In my last post we explored how revenue agencies in several countries are designing improved services, leveraging digital technologies and striving to meet the evolving expectations of consumers and businesses. In this post we look at how the design of these services can help countries address one of the revenue world’s most universal problems: taxpayer errors.
As we know, everyone makes mistakes. But we can take some comfort in the fact that even rocket scientists have such moments. A decade ago, NASA’s US$125 million Mars Climate Orbiter disintegrated because of a mix up between metric and imperial units. While we accept, human error is inevitable in all spheres of life, our research shows mistakes to be particularly rampant in tax returns, claims, and other interactions.
From confusion about technical areas – like tax credits, dividends or property income – to inadvertent omissions, arithmetic blunders and spelling mistakes, avoidable errors cost billions. In the UK, for example, they cost an estimated US$11.4 billion every year in tax yield.
Some have postulated that digitalising every process is the answer. However, it is increasingly clear that there is much more to it than that. Several revenue agencies are close to total digitalisation, but errors are still a much bigger problem than hoped. Indeed, according to Accenture’s Global Taxpayer Survey – which is fielded in 12 highly digitised jurisdictions – 42 per cent of taxpayers made filing errors in the last two years.
Some countries are doing better than others in the battle to minimise errors. Systems in place in Australia, Japan and the US, for example, yield fewer taxpayer mistakes than average in four key areas identified by the survey.
In our research, taxpayers chose automatic validation of entries as the best way to reduce or eliminate errors in the future. Today, such digital error checking is still basic, including things like ensuring all fields are complete, or that addition is correct. Less obvious errors continue to flow through digital platforms. Indeed, up to 40 per cent of all errors are discovered after information is submitted to the tax authority.
It is clear that electronic systems can have numerous automated checks but still be complicated and burdensome for taxpayers. What needs to change is that digital services must be designed more around the customers they serve, anticipating their needs, level of knowledge and available information.
Part of Australia’s progress in this area has been its Reinvention Programme, initiated in 2015, which focuses on using service design to create better services and experiences for users and staff. It encompasses surveys to assess taxpayer and staff satisfaction; co-designing parts of the taxpayer experience with different taxpayer segments; visits to taxpayers to understand how they interact with the tax system; simulations to test ideas and products, and so-called sandbox environments, where ATO teams can test ideas and obtain feedback from users.
It is this kind of comprehensive approach to design that is needed to really get the most from digitalisation of tax services and reduce taxpayer errors. The results show up in our research: Australian respondents are more likely to have gone error free over the past two years (80 per cent, vs. 72 per cent overall), have an error resolved on first contact (54 per cent, vs. 45 per cent overall) and find it easy to explain an error to their tax agency (75 per cent, vs. 55 per cent overall).
Another example from the ATO is its new online portal for tax intermediaries, which was co-designed with the stakeholders it is designed to serve. Tax intermediaries worked with the ATO to determine which features they liked about the old system and what was needed to improve its usability. The new portal is still in public beta stage, but has been positively received in early use, where reports suggest it is helping to reduce effort and errors emanating from intermediaries.
In addition to improving revenue and compliance metrics, reducing errors will relieve pressure from the workforce. Millions of unnecessary rectifications drag down productivity and morale. Our research also indicates that fewer than half of errors are resolved during the first interaction between the tax authority and the taxpayer. Well-designed systems that can prevent taxpayer errors will therefore help staff add more value by spending more time focusing on higher impact priorities.
Globally, over one third (38 per cent) of taxpayers are not confident that they pay the right amount of tax. With a strong service design approach, agencies can, in time, expect to drastically reduce taxpayer errors, while also increasing taxpayer certainty.
The maturation of more capable natural language chatbots or virtual assistants will also help to improve certainty and reduce errors. With the help of more sophisticated machine learning, these technologies are increasingly able to personalise their communications to individual scenarios and therefore provide more useful support. Similar technology will augment the capabilities of human tax agents, acting as capable assistants during interactions with taxpayers.
This kind of automation requires constant refinement as the taxpayer and tax administration change over time. However, the breadth and depth of these capabilities is expanding, and it is simultaneously becoming easier to train, adapt and update them. Virtual assistants are likely to become indispensable to modern tax agencies and we expect this to significantly reduce taxpayer errors.
Overall, between better design and advancing technologies, connecting with the revenue agency will become more intuitive, interactive and supportive for taxpayers – making it easier to comply. Agencies will set new benchmarks in compliance and enjoy significantly more efficient operations, while taxpayers will become more satisfied with the service, more compliant and less burdened by the tax system.
To read more about how service design can impact taxpayer errors, have a look at our detailed report, “Cutting Taxpayer Errors With Stronger Service Design,” published just a few months ago.
 The 12 countries comprised Australia, Denmark, France, Ireland, Japan, Netherlands, New Zealand, Norway, Singapore, Spain, the U.S. and the UK.
 Accenture Taxpayer Survey 2017
 Accenture Taxpayer Survey 2017