In Maryland, the Department of Revenue's annual data entry backlog forced the agency to implement an IRM system known as SMART. In conjunction with Andersen Consulting, the department integrated the state's disparate tax applications, reorganized along functional lines, and implemented an Image Revenue Management System. As a result, Maryland was one of the first states to utilize a fully comprehensive tax management system. The department can now process over 425,000 returns in a single week.
Imaged Revenue Management Systems are quickly becoming the rage for other state departments of revenue as well. Florida, Maine, Massachusetts, Mississippi, Pennsylvania and Vermont are a handful of states implementing new IRM systems. Moreover, a survey conducted by G2 Research indicates that a significant number of states across the nation plan to implement some aspect of an Imaged Revenue Management System over the next three years.
INTEGRATING THE TAX MANAGEMENT PROCESS
State departments of revenue are increasingly focusing resources to streamline the entire tax process across all state tax programs. Instead of completing functions -- such as taxpayer registration, collections, remittance processing, audits, etc. -- across individual tax applications on disparate information systems, integrated tax systems enable agency personnel to perform these functions all on one system. Integrated tax systems require these departments to shed the organizational structure of old and embrace the new design. As a result, extensive business process reengineering projects are always completed before the development of an integrated tax system.
Mississippi, for example, has developed a comprehensive tax system called the State Tax Automated Revenue System (STARS), which integrates 41 previously independently operated mainframe applications with a single, integrated client/server solution. The department will also utilize a comprehensive Imaged Revenue Management System developed by Grumman to improve the overall functionality of the Integrated Tax System. STARS, which is being developed by AMS, will be fully operational by 1997.
Similarly, Tennessee's Department of Revenue has decided to implement the Revenue Integrated Tax System, which will combine over 20 categories of taxes into one system. The department, working in conjunction with Andersen Consulting, expects the system will be fully implemented by the end of 1996.
Perhaps the most innovative approach to the utilization of an Imaged Revenue Management System is via outsourcing. In 1994, New York's Department of Revenue awarded an outsourcing contract to Fleet Financial for the state's Personal Income Tax Program. Essentially, Fleet Financial, along with subcontractor CSC, are responsible for all front-end processing activities and for providing the department with the information technology infrastructure to manage back-end processing functions. Although the department has paid a fixed fee for systems development, implementation services, and hardware and software procurement, all future services will be paid for on a transaction basis.
The results of the project have already been significant. The department has accelerated the refund processing time from 90 days to 45 days. In addition, as a result of the agreement, the department was able to shift the majority of resources previously dedicated to front-end tax processing to revenue generating functions such as tax resolution, tax compliance and tax enforcement. In fact, the state expects the outsourcing contract to generate a savings of 30 percent over traditional costs --approximately $75 million.
Whether implemented independently or as a part of a larger system, Imaged Revenue Management Systems represent the conduit for modern tax processing. As more and more states either expand current IRM pilot projects or develop more sophisticated systems, imaged revenue management will continue to revolutionize the traditional tax collection process over the next ten years. Similarly, other agencies such as departments of labor and human services -- which have paper-intensive processes, high volume transactions, and remittance responsibilities -- are likely to develop IRM systems of their own.
For more information, contact Rishi Sood at G2 Research 415/964-2400.