Measurable is Manageable
Jan 14, 2019
Lean government’s drive towards data-driven culture
Revenue agencies across the country are under pressure to do more with less. How will they cope with budgets trending downward? Legislative changes to tax law and tax compliance programs are costly and nowadays increasingly reliant on thinning resources. Coupled with heightened scrutiny of department operations, these changes are under more pressure than ever to get it right and to do so quickly. Between cost and scrutiny, there is a need for rapid, measurable, and successful program execution. Now, more than ever, the nation’s revenue agencies are turning to analytics solutions to meet this need.
One such agency is the IRS. Since 2011, the IRS has seen both its budget and workforce shrink drastically under increased pressure to improve operational efficiency. Responsibility for implementing major changes to the Internal Revenue Code, most notably the 2017 Tax Cuts & Jobs Act, is complicated by these tighter resource constraints and the IRS’s persistent public image problem. Many of the novel or updated programs specified in these tax code changes focus on high-impact, low-cost methods of closing the tax gap and encouraging long-term compliance. Decreased funding for traditional, costlier enforcement and collection options means these high-impact programs will systematically pick up the compliance slack on aging or hard-to-collect cases.
Modern strides towards lean government hint at continued iteration on efficiency in tax administration. Given the above complications, there is a vital need to understand, plan for, and implement novel programs with accuracy and fairness. The IRS faces substantial near-term risk to its core mission if these programs become beleaguered with controversy or misunderstanding. In the long-term, implementation of tax code changes that falls below the mark on perceptions of quality taxpayer service or fairness could contribute to:
- Weakened compliance rates. Coupled with curtailed enforcement programs, changes to tax law perceived as unfair have the potential to reduce voluntary compliance levels.
- Fewer dollars collected. Inadequate levels of service or enforcement may give the impression that the IRS lacks the bandwidth to pursue certain types of debt in a timely manner, thereby reducing levels of timely filing and payment.
Hence, the increased use of data and analytics within the IRS. Integrated and continuous analytical support for enforcement and service functions means the agency knows sooner the scale and effect of major tax code changes on budgeted resources, thereby reducing risks to delivery on its mission.
From buzzword to bulwark
Applied analytics within state and federal revenue operations is not a novel concept. Most agencies, including the IRS, possess an established analytics solution with a centralized data warehouse and teams dedicated to managing this solution. Within the FY 2018-2022 IRS Strategic Plan, there is a top-down focus on advancing data and analytics for improved efficiency, service, and enforcement. However, budget and staffing limitations constrain the necessary knowledge transfer for this top-down drive to reach the bottom. With around forty percent of US Treasury employees eligible to retire in the next five years, the time for a data-driven culture within the IRS is now.
A fully data-driven culture within the IRS is on the horizon. In a data-driven culture, collaboration between teams ensures subject matter expertise is translated into knowledge management. Early and frequent interaction between implementation and analyst teams ensures efficient and flexible use of resources for dedicated or ad hoc activities. Team members understand the data generated and consumed by their roles, how those data are handled and transmitted, and what questions those data can answer. Major tax code changes are then braced with workload projections, metrics frameworks, impact assessments, and program simulations – everything is measurable. The IRS is among the agencies leading the charge on defining data-driven culture in governance, where anything that can be measured can be managed.
To learn more about how ASR is proud to continue its support for the IRS on this endeavor, click here.