Analytics in the Australian Taxation Office (ATO)

1. Analytics in the Australian Taxation Office (ATO) Warwick Graco Manager Analytics Change Program ATO Warwick.graco@ato.gov.au

2. Background • I have worked previously in Defence and Health. I now work in Taxation • I have a BSc from UNSW and a PhD from UNE • I am manager of a small team of data miners and modellers working in the Change Program at ATO • Our Primary Responsibility is to help provide Client Intelligence to support the regulatory functions performed by the organisation

3. Outline • Extracting Knowledge from Data • Challenges facing the ATO • Role of Analytics • Detection Capabilities • Role of Chief Analyst/Chief Intelligence Officer

4. Knowledge from Data • SAS International Forum in Copenhagen in June had the basic theme of how to extract knowledge from data • Many presentations from both government and private enterprise dealt with this issue • It is a cliché that all organisations have much data but little knowledge

5. Knowledge from Data • Knowledge can be used to raise profits, increase productivity, lower costs, improve customer satisfaction and similar • A major challenge in the 21st Century is how to extract knowledge from data • This presentation discusses aspects of what the Australian Taxation Office is doing about this issue in relation to client intelligence

6. Challenges Facing ATO

7. Challenges Facing ATO • The ATO is the major revenue collector for the Australian Federal Government raising 93 percent of revenue in FY2002-2003 • It is responsible for raising revenue from a variety of sources including income tax, GST, superannuation, excise and duties, fringe benefits tax, company tax and agriculture levies

8. Challenges Facing ATO • The ATO is seen by the public as a punitive organisation ie. it penalises taxpayers who are non-compliant • The ATO also had to cope with the introduction of the GST in July 2000 which was a major administrative undertaking and which created much paperwork and frustration

9. Challenges Facing ATO • ATO also monitors policies and practices in overseas revenue agencies and the move in European ones to assisting taxpayers to meet their obligations • These developments led the ATO to consult taxpayers on services and standards they expect from it as a revenue collection agency and how their interaction can be made easier

10. Challenges Facing ATO • The ATO also engaged consultants to advise it on future directions with tax collection and compliance • This led to the new policy of ‘easier, cheaper and more personalised’ • The ATO wants to improve the client experience and especially does not want to inconvenience clients who meet their taxation obligations

11. Change Program • These deliberations resulted in the Change Program being instituted in the ATO • This is an ambitious program to upgrade the infrastructure and technology of the office • The aim of this program is make the ATO a friendlier and more personal organisation

12. Key Capabilities • Two key capabilities of the Change Program include: • New Tax Administration System (TAS) • Client Relationship Management System (CRM) • TAS will improve the efficiency with which clients are registered in the tax system, their returns and statements are processed and their refunds are paid

13. Key Capabilities • CRM will improve the interactions clients have with the ATO. • This is done in two ways: • CRM collects information from clients via call centre conversations, correspondence and other interactions • CRM is backed up by the results of analysis which provides ‘intelligence’ on clients

14. Other Capabilities • Supporting these capabilities are other major initiatives such as: • channel improvement in terms of ebusiness eg ATO portal and electronic lodgement • information management and analytics in terms of providing the outputs to drive both CRM and Case Management

15. Case Management • Case Management is used to manage cases that require auditing, investigation or some other regulatory intervention • A good Case Management System specifies work flows and provides a record of milestones, determinations and achievements with cases

16. ‘Fog of War’ • A major failing of CRM and Case Management Systems to date has been the lack of information on clients ie. lack of Client Intelligence • Staff interacting with the public had to operate in the dark because of poor or inadequate information on clients • Case management records were patchy, incomplete or spread between incompatible systems

17. Single Capability • ATO has many legacy case management systems • The aim is to replace them with a single Case Management System and a single CRM • Siebel Systems is providing the solution for both requirements

18. Analytics

19. Analytics • Many definitions of this term • Refers to the process of analysing issues to identify patterns and relationships and to gain new insights and understandings. • It is essentially about understanding issues

20. Compliance Triangle • To help the ATO to determine how it manages clients, it uses a compliance triangle • This is employed to: • Determine where clients lie in the triangle and • How best they are best managed or treated

21. Compliance Model Attitude Compliance Measures Push Down Not Comply -Disengaged Don’t Want To Comply - Resisters Try but do not Always Succeed- Triers Comply - Supporters Use full Force of Law Deter Assist to Comply – eg Educate Make it Easy Role of Analytics is to work out where Clients fall in this Triangle

22. Knowledge-Value Chain – ATO Perspective Informatics Data Text and Imaging Implement- ation Rules & Treatments Dynamic Decision Making Analytics Differentiated Services to Clients

23. Analytical Disciplines Quantitative Qualitative Intelligence Analysis Machine Learning and Reasoning Research - Hypothesis Testing Risk Analysis Statistics OLAP – Data Cubes Operations Research Profiling

24. AnalyticsCycle Strategy Strategy Intelligence Analysis Risk Analysis Analytics Workbench Profiling Profiling Informatics - Data, Text & Imaging Targetting Discovery, Detection & Decision Making Treatments eg Auditing or investigation

25. Analytics Workbench • This provides the tools that enables analysts to do their work including profiling, mining and modelling • SAS Suite including SAS Enterprise Miner was selected to provide base functionality for the Analytics Workbench • ATO is also working on requirements for an Intelligence Workbench

26. Detection

27. Client Profile • Identifiers – Name, Age, Gender, Occupation and Address • Income – Wage/Salary, FBT and Interest/Dividends • List of Claims for Work-Related Expenses, Rental Property and Gifts • Offsets for Spouse, Invalid Relative or Zone Allowance • Risk Classification

28. Claims Processing • This is an online real-time transactionsystem that contains business rules for checking for eligibility and entitlement • It also has compliance rules checking for integrity breaches eg. self education expenses exceed a threshold • Cases which exceed thresholds are placed in a queue for review

29. Detection Capabilities Client Profiling Case Management Decision Support System Claims Processing CRM

30. Timeframes - Detection Past Time Current Future Time (retrospective) Time (prospective) (inspective) Classification Judgment Prediction Aim to move to a position where you can identify potential high-risk cases ahead of time

31. Chief Analyst/Chief Intelligence Officer (CINTO) • Organisations now have senior managers who fill appointments such as CFO, CTO, CIO and CKO • It is suggested that they now need a Chief Analyst/CINTO who is responsible for both qualitative and quantitative analysis including: • Intelligence • Risk Analysis • Profiling • Mining and Modelling