IBM has launched the Tax Audit and Compliance Solution that utlizes advanced analytics to assist revenue agencies zero in on questionable tax returns. The program is at present being used by U.S. state revenue agencies and international government agencies.
IBM said the Tax Audit and Compliance solution provides a more scientific, data-driven approach to tax audit case selection, goes well beyond existing methods of tracking tax compliance, which range from manually matching internal data with lists of taxpayers to using data warehouse and query tools. By identifying potential compliance problems at the time a tax return is filed, the Tax Audit and Compliance solution is capable of data mining thousands of tax returns in seconds, can help save years of tracking, investigation and collection costs.
Tax Audit and Compliance Solution is developed by the IBM Center for Business Optimization. The solution makes uses of algorithmic data mining and predictive modeling to compare individual taxpayer behaviors to those of related taxpayers. The resulting analysis aids agencies to detect new tax evasion methods and provides auditors with lists of potentially fraudulent tax returns.
William Pulleyblank, vice president, IBM Center for Business Optimization said, “In this era of globalization, with numerous rapidly growing economies and an increasing volume of international transactions, tax evasion techniques are growing more sophisticated.”
“Simultaneously revenue agencies are being affected with a cascade of budgetary and staffing restrictions, continually changing tax statutes and more rigorous privacy requirements. As a result of these pressures, the traditional enforcement methods for audit selection and tax collection relied on by many agencies are no longer adequate.”
The IBM Tax Audit and Compliance Solution is designed to be installed at the customer site, or it can remain on IBM computers, with IBM consultants performing analyses on behalf of the client, saving agencies the expense of investing in additional IT infrastructure. In most cases, revenue agencies have achieved a significant return on investment within one year of implementing the Tax Audit and Compliance Solution.
The Tax Audit and Compliance solution leverages the same base technology that IBM developed for healthcare organizations looking to recognize fraudulent claims. This technology is also part of the IBM Identity Risk and Investigation Solution, which analyzes employees’ online behavior to thwart insider attacks, and it is also used in a software designed to detect Medicaid provider fraud, waste and abuse.