INSIGHT: Reimagining the Taxpayer Journey—How Tax Administrators Can Lead the Way For Digital Government Services

I only recently became a regular bus commuter. Despite living steps away from a metro bus stop, I simply never took the time to learn the routes. It would have been as simple as grabbing a paper schedule at a nearby metro facility or even doing some light research on the web. Instead, I found my way to other means of transportation to work, either driving and paying too much for parking, or more recently, using a service like Uber. But then I discovered that my local metro bus authority had released an app. Catching the bus was suddenly as easy and familiar to me as ordering an Uber, although far less expensive. With a few taps on my smart phone, I am armed with real-time updates of precisely when the next bus will appear, allowing me to perfectly time when to leave my house for the ride to work or when to leave the office to catch the bus home.

This is just an example of how governments can transform citizens’ perception of public services by designing digital journeys with them in mind. Change has already begun: a recent survey showed 65 percent of U.S. respondents now use digital government services, up from 30 percent in 2016. However, the U.S. still has a long way to go. In Singapore, 76 percent of citizens say that public sector digital services are better than private sector, compared to only 48 percent in the U.S. (2018 BCG Digital Government Citizen Survey).

For many, taxes are associated with government at its most challenging to navigate. Back when I served as the Acting Commissioner of the Internal Revenue Service, I was responsible for trying to make the process less frustrating. In fact, the opening phrase of the IRS mission statement is to “Provide America’s taxpayers top quality service.” Like many other government entities that deal often and directly with the citizenry, digital solutions have become an increasing focus for the IRS and state tax authorities.

Given that tax filing is the one government service that every adult citizen has to deal with, at least once a year, for his or her entire life, getting the digital taxpayer’s journey right will go a long way towards improving the quality (real and perceived) of digital government services as a whole. Even more critical, digital solutions will make tax administration more efficient and better able to drive the goals of our federal, state, and local tax systems. In industries like retail banking and insurance, digital customer journeys have led to 15 percent to 25 percent in cost savings and 40 percent reductions in process loops. Governments around the world have had a similar experience: one European government in particular achieved $370 million in savings by fully digitizing 63 service processes across agencies and consolidating call center operations.

Four Stages of the Taxpayer Journey

Effective digital taxpayer journeys should not be limited to digitizing existing processes, forms, and products; rather, it is about rethinking and simplifying the customer experience by starting from the end-user’s point of view. The process involves rethinking four major phases in the taxpayer’s customer journey: trigger events, choice of channel of interaction, service delivery, and performance assessment.

Trigger events. Tax administrators can start by mapping the different events that prompt request for services or require actions by taxpayers. A good example is the release of W2 or 1099 forms, which for millions of taxpayers signals the beginning of the filing season. Once these forms are transmitted, they might trigger a “welcome” email or alert on a smartphone with an invitation to create or update a profile, upload personal information, and access tools and information to help them prepare their return.

A tax administration can proactively create additional trigger events that can help taxpayers meet their responsibilities, customized to the taxpayer’s preferences. For example, a taxpayer could opt in for a mobile phone alert reminder for quarterly filing deadlines. The digital solution could then provide a pre-populated mobile-friendly form that makes the filing quick and easy. Another example would be monthly reminders to help ensure business expense and charitable deduction records are updated when they are fresh in the taxpayer’s mind.

Channel of interaction. Eighty-five percent of users worldwide access digital government services through three or more devices (2018 BCG Digital Government Citizen Survey). The design of end-to-end customer journeys requires an understanding of what drives taxpayers’ choice of channels of interaction to provide a consistent omnichannel experience and seamless transitions from one channel to another—say, from a mobile app to a call center. In order to improve omnichannel experience, an Australian human services agency has successfully rolled out a “tell us once” policy to minimize customers’ need to repeat information they have already provided when interacting across channels.

In fact, tax administrators should think about the ecosystem of companies that hold relevant financial information—from banks to hospitals, health insurers, utilities, gig economy employers (AirBnB, Lyft, Uber, etc.) and other government sources (welfare benefits, property taxes, etc.). With express user consent, and with appropriate security measures in place, income and expense data from all these sources could be seamlessly transferred to help auto-populate federal or state tax forms, asking taxpayers to review and amend rather than fill them out from scratch. Artificial intelligence and process automation can also be used to auto-validate parts of tax returns, avoiding the use of staff time on low-value, low-risk verification tasks, as another government’s immigration agency has done for its visa application processing systems. As these mobile and digital solutions are deployed, they can help reduce identity theft through sophisticated authentication methods that are already actively used in commercial financial services.

Service delivery. A digital taxpayer journey can also enhance the ability of tax administrators to deliver services more efficiently by leveraging predictive analytics to anticipate customer needs, automating issue resolution, prioritizing high-complexity needs, and load balancing back-office tasks. The Irish Revenue Research and Analytics Branch, for instance, has had success mining data to detect tax fraud and minimize “false positives” in the selection of tax returns for audit, increasing its “hit” rate for audited cases to 75 percent. Staff time spent auditing returns with low probability of fraud is thereby minimized and, just as importantly, the odds that compliant taxpayers will be unnecessarily audited are significantly reduced.

Improvements in service delivery isn’t always driven by technology upgrades: often, seemingly simple design changes can have powerful behavioral effects. Using insights from behavioral economics, one agency reduced by 50 percent the volume of calls from customer checking on the status of pending processes simply by changing the language used to acknowledge the receipt of customer inquiries.

Performance assessment. One of the advantages of digital journeys is that they generate data that can be used to monitor and improve service delivery. Digital tools can help tax administrators understand how people navigate their sites or mobile apps, what types of services are most in demand, and how and why they switch channels (e.g., giving up on self-service channels and calling a contact center). Combined input from customers themselves on satisfaction levels, this data on digital behavior can provide a clear indication of how service is improving, and how it can improve further.

Gain Momentum Through Quick Wins

Creating a best-in-class digital taxpayer journey is a long process, but it begins with identifying and executing on a short list of opportunities that can lead to demonstrable improvement in a short time.

Tax administrators might begin by focusing on the most commonly forgone tax deductions or incentives, especially among small businesses and low-income earners. (Low-income earners are still lagging behind in uptake of digital services, with only 51 percent filing taxes online as compared to 71 percent for the U.S. as a whole.) Tax filing season could become an opportunity to initiate a sustained engagement with such taxpayers to help them make tax-informed financial decisions, leveraging digital channels as interfaces, and avoiding unscrupulous tax preparers who too often take advantage of vulnerable populations. And the IRS in fact has a platform that suits this purpose well: its Find My Refund App represents an opportunity to engage taxpayers in a digital channel that can be enhanced with more self-service capabilities over time.

Regardless of where they decide to begin, tax administrators have an opportunity to improve customer service through digital-by-default solutions as a part of a new taxpayer journey. Digital journeys not only increase customer satisfaction through seamless self-service, they allow tax administrators to shift staff time to more value-added resolution of complex service requests, improving both the efficiency and effectiveness of tax administration.

This spring, as we all file our returns, and as I perfectly time my arrival to the bus stop for my morning commute, it is a good time to think about the future of tax administration and the role digital solutions will play.

This column does not necessarily reflect the opinion of The Bureau of National Affairs, Inc. or its owners.

Daniel Werfel leads the Public Sector practice in North America at The Boston Consulting Group in Washington. Before joining BCG, Danny worked at the IRS where he served as Acting Commissioner. Before that appointment, Danny worked for the Office of Management and Budget, first as Deputy Controller and then as Federal Controller.