SAP Thought Leadership Customer Relationship Management Transforming Tax Processes with CRM and Analytics Solutions Improving Citizen Focus by Enhancing Service and Compliance
Tax agencies must operate in an environment of increasing complexity and constrained budgets with fewer resources to collect the very revenue that would alleviate shortfalls.
CONTENT 4 Executive Summary 5 Growing Challenges for Tax and Revenue Agencies 5 Challenges Arising from Fragmented Information Systems 5 Addressing Rising Complexity 7 Key Enablers of Tax Process Innovation 7 E-Government for Tax and Revenue Management 7 Taxpayer Interaction Centers: Better Service and Self-Service 7 Integrating Communications with Tax and Revenue Applications 8 Managing a Large Volume of Complex Tax and Revenue Cases 8 Communication Campaigns Shaping Public Perceptions 9 Analytics: Closing the Loop to Improve Performance 10 E-Government in Action 10 SAP Tax and Revenue Management for Public Sector 11 SAP Customer Relationship Management 12 Business Intelligence Software from Business Objects 12 Find Out More
Executive Summary Embracing the Citizen-Focused Principles of E-Government The pressures on tax agencies today are diverse and growing. There is strong urgency to secure funds to address the fiscal challenges of governments, while at the same time aligning with political objectives to become more citizen focused. Tax agencies must operate in an environment of increasing complexity and constrained budgets with fewer resources to collect the very revenue that would alleviate shortfalls. To achieve their revenue collection goals, tax agencies must focus on ensuring that businesses and individuals comply with the tax code and that noncompliance is identified and addressed. They must overcome challenges associated with fragmented information systems, which thwart their objectives by contributing to revenue leakage, poor constituent service, and growing levels of fraud. Rising complexity caused by cross-border and Internet-based transactions, mobile populations, outsourcing, and other factors also contributes to the challenges. By embracing the citizen-focused principles of e-government, tax agencies can make great strides in advancing their programs. Through better support of their agents with customer relationship management (CRM) and data analysis software solutions, tax agencies can enhance service delivery in tax interaction centers. They can better manage large volumes of tax cases, establish communication campaigns to shape public awareness, and close the loop between analysis and execution in the interest of continuous improvement. SAP provides well-integrated solutions for citizen-centric tax and revenue management, helping governments around the world better meet their goals for positive constituent relationships, compliance, and revenue collection. 4 SAP Thought Leadership Transforming Tax Processes with CRM and Analytics Solutions
Growing Challenges for Tax and Revenue Agencies Ensuring Compliance, Closing the Tax Gap Taxation remains a key policy tool, addressing social objectives, economic growth, and foreign investment. Because tax laws are influenced by so many different agendas, they tend to grow in complexity over time. Yet it s essential to enable a clear and simple understanding of requirements as they apply to any specific individual or business. Such clarity facilitates voluntary compliance with tax obligations and helps reassure constituents that rules are being applied fairly. Governments want citizens and businesses to be fully compliant, and achievement of this goal is facilitated when citizens find it easy to follow the rules. Through better compliance, governments can close the tax gap ensuring that citizens and businesses pay the full tax that is due. Tax agencies must also address noncompliance another growing challenge, given tax-code complexity, the increasing web of transactions in which businesses and individuals can engage, and the need to sustain constituent goodwill. Agencies must identify citizens and businesses that are not filing appropriately or are evading taxes and enforce the law to address any fraudulent activity. Challenges Arising from Fragmented Information Systems In addition to the political and fiscal requirements facing them, tax agencies are typically dealing with aging, standalone information systems. Some of the resulting challenges include the following. Governments want citizens and businesses to be fully compliant, and achievement of this goal is facilitated when citizens find it easy to follow the rules. Stemming Revenue Leakage Agencies typically operate several systems, built over many years to cover different types of taxes, fees, and payment methods. Information gaps result: for example, whether taxes are being fully collected in line with new legislation. System inflexibility can create difficulties addressing these gaps and thus can mean significant amounts of uncaptured revenue. Enabling Good Service and Facilitating Compliance With multiple systems and a lack of standardization, it can be difficult to create a single view of a taxpayer s income records and filing obligations. This lack of visibility results in inaccuracies and poor constituent service and thwarts efforts to improve efficiency and create one-stop shopping for taxpayers. Moreover, storing taxpayer data in multiple locations with limited access by agency employees makes it difficult to respond to specific taxpayer needs and thereby facilitate compliance. Enforcing Compliance and Reducing Fraud With inefficient, disparate systems, it s difficult to determine whether any specific taxpayer is compliant. Audit coverage may be poorly targeted and recovery rates may be low. With a lack of complete information, taking legal action against those not in compliance can be hindered. And fraud will tend to grow. Efficiency A lack of well-integrated information systems makes tax collection and compliance enforcement very resource intensive. Agencies must either hire more staff to compensate for the lack of good information or their governments must settle for a larger tax gap. Addressing Rising Complexity Many factors compound these challenges. Tax profiles of businesses, families, and individual citizens have been complicated by a global economy, mergers and acquisitions, frequent job and residence changes, shifting lifestyles, and an increase in home-based businesses. Taxable transactions are more involved as national economies are becoming increasingly complex and intertwined. In some countries, high income paired with a cash-based economy makes tax avoidance more prevalent. And many types of financial transactions now occur online; criminals are employing new Internet-enabled tactics involving identity theft and multiple IDs. These developments add new dimensions to tax collection and compliance enforcement. SAP Thought Leadership Transforming Tax Processes with CRM and Analytics Solutions 5
At the same time, processes for tax and revenue management have been complicated by an increase in outsourcing and collaboration between government agencies and third parties. Further burdens arise from a wide range of new initiatives that require tax agencies to be more agile, responsive, and constituent-focused. And citizen expectations are rising as a result of superior service delivered by a more customercentric private sector. Addressing these challenges takes a citizen-centric approach to tax and revenue management, aligned with the trend in governments to gain greater insights into the concerns, needs, and expectations of constituents (see the figure for a set of typical goals and strategies of tax and revenue agencies). Tax agencies must keep change management at the top of their agenda as they implement new programs and craft communication about tax-rule adjustments. They must gain a 360-degree view of taxpayer interactions across touch points, enhance efficiency, and operate in a proactive, service-oriented fashion. To achieve these goals, tax agencies require innovative processes enabled by a new generation of software solutions. Key Goals Strategy Increase Tax Revenues Without Increasing Tax Maximize Compliance Rates Minimize Taxpayer Burden Gain deeper taxpayer insight to support a lifetime relationship Assess and collect tax due equitably and fairly Develop education and marketing programs to support taxpayers Develop programs of customer support (targeted early compliance and risk management) Proactively identify which customers are at risk of becoming noncompliant Improve tax investigation Minimize the amount of time and effort involved for taxpayers in meeting their obligations Make timely payments of refunds and grants Provide the information taxpayers need when they need it Improve Responsiveness Provide prompt and accurate responses to inquiries Provide differentiated services, depending on taxpayer s profile Maximize the quality of assistance Optimize Revenue/Cost Ratio Increase process efficiency Lower TCO of the technical platform Lower the cost of changes in tax legislation Figure: Typical Key Goals and Strategies for Tax and Revenue Agencies A Citizen-Centric Approach 6 SAP Thought Leadership Transforming Tax Processes with CRM and Analytics Solutions
Key Enablers of Tax Process Innovation Making the Shift to E-Government A broad range of government activities from public security to transportation and healthcare are being revamped to focus more fully on citizen needs. Governments are leveraging integrated software solutions, including new Internet-based systems, to achieve this transformation in what are generally referred to as e-government initiatives. The overarching approach of these e-government programs is to design and enable innovative public sector processes, thereby measurably improving service levels to constituents. E-Government for Tax and Revenue Management The shift to e-government is particularly beneficial for enhancing tax and revenue processes. In addition to improving relationships with taxpayers, this approach can reduce the costs incurred by tax agencies by encouraging citizens to get information, file their taxes, make payments, and handle disputes online. It can also help tax agencies share data among different departments as well as with other government organizations and with the private sector. E-government for tax processes requires a flexible IT foundation that can support future changes, such as the implementation of new tax programs, and a holistic approach toward taxpayer service. Tax agencies must be able to access citizen data electronically from multiple sources including payrolls, corporate pension offices, and social welfare departments and capture a complete view of taxpayer interactions across departments. A broad range of software solutions is valuable for supporting tax processes. A key component of such solution sets is a customer relationship management application or, more aptly for tax processes, a constituent relationship management application. To help achieve higher levels of taxpayer compliance, these CRM solutions support processes akin to CRM service and marketing in the private sector; the areas covered typically include taxpayer interaction centers, case management, and communications campaigns. To address audit decisions and noncompliance issues, analytics solutions (which extract useful information from massive amounts of data) are also important components of e-government initiatives. Implementation of CRM, analytics, and related systems for tax agencies is discussed below. Taxpayer Interaction Centers: Better Service and Self-Service Governments are making it easier for taxpayers to get the information they need and to handle routine transactions through interaction centers. Through CRM-based interaction-center functionality, agents that handle real-time communication with taxpayers have ready access to a single information source that provides a comprehensive view of each client including previous tax filings and payments, correspondence records, and interaction histories. In a well-integrated system with strong security and structured master data, the results of each interaction can be made available to parties throughout the tax agency as well as to staffers in other government departments. Knowledge databases can enable taxpayer self-service options online ( e-tax ), and CRM-based workflow can streamline e-tax service processes making it easier to fill out online tax forms, for example. Taxpayers typically have the option of contacting an interaction center by phone or e-mail, or receiving selfservice through a Web site. Self-service features can reduce administrative effort and cost while improving taxpayer data and strengthening the taxpayer relationship. Taxpayers can use Web-based portals for filing tax returns, making payments, checking on refunds, viewing filing histories, registering businesses, filing appeals, and updating personal information. Online customer service centers let taxpayers search a knowledge database for answers to frequently asked questions. Integrating Communications with Tax and Revenue Applications Tax agencies can improve customer service by deploying a software-based business communication management (BCM) solution, which integrates multiple channels of communication with tax and revenue applications. Leveraging uniform IP-based solutions, these agencies can address issues inherent in business processes involving human communications which are especially intrinsic to government organizations, where knowledge and responsibility are widely distributed. With BCM, these agencies can communication-enable business processes, eliminate isolated and selfcontained telecommunications infrastructures, create a virtual call center SAP Thought Leadership Transforming Tax Processes with CRM and Analytics Solutions 7
where appropriate, and achieve better alignment across all citizen-facing interactions. Tax agencies that deploy BCM can get each query to the right individual (with the right skills) as quickly as possible, reduce the process latency inherent in person-to-person handoffs, and make constituent service more proactive and personalized. Because these solutions operate over a common IP platform, agencies can leverage geographically dispersed talent while lowering longdistance telephone charges, and they can use all service agents more effectively. In short, BCM helps tax agencies enhance service over the complete tax and revenue life cycle. Managing a Large Volume of Complex Tax and Revenue Cases Tax agencies must manage a large volume of individual and complex cases that must be tracked from beginning to end. These might involve investigations of fraud, a taxpayer declaration of bankruptcy, an on-site audit, or follow-up actions after an appeal. In each instance, the agency must create a case file that can be readily accessed by anyone involved in the issue. While providing this visibility, the agency must ensure file security. A key component of best-in-class CRM solutions encompasses case management. Such a solution provides the requisite visibility and security and helps ensure that resources necessary to resolve a particular issue are identified in the case file. Also important are the following: Document-matching functionality Exception- and event-driven processing Functions for incorporating notes from case managers Functions supporting dunning Functions for generating specific documents such as demand-forpayment or garnishment letters The file is updated with each subsequent transaction, and it s closed once the case is resolved. Tools for predictive data analysis can be used with the case files to identify opportunities for improvement and generate summary reports for officials to review. CRM solutions can provide an infrastructure that ensures all cases are handled appropriately, incorporating tight integration with interaction center Through CRM-based interaction-center functionality, agents that handle real-time communication with taxpayers have ready access to a single information source that provides a comprehensive view of each client including previous tax filings and payments, correspondence records, and interaction histories. software to support the agents who frequently manage case files. A welldesigned CRM-based case management solution can help achieve efficiency, ensure accuracy, and enable compliance with statutory requirements. Communication Campaigns Shaping Public Perceptions Just as private companies use marketing campaigns to shape the awareness of their customers and prospects, tax agencies with their unique citizenfacing role must communicate the potential benefits of their services to the public. These communications must be appropriately targeted to support development of the right relationships and intended perceptions. That means segmenting the taxpayer population by income level or audit probability, for example according to campaign objectives. It also means finding appropriate ways to communicate with the public and secure feedback, including through traditional correspondence related to tax filing and through Web channels. As in the private domain, the marketing functions of CRM solutions can help an agency engage its audience. These features provide the mechanisms for running campaigns to promote the value of agency programs and services, monitor responses from those campaigns, and manage campaign budgets. Agencies can leverage integrated data analysis to identify potential refinements to their communication campaigns, with the ultimate goals of lowering operating costs, increasing compliance, and closing the tax gap. 8 SAP Thought Leadership Transforming Tax Processes with CRM and Analytics Solutions
Analytics: Closing the Loop to Improve Performance A citizen-focused, e-government tax solution should also include robust functionality for data analysis and reporting and be easily adaptable as tax laws change. Tax agencies need the ability to explore and analyze huge amounts of data and unstructured information (such as text). By identifying meaningful patterns within that information and using those patterns to establish various rules and models, agencies can improve compliance while making the most of agency resources. Moreover, these agencies can use analyses in a continuous feedback loop, continually refining processes and enhancing execution performance. Data-mining routines coupled with complementary systems to ensure data quality are particularly useful for fraud detection and management. Agencies can establish baselines covering fraudulent activity based on historical data; and they can then use models to determine which taxpayers to audit or identify taxpayers who have failed to file their returns. Tax agencies that deploy business communication management solutions can get each query to the right individual (with the right skills) as quickly as possible, reduce the process latency inherent in person-toperson handoffs, and make constituent service more proactive and personalized. Choosing which tax returns to audit can be handled through technology for predictive modeling. Here, data analysis results in a numeric score that indicates the likelihood of a relevant outcome, such as unreported income. Such a score could be used to determine the potential tax adjustment from an audit and help an agency weigh various audit strategies. The agency can identify leads for potential nonfilers by cross-matching its internal data with data from external sources, and it can use data-mining tools to identify a filer s connection with income that was not reported. The data-mining tools can also determine how these leads might best be prioritized for example, according to the size of payments that nonfilers may owe. All too often, e-government solutions are rolled out without any proof that they will be cost-effective. By leveraging analytics and closing the loop with execution through CRM-based interaction centers, case management processes, and communications campaigns, agencies can deliver continuous improvement. They can measurably demonstrate a range of outcomes, including increased compliance, lower costs, and enhanced public perceptions of tax services. SAP Thought Leadership Transforming Tax Processes with CRM and Analytics Solutions 9
E-Government in Action Solutions for Citizen-Centric Tax and Revenue Management SAP offers an open, unified platform to help tax administrators develop a fully integrated e-government solution for managing taxes and cash receipts, helping foster a culture of taxpayeroriented service. The comprehensive functionality of SAP software provides a complete, citizen-centric solution with analytics support to close the loop between agency decision making and execution. Building on extensive private sector experience, SAP has designed software to address the specific requirements of tax management by public agencies. The platform includes full operational support for processing tax returns along with a wide range of revenue-accounting functionalities and comprehensive correspondence options. These functions integrate fully with SAP analytics software and CRM solutions. The SAP software platform supports several channels of interaction between taxpayers and tax agencies, including traditional paper-based communication and a wide range of online transactions. Taxpayers can use the Web to send tax forms directly to the appropriate agen- cy and pay their taxes online. By creating a special access profile, taxpayers can display open items and relevant account data. SAP Tax and Revenue Management for Public Sector The SAP Tax and Revenue Management for Public Sector package gives tax agencies a single view of all taxpayer transactions for a more holistic and efficient approach to tax and revenue administration. The package forms an agile foundation for an e-government transformation, positioning an agency well for future collaboration scenarios and tax-rule changes. Part of the SAP for Public Sector solution portfolio, the package supports the full set of integrated tax-system functions, including: All functionality needed for registration, returns processing, taxpayer accounting, revenue accounting, and case management (including appeals, audit, collections, bankruptcy, and customer service) Enablement of processes across government agencies responsible for tax and revenue management, with robust common application services including workflow, compliance generation, and reporting thus maximizing revenue collection and increasing compliance rates The package includes specific support for: Unified taxpayer service Taxpayers can register through multiple channels and use a unique Internet account to access various services throughout the tax life cycle, facilitating voluntary compliance. SAP software provides e-tax services that allow full Internetbased self-service for taxpayers, including registration, filing, returns processing, payments, customer selfservice, account changes, and more. Efficient billing, collections, and disbursement processing The package supports the management, tracking, accounting, and reporting of information related to tax payments, accounts receivable, billing, and refunds. Integrated revenue accounting The integration of accounting and control functions with tax and revenue management processes provides timely tax and revenue distribution, general-ledger 10 SAP Thought Leadership Transforming Tax Processes with CRM and Analytics Solutions
accounting, funds management, and fiscal reporting to legislative bodies and the public. Timely filing of returns and payment processing Taxpayers can file returns through multiple means including paper-based forms, fax, or the Internet. Extensive correspondence and contact management Agencies can store all taxpayer interaction in one consolidated view. Consistent audit compliance Audits are chosen through a rules engine either by random sample or by matching income documents. Support for all revenue and receivable types In addition to taxes, receivable types include fees, permits, licenses, tolls, and duties; there is substantial flexibility to add and modify tax types. Help with voluntary compliance Agencies can streamline revenue administration processes through a one-stop online collection function that shows taxpayer obligations, the status of these obligations, case documents, payment history, and other related details. SAP Customer Relationship Management The SAP Customer Relationship Management (SAP CRM) application helps tax and revenue management agencies build the bonds with taxpayers necessary to enhance revenue, improve compliance, and increase public support for their programs. The application includes support for the following. Interaction Center Management Tax agencies can leverage internal information to give call center agents a single view of the taxpayer. Integration with SAP Business Communications Management software can help tax agencies integrate multichannel communications with constituent-facing processes, use the knowledge distributed throughout their organizations more effectively, and establish a virtual call center that provides a seamless experience for taxpayers across multiple channels. Comprehensive Case Management The software provides a central repository for managing information triggered by different events, sources, and channels. It can help tax agencies maximize the recovery of funds by managing, A citizen-focused, e-government tax solution should include robust functionality for data analysis and reporting and be easily adaptable as tax laws change. tracking, and reporting on the activities, appeals, rulings, and results of investigations to ensure enforcement and compliance. Agencies can more accurately select cases for audit and more quickly determine appropriate collection processes. Marketing SAP CRM provides a central marketing platform that enables tax agencies to analyze, plan, develop, and execute all communication activities through all constituent interaction points. This integrated application empowers agencies with SAP Thought Leadership Transforming Tax Processes with CRM and Analytics Solutions 11
complete business insights enabling managers to close the loop by monitoring campaign results, make data-based business decisions to refine targeting, and drive improvements in end-to-end taxpayer communication processes. Business Intelligence Software from Business Objects Business Objects, an SAP company, offers a wide range of solutions to help tax agencies track, understand, and manage performance. These solutions can provide valuable support for audit selections, identifying nonfilers, collections, revenue accounting, and fraud management. There are comprehensive functions for information discovery and delivery as well as for queries, reporting, and analysis, including the following: With Xcelsius software, agency staffers can create interactive dashboards to analyze taxpayer data. Agencies can use comprehensive support for managing data quality and data integration, which can help them more accurately identify taxpayers and all their payment obligations. Predictive modeling capabilities incorporated in BusinessObjects Predictive Analysis software allows agencies to determine where audits may be most productive or which taxpayer sets are more prone to fraudulent behavior By leveraging analytics and closing the loop with execution through CRM-based interaction centers, case management processes, and communications campaigns, agencies can deliver continuous improvement. They can measurably demonstrate a range of outcomes, including increased compliance, lower costs, and enhanced public perceptions of tax services. BusinessObjects Text Analysis software (which processes, classifies, and summarizes vast amounts of text information) can help agencies mine tax returns and other information to detect anomalies and fraud. In short, advanced analytics software from Business Objects can help agencies measure, detect, and identify tax-related patterns thus continually improving tax process execution and enhancing performance. Find Out More By establishing highly effective tax interaction centers, case management processes, communication campaigns, and data analyses, tax agencies will be well positioned to improve compliance and close the tax gap. In these arenas, SAP is uniquely able to provide the necessary CRM and analytics solutions that are well integrated with end-to-end tax and revenue management processes. To read about the success that the Florida Department of Revenue has had with tax and revenue management solutions from SAP, please visit www.cwhonors.org/case_studies /floridadepartmentofrevenue.pdf. For more information about transforming tax processes with CRM and analytics solutions, call your SAP representative today or visit us on the Web at www.sap.com/industries/publicsector /public/businessprocesses/taxrevenue.epx. 12 SAP Thought Leadership Transforming Tax Processes with CRM and Analytics Solutions
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