Californian tax-evaders beware. The California Franchise Tax Board (FTB) is amidst a five-and-a-half-year project to automate its systems to identify what the agency refers to as noncompliant taxpayers – and it’s working. The IT systems modernization, initiated July 2011, is finding tax owed to the state faster and more efficiently than expected. FTB announced on July 1 that the systems upgrade already has garnered an additional $1 billion in tax revenue, a milestone that wasn’t expected to be reached until April of next year.
The modernization, called the Enterprise Data to Revenue (EDR) Project and contracted through vendor CGI Technologies and Solutions, is expected to raise $4.7 billion in extra revenue for the state during the project’s build-out and an additional $1 billion yearly after completion at the end of 2016.
“The EDR project is essentially a re-engineering of our return filing and payment processing systems,” explained Denise Azimi, FTB public affairs officer. “So it’s moving us closer to being a fully automated processing plant. We still do a lot of processes by paper. A lot of people e-file, but a lot of people still file on paper too. The EDR is helping us to be more efficient and it’s also updating our automated tax systems at the same time.”
An agency brochure (PDF) outlines the project’s four major components. The project will create a new returns processing system, it will make the agency’s data warehouse accessible to all legacy systems, it will create a secure online taxpayer folder that provides agency staff and stakeholders access to secure documents, and the project also modernizes legacy systems so they will work with the other three new components.
The $1 billion discovered by the system so far could be the tip of the iceberg, according to the FTB.
“Most of the billion dollars came from noncompliant individual and business taxpayers, so, people that are behind in their taxes,” Azimi said. “And people make mistakes in their tax returns, too, so that’s either detected when we’re processing the returns, we see errors, or at audit later on. In California, we estimate the tax gap is about $10 billion a year, and that’s simply defined as the difference between what people voluntarily pay and what they legally owe.”
If the $10 billion estimate is accurate, that leaves billions more in revenue that automation and smarter uses of data could potentially raise for the state.