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Use of data analysis techniques in risk based selection of tax interventions

Use of data analysis techniques in risk based selection of tax interventions. Mike Wells, Director Risk & Intelligence Service HMRC. How RIS operates currently. Divided into three core functions Analysis & Information Campaigns Operations. RIS performance.

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Use of data analysis techniques in risk based selection of tax interventions

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  1. Use of data analysis techniques in risk based selection of tax interventions Mike Wells, Director Risk & Intelligence Service HMRC

  2. How RIS operates currently Divided into three core functions • Analysis & Information • Campaigns • Operations

  3. RIS performance • Last year RIS produced 265,066 risk packages. A further 4955 intelligence products were produced within RIS Criminal Intelligence Group of which 2567 were delivered to UKBA, 1445 to other parts of HMRC and 943 to other agencies. • The use of a new data matching tool, Connect, in 2008/09 helped protect around £500 million, much of it in preventing fraudulent repayment claims • Offshore campaign gathered data from around 400,000 accounts held by around 250,000 individuals and delivered yield of around £400 million • In the 24 months to March 2010 RIS will have reduced its headcount by 18%, a reduction of some 600 staff to just under 2700 people

  4. Current use of tools and techniques (1) • Central Risk Analysis Models • Risk scoring, historic enquiry data, some external data • Indicate probability of non-compliant behaviour • VAT is strongest model • National Business Pictures/Tax Alerts • Risk analysis tool • Evaluate emerging risks and their impact • Data Matching • Connect • Campaigns and projects based on specific data sets

  5. Current use of tools and techniques (2) • National Risk Overview • Evidence-based, analytical overview of key risks to compliance • Used to set priorities for Fiscal Fraud Group Delivery Plan • Indicator Analysis • New capability • Early warning of changes to established and new risk indicators • Web Robot • Internet search and monitoring tool • Enables efficient collection of bulk data

  6. Connect • Approaching 1 billion data items • Links 26 different departmental and external data sites • Capability to data match and target anomalies • Potential for much enhanced risk profiling from wider data set • Automation of risk package production • Opportunities on real time transaction work

  7. Effectiveness of current approach – National Business Pictures (NBPs) • Originally built by KAI using the Analytical Data Warehouse (ADW) to generate data files which can be viewed and queried using Excel • Results are presented in charts which show selected data items over a period of time • Take data from all regimes e.g. tax paid, intervention results • Individual NBPs have been built for VAT, Income tax Self Assessment, Corporation Tax and International Trade. PAYE and Repayments are in development • Used for early identification of trends and anomalies, economic impact of changes, tracking audit, campaigns and projects for taxpayer behavioural changes, checking that policy or legislative changes are being implemented, trade sector or segmented customer view and cross-tax risk identification.

  8. International Tax Benchmarking (1) • AT Kearney report (May 2009) • Examined HMRC, ATO and SARS in 8 benchmark areas, including GST/VAT risk assessment • For GST/VAT risk assessment they examined three variables • Yield per dollar invested and yield per audit as a percentage of average taxpayer receipts • Hit rate • coverage

  9. International Tax Benchmarking (2) Returns on investment vary significantly due to a variety of factors HMRC $297 per $1 SARS $194 per $1 ATO $41 per $1

  10. International Tax Benchmarking (3) HMRC is able to deliver a high coverage and high hit rate with relatively low investment per taxpayer, but returns on audits are modest

  11. Challenge ahead • Getting more for less • Understanding the quality of our risk selection and optimising impact

  12. Developing our approach • Enhanced data matching and web monitoring tools – Connect and Quantitative Web Matching System (QWMS) • Campaign based interventions • Better feedback on the results of interventions – Caseflow • Understanding behavioural characteristics to segment risks and responses (top level research and granular operational targeting) • Use of viral marketing concepts e.g. Life Event concept for campaigns

  13. Questions?

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