Mining Data to Increase State Tax Revenue in California Case Solution And Analysis, HBR Case Study Solution & Analysis of Harvard Case Studies

Mining Data to Increase State Tax Revenue in California Case Solution

Background

Lanza, the director of the filing compliance bureau of California franchise tax board and Mary Yessen who is the section manager for bureau’s integrated non- filer compliance business section met on January 2006 to discuss the ways in which the data shall be collected from new ways and their analysis. The motive behind this meeting was to identify those citizens who are not paying tax even with sufficient income.

The newly integrated non-filer compliance system built by IBM Global Services is so much sophisticated that it has received an award from center of digital government. However, there are significant researches and analyses going on to use this system more effectively by the use of more data gathered from many other sources.

The NIC system utilizes the data warehouse, which indicates the direct and indirect sources of income for the citizens of California. In this way potential non-filer and those who pay taxes at understated incomes or do not pay tax at all are being identified. The system works efficiently without any influence from the political forces under the supervision of the board’s executive officer. Mr. Gerald H. Goldberg has been retired and it is expected that the new officer will share the same characteristics as him.

There are issues to be solved in the presence of Lanza and Yessen. They need to consider the means to increase the tax revenues and the sources to get more pool of data in order to identify the number of non-filer and potential non-tax payers. This also involves severe public security issues and privacy problems. All these issues should be incorporated and decision is needed to be made accordingly.

Problem statement

California has been facing large budget deficit, although the personal income taxes have been providing half of the state’s general reserve fund. This deficit is expected to be extended to $6 billion. Many of the residents are not paying their fair share of taxes to the government. There are individuals and organizations that are showing their income at lower level than the actualwho do not file returns or pay taxes at much lower rates than that should be paid.

There is a need to make a careful and effective compliance system in order to address the above problems and bring in more tax payer those are non-filerastax collection has many drawbacks and half of the tax only comes from one percent of the top earners of the state (Need For Tax Reform , 2015).The system has been developed but now the data mining required more pool of data. For the means of gathering data, there is a need to make a decision. The decision has to be made by giving due consideration to expected concerns of the citizen that will be raised about the privacy, working with other state agencies and other social and political issues.

Analysis of problem

The board (FTB)

The Franchise Tax Board (FTB) is responsible for the collection of the personal and corporate income taxes for the California state. The board collects personal taxes, corporate taxes and also runs some non-tax programs such as child support debt collection.

Generally, the board has three main functions, tax filling and collections, auditing and filling enforcement. For filling enforcement, the board has constituted a 120-member filing compliance bureau. Moreover, the bureau has two step compliance processes.

Firstly, the non-tax payers are identified by tracing their income. These individuals are then served with notices to either pay their taxes or if they refuse to pay, then they should provide reasons for it. The failure of the response on part of the individual will cause the issuance of Notice of Proposed Assessment. This notice demands to pay the amount of tax estimated by the tax department.................

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