In a world that’s increasingly driven by technology, organizations that fail to innovate at pace are destined to decline. In my last blog I looked at the characteristics and practices that enable leading organizations to harness innovation to unlock trapped value in the digital era. Those characteristics and practices are as relevant for public sector organizations as they are for commercial businesses.

For the revenue industry, putting innovation practices to work could potentially release trapped value in many ways. Opportunities to release trapped value by taking advantage of technology advances continually emerge in taxation administration as they do in other industries. Lets look at some examples of what impact adopting innovation practices might have from increasing revenue to eliminating errors in filing to increasing national competitiveness.

Take the challenge of increasing revenue. Currently, most revenue organizations broadly divide their activities into those that provide service and respond to taxpayer queries and those that focus on compliance activities. Different metrics apply to how their respective performance is assessed.  New technologies, such as natural language processing, biometric identification, behavioral science, and augmenting human agents with AI and RPA can be applied to both service and compliance activities.  However, those organizations that adopt innovative practices will be more inclusive in their thinking and are much more likely to embrace the opportunity not only to adopt the new technologies but also to recognize the value in combining many compliance and service activities together using shared technology. Such innovation enhances the experience for taxpayers, gives greater process efficiency and provides a management focus more clearly targeted at achieving higher revenue collection.

Zooming in on error elimination, it’s clear that there are some significant opportunities for improvement. Forty two percent of taxpayers made an error in the last 24 months, and 33% have made a taxpayer error that was discovered after submission. Fewer than half of errors were resolved during the first interaction between tax authority and taxpayer. In response, over half of taxpayers believe that automatic validation would be the best way to reduce or eliminate errors in future.

So how could revenue authorities make fundamental changes that will eliminate large volumes of this error? By adopting another winning innovation strategy: hyper-relevance. This means understanding how to tailor actions and responses to customers’ changing needs. That requires, for example, creating distinct processes that are relevant to specific taxpayer segments and providing them with targeted content.  Support needs to be contextually relevant and easy to access in a way that suits individual preferences and relative willingness to use technology. For example some will be happy to interact with virtual agents that harness natural language processing. Others will prefer to deal with a person. But bringing the right technology around the clearly defined needs of taxpayers could help make all interactions as relevant as possible and eliminate the chances of errors.

Or take national competitiveness. Today, revenue organizations tend to think about this in terms of the ease with which taxpayers are able to file returns and make payment, as well as the administrative burden on taxpayers and tax rates. But as the digital world becomes increasingly network driven, revenue organizations can rethink their role and how they can bring network-led innovation to create a more competitive economy. That could include encouraging the use of APIs, promoting e-invoicing and better integrating new processes across government that make it easier and more efficient for taxpayers to operate. Rather than simply making it simpler for businesses to file and pay taxes, revenue organizations could play a key role in improving business conditions. While such improvements may seem obvious their adoption requires the recognition of the importance of networks in driving out the value offered by today’s technology.  The focus on networking is another example of an innovation practice which helps organizations release trapped value and which in this case could have a real impact on the broader economy.

There are just a few examples where the right approach to innovation could return game-changing results. Trapped value is a challenge and opportunity for every organization. And a bold new approach to innovation holds the key to unlock it.

If you’d like to discuss how innovation practices could be applied in your organization, please get in touch.

David Regan

Managing Director – Consulting, Revenue Lead

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