligence (AI) bots to track employee activities, learn the process steps, and then automate the end-to-end process. That can, for example, enable DORs to automatically group taxpayers by category to make workflows more efficient. Results include accelerated tax processing and faster, more satisfying taxpayer experiences.

4. AI-enabled fraud detection

Tax noncompliance and fraud costs the United States hundreds of billions of dollars per year, according to the IRS. With the FTC receiving 1.4 million complaints of identity theft per year, tax fraud will continue to plague DORs.

AI offers a powerful solution. Machine learning (ML) algorithms can rapidly analyze large data volumes and reliably spot anomalies that indicate fraud. Such automated fraud detection has been proven at the IRS and state DORs. AI can be applied transparently and equitably to avoid bias in fraud detection and preserve the public’s trust.

Deployment of AI can also help address state and local government’s talent crisis. States struggle to recruit younger tech talent as an older generation of IT workers retires and the private sector lures the Gen Y and Gen Z workforce with the latest technology. By investing in AI and the modern platforms it runs on, agencies will be better positioned to attract the talent it needs.

5. Advanced analytics

Finally, revenue departments should be employing advanced analytics to measure both their performance and taxpayer perceptions of their performance. Too often there’s a disconnect between these metrics. DORs report operational improvements to the Governor’s office, while taxpayer satisfaction paints a very different picture.

DOR operations generate ample data for measuring performance. But many revenue departments lack end-to-end tax systems that enable them to capture, manage, and visualize that data. A comprehensive, software-as-a-service (SaaS) tax solution can leverage data and analytics to measurably improve processing times, reduce noncompliance, and increase collections. Such a modern tax system can also tangibly improve customer experiences and help build back the public’s trust.

-Voyatek Leadership Team