by Erica Lailhacar, Director Solution Management, SAP

dreamstime_xs_32981853-150x150According to European Commission estimates, European Union (EU) countries lose more than €1 trillion a year to tax evasion and avoidance. In the U.S, unreported income costs the U.S. Treasury alone $250 billion or more in lost taxes each year, and the IRS estimates that 17% of Americans are fudging on their filings.

With these alarming figures, it should come to no surprise that this is becoming more and more of a priority topic on every government’s agenda.

The reality today is that only a very small percentage of tax offenders are being caught. Why can’t detection systems be more efficient?

In addition to the complexity of the law and the loopholes that taxpayers find in fiscal systems, most detection is done manually. This seriously constrains scalability. As a result, the chance of not getting caught is high, especially if you have an average income level.

With the application of new technology and new detection processes, SAP aims to enable government s to rapidly stop and reverse this trend and to be much smarter about the way they go about catching the offenders. How? By uncovering hidden and untapped fraud patterns, automating the detection process, and detecting evaders as early as possible:

  • Identifying true cases of fraud among millions of tax returns with many different attributes is a mayor challenge. Yet it needs to be done faster than ever before and with more accuracy. With tax evasion tricks changing as fast as laws, rules alone aren’t enough to stay ahead of offenders. Advanced analytics solutions from SAP such as SAP Predictive Analysis enable the discovery of new and emerging patterns that can then turn into rules that can be automated. With the combination of advanced predictive algorithms and rules, no scheme is too clever or complex to be detected.

  • The SAP Fraud Management analytic application, which relies on using advanced technology and data analysis to take a proactive approach for fraud identification, allows the automation of the fraud detection process so that every tax submission can be scrutinized. “Big Data” technology makes it possible to rapidly analyze millions (and even billions) of tax records to check for signs of fraud without the limitations of manual intervention.

  •  The ability to execute these detection methods in real time (for example, the instant a tax report is submitted electronically or while the taxpayer is doing the declaration online), will enable prosecutors to catch offenders before their tax return is paid, reducing the costs of prosecution and refund processing.

Paying taxes is everyone’s civil duty, and the whole society benefits when everyone contributes his/her fair share. With time, governments will be able to exchange data across borders and even the most complex schemes used to commit tax evasion will be vulnerable. The technology to make it possible is here today, and it’s ready to be put into action.


This blog originally published on the Decision Factor blog and has been republished with permission.