Current economic times have spurred a new wave of creativity on the part of state officials tasked with managing revenues. And technology is a key part of new solutions helping to keep ledgers in the black.
In Missouri, the Department of Revenue (DOR) is tasked with collecting all monies the state is owed. Besides tax collection, DOR also issues vehicle titles, registers cars and issues licenses to Missouri drivers.
This broad scope of responsibility involves 118 distinct tax systems, which until recently had limited ability to share information. Analyzing data from so many disparate programs was a highly manual, time consuming process. This outdated, fragmented technology meant many noncompliant taxpayers were flying under the radar, leaving their tax burdens unpaid.
Several states with similar challenges have partnered with technology vendors to implement data warehousing solutions that unite taxpayer information from a variety of sources. Compliance can be improved when data such as IRS intelligence is compared with state databases and third-party source material.
While data sharing with the IRS is not new for Missouri, the data warehousing solution has sped up the process considerably. “The new system allows us to compare the information we receive from the IRS with our information in a much easier fashion,” DOR communications director Ted Farnen explained in an email to Government Technology. “It is a much less manual process than before and more efficient.”
Data sources used to pursue delinquent taxpayers sometimes come from surprising sources. For example, Missouri has found success analyzing the Federal Aviation Administration database to verify that airplane purchases show up on state tax returns.
Data warehousing company Teradata is making inroads into the government market. The company runs a large data warehouse at the Centers for Medicare and Medicaid Services, used to help detect fraud in those systems.
Teradata has worked with Missouri to recover more than $300 million in tax revenues since 2005. Its “benefits-based business model” appeals to cash-strapped governments that have a tough time getting legislative approval for large up-front technology expenditures. The company used this approach in Missouri and seven other states, relieving governments of any up-front capital costs.
The company works with the state to identify non-compliant taxpayers, receiving a portion of monies once they are actually recovered. According to Teradata, the company has entered into similar arrangements with Arizona, New Jersey, Iowa, Texas, Ohio, Oklahoma and Maryland. All told, $1.7 billion has been recovered through these efforts.
These revenue streams are not one-time funds, either. “If we find an individual or a company who wasn't reporting or paying a certain type of tax that was due, once you get them compliant, that trickle seed revenue goes on for years,” said Mike Brown, a vice president in Teradata’s professional services organization serving government customers.
Missouri also is using a case management solution in conjunction with the data warehouse, which simplifies audits and streamlines customer interactions.
According to the DOR, one database administrator and five computer programmers work on the database that informs recovery of outstanding tax burdens. Many more, about 50 employees, utilize data pulled from the data warehouse to pursue revenue collection from noncompliant taxpayers.