US Government Slow In Adopting Big Data?

March 13, 2019

We are not sure if this is good news or bad news. But the United States may be slow in adopting new technology and policies. The IRS is one government branch that is leveraging big data with actual results. Mondaq shares the IRS’s data analysis in the article, “United States: States Follow The IRS In Joining The Big Data Revolution.”

The IRS has used data analysis since the 1960s to select taxes to adult. As the technology advanced over the years, it has caught more errors and corrected them without any human involvement. The IRS created a new data analysis projected dubbed the Nationally Coordinated Investigation Unit (NCIU). NCIU will focus on using external data and the IRS to select criminal investigations. They also signed a $99 million deal with Palantir. With Palantir’s technology, the IRS will analyze and search terabytes of data on internal and external data sources on a single platform. The IRS is not only data mining for criminal activities. Big data is also being used for civil audits and predict outcomes on cases referred to the IRS Office of Appeals.

State governments have followed the IRS and implemented their own tax data analysis projects. Many of them have already caught fraudulent returns and so far state governments have saved sizable chunks of cash. These data analysis implementations are great, but there are still limitations. We learned:

“Like the IRS, many state departments of revenue have faced significant budgetary pressure in recent years, as governments have tried to cut down the size and cost of government, and have turned to technology to fill the gap. As powerful as data analytics are, however, there is a limit to the extent they can replace human investigators. In 2016, for example, the Arizona Department of Revenue began to lay off dozens of auditors and tax collectors, citing budget cuts. The result was a catastrophe, as audit collections dropped nearly 47 percent—$82 million—in 2017. The IRS itself has taken a markedly different approach: IRS CI has recently announced a hiring blitz, in the course of which it will hire 250 special agents, a number of data scientists, and over 100 professional staff.”

Big data analysis will become a significant tool in the future for the IRS and local tax offices. Good or bad? Excellent question.

Whitney Grace, March 13, 2019

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