tax&revenuemanagement –reducingthetaxgap...the sap tax and revenue management for public...

Tax&RevenueManagement

– Reducing the Tax Gap

in collaboration with

Tax agencies are agents of changewithin the public sector, respondingto citizen-focused governmentpressures that stem from acombination of constituent-leddemand, compliance pressures andpolitical mandates. Throughout theworld, governments are beingchallenged by citizens to deliverbetter, less costly and more customer-focused services. This requiresdifferent channels for deliveringservices to the citizen, fundamentalchanges to government culture andemployee behavior and a newconsideration of the channels throughwhich services are delivered.

Within this changing environment,tax agencies, as the ‘de facto’ bankerof government, have a central role toplay not just in collecting the taxes tofund public services but also as a keycitizen-facing organization.

Consider these facts:

•Taxes (income, sales, property, fuel,estate, etc.) are typically the singlehighest component of governmentrevenues.

•Revenue-generating, citizen-facingagencies like tax agencies all havetechnology modernization strategies.

•Between 2000 and 2004 the UK's‘Corporation Tax Gap’ (the differencebetween the expected rates of taxthat UK companies should pay andwhat they actually paid) saw the top50 UK companies paying around 30billion euros less tax on their profitsthan expected rates would suggestappropriate.

•The tax gap according to USA’sInternal Revenue Service (IRS) isestimated to be over 250bn euros.

This is serious money. So findingsolutions that enhance citizen serviceswhile improving the collection oftaxes has high urgency amongst taxagencies.

In this paper we will explore thegeneral trends and put forward theshared view of Capgemini and SAP ona solution to improve tax and revenuemanagement and help tax agenciesincrease revenues and taxpayercompliance. We aim to help you to‘mind the gap’ whether you’re lookingat it from the perspective of a solidbusiness case or as it fits in withsocietal developments and the newpositioning of the tax department.

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Introduction & Context

Public Sector the way we do it

changing the way in which frontlineand back office services are delivered.

New technologies have alsofundamentally changed the way inwhich services, whether they are inthe private or public sector, aredelivered. This has seen the channelsof delivery moving away fromtraditional face-to-face contact to callcenters and the Internet. Technologyhas created flexibility in how andwhere services are delivered whileoffering new ways to take out cost.

Four Challenges Facing TaxAgenciesTax agencies cannot escape thesepublic sector challenges. A simpleway to look at this from theperspective of a tax agency is shownin the table below. There is adilemma: reduce the tax gap whileimproving efficiency and being citizenfriendly and at the same time goingthrough a new strategic positioningwhile the budget decreases.

high percentage of government serviceexpenditures, so there is anopportunity to seize this and use it to agovernment’s advantage by:

•investing in new, less expensive waysto deliver frontline services to thecitizen,

•looking at how they can create moreeffective back office, publicadministrative functions for less cost,

• looking to where others can provideservices at a lower cost,

•embracing flexible and adaptivetechnology.

Most countries are investing inmodernization programs, for examplethe “Modernisation de l’Etat” in France,the “12 Golden Projects” of the ChineseCentral Government, the“Transformational Government” Agendain the UK, and the “President’sManagement Agenda” in the US. Theseagendas have much in common. Theyare predicated on reducing cost,investing in new technologies and

Governments – particularly those inEurope and North America – are facedwith a dilemma. Better services to thecitizen cost money, but the citizen isno longer willing to pay more taxes topay for these services. In addition, aseconomies globalize, businesses aretaking corporate tax rates intoconsideration in their investmentappraisals – in effect, governmentshave to use corporate tax rates as ameans to compete with one anotherand so make their country anattractive investment proposition. Sothe revenue streams open togovernment have become tighter – taxrates cannot be increased, thetaxpaying population is decreasingand within the EU the opportunitiesto borrow are now more restricted.

But it is possible to turn this challengearound and see the opportunity totransform the way that governmentsdeliver services. If the source of incomeis more restricted, then governmentshave to reduce costs and increaseefficiencies. Typically staff costs form a

Tax Revenue Management - Reducing the Tax Gap 3

What are the compelling pressures tax agencies face today?

Compliance Cost Efficiency Citizen-focus

How to reduce the tax gap by:

• making it as easy as possible tocomply,• having the means to effectively tacklenon-compliance.

How to deliver the same level of servicefor less money, delivering genuineefficiency gains not simply costreductions.

How to harness new technologies to:

• deliver services to the citizen, whenthey want them and how they wantthem,• make it easier for the citizen andbusinesses to comply with their taxobligations.

Change

These 3 challenges are underpinned by the transformational challenge:

• Why have a tax agency in the 21st Century?• What business is a tax agency in and what is its new business focus?• What organizational structure is required?• What culture and behaviors are now expected from staff?• Does the tax agency have all the skills, capabilities and the capacity to step up to the transformational challenge?• Can the tax agency bring about change?

These business challenges are notuncommon among most major taxagencies where non-compliance, costefficiency and changing services tomeet citizen demands are the norm.This is because of the importance ofthe tax agency as the government’sbanker and because taxation providesthe bulk of the income to enable agovernment to function.

Tax agencies have a responsibility toreduce the gap between what ought tobe paid and what is collected as taxes.With compliance for example, taxagencies must bring in the rightamount of tax and thereforeundertake compliance activitiesbecause some parts of the taxpayingcommunity are non-compliant (theso-called tax gap between what taxshould be collected and what isactually collected). This can be causedby lack of insight, error-prone filingand negligence, lack of follow-up oreven intentional fraudulent actions.

Globalization increases the challengesof tackling non-compliance andimpacts the income a country receivesthrough taxation. Essentially, as moreeconomic activity globalizes the easierit becomes to move money aroundand to therefore avoid taxes. And inrapidly expanding economies, such asChina, there is the added challenge ofan entrepreneurial high incomesection of society which, whencombined with a still largely cash-based economy, means tax avoidanceis much more likely. As an example ofthe impact of globalization look at theEU where new regulation will allow atransporting firm to file an importwhere it likes – some countries willsee a large drop in revenues (levyingimport duties and VAT might goelsewhere).

As a result, agencies everywhere arethinking about their position. Newtechnical ways arise to collect taxes atthe source, which for instance meansthat filing afterwards is a formal

4

Registration,Account

Maintenance

Collect TaxInformation

Returns Filing& Processing

Filing CompliancePayments,Collections

Disputes & Appeals

Audits,Tax Inspection &

Detection

Accounting

Measurement

Illustration 1: Discrete Steps of Tax Lifecycle

obligation only. All traditional valuesare turned upside down. Agencies facethe questions of how to organize,what responsibility they have, andhow to keep control of the newdecentralized data collectionstructures. Creating bespoke solutionsis out of the question: this takes toolong and the flexibility that is neededcannot be designed for – this isindustrial knowledge that is notreadily available. Agencies needinsight to change and make that leap.They must choose the integrator whoprovides the necessary skills,capabilities and the capacity to stepup to the transformational change.

The Components of Tax & RevenueManagementWithin the tax administrationlifecycle, we see the business processof managing tax assessment, collectionand enforcement as having nine broadelements – see Illustration 1.

But what Illustration 1 does not takeinto account is the complexity of taxand revenue management. Capgeminiand SAP have found that, typically,the government tax and revenuemanagement lifecycle has manyproblems, including:

•SSiinnggllee rreevveennuuee ttyyppee lliimmiittaattiioonnss withmultiple systems, processes andpersonnel for different taxes causingredundant data capture and adding tocomplexity. Most governments havedozens of tax and revenue types,from sales, fuel, tourist developmentand rental car surcharges toconvention development tax anddocumentary stamps on deeds. Andas tax becomes more and more aninstrument of government policy inthe areas of environmental protectionand social wellbeing, the challenge isto quickly add new tax and revenuetypes to the tax system.


•LLiimmiitteedd vviieeww ooff tthhee ttaaxxppaayyeerr withlittle or no single view of thetaxpayer or the taxpayer’s totalobligation, resulting in lost revenueand in some cases low compliance.Tax agencies typically have differentemployees and systems to handleeach tax type, with no single pointof visibility into a taxpayer’s overallrecord. This leads to poorercustomer service, a lack of ‘singleview of the citizen’, customer datastored in multiple locations with noeasy detection of under and over-payments, and correspondingproblem resolution becomingdifficult.

•LLoowweerr ccoommpplliiaannccee, because riskassessment is more difficult due to alimited visibility into taxpayers’ totalobligations and status. In some taxagencies this leads to poor targetingof audit activities.

•LLooww ccoolllleeccttiioonn eeffffiicciieennccyy due to thehigher cost of operations. Typically,we see a high ratio of cost relative torevenue collection. Many taxagencies now not only collectmoney, but they make payments tobusinesses and citizens alike in theform of refunds, grants andsubsidies. This process can often beas inefficient as the collectionprocess.

•DDiiffffiiccuullttyy iinn mmeeaassuurriinngg eeffffeeccttiivveenneessss,because with no consolidated viewof performance across variousprocesses, transactions, steps,interactions and data, it is difficult tohave robust performance indicatorsthat can demonstrate real andgenuine high quality businessperformance.


These problems are exacerbated bythe existing technologicalenvironment where most tax agencieshave large-scale legacy systems andhave not been able to standardizethose systems. Most environments area combination of in-house developed,custom-built, isolated islands ofautomation. In many cases, themultiple systems supporting multiplerevenue types further increase the ITcomplexity. Why are custom, ‘one-off’systems so problematic? When weexamine the way custom-builtintegration has evolved, thecomplexity inherent in custom-builtintegration slows progress andincreases costs. At system level, thelogic needed between applications is

‘hard-wired’ into these applications tomimic a business process. However,once the business process requiressome changes, these hard-wiredsystems now become prohibitivelyexpensive, as intense programmingwork is required to change theprocess.

So when you bring all of these factorstogether the reality is that tax agenciesare faced with an environment whichis more like Illustration 2 than theideal of Illustration 1. The ultimatepain of such a disjointed environmentis uncaptured revenue and lowtaxpayer compliance rates. Thechallenge is how to change thisenvironment.

Fragmentedaccess fortaxpayers

Registration,Account

Maintenance

Collect Tax Information

Returns Filing& Processing

Filing CompliancePayments,Collections

Disputes & Appeals

Audits,Tax Inspection &

Detection

Accounting

Measurement

Singlerevenueand taxtypelimitations

Limited view oftaxpayer

Undetectedfraud & taxevasion, lowenforcedrevenues

Low voluntarytax complianceand revenues

High taxpayerburden

Slow revenuereconciliation togeneral fund

Cannot measure revenueagency effectiveness, lowrevenue per dollar spent

Low collectionefficiency, highcost of operations,low paymentefficiency

Redundant systemsfor each tax,revenue andreceivable type,multiple sources oftaxpayer data

High cost perreturn filed

Legacy, custom-built, disconnectedsystems for eachstep in tax lifecycle

Illustration 2: Pain Points for Tax Agencies

blend some of them. In theNetherlands and the United Kingdom,the tax agency is now also theprovider of social security benefits tothose in work. In Denmark, the taxagency is responsible for vehicleregistration and associated road taxes.In the United Kingdom, the EducationDepartment sets the policy on studentloans, a student loan companymanages the process and provides theloans, but it is the tax agency whichacts as the loan recovery service. TheCanadian Government has gone a stepfurther, aggregating all governmentservices that entail customer contactinto a single department, ServiceCanada, which is, by implication,responsible for all accompanyingfinancial transactions.

•Where the state fulfils financialobligations to the citizen – forexample, payments of social securitybenefits, unemployment benefits,agricultural payments and pensions.

•Where the state acts as a serviceprovider (in some instances amonopoly service provider) and thecitizen purchases products orservices from the state – for examplepassports, visas, discountedmunicipal travel passes and studentloans and grants.

In tax agencies these are typically thedebt management, banking andenforcement functions. But these corefinancial transactional services cutacross the whole of the public sectorand there is an emerging trend to

In our view, the complexity is not goingaway. Take for example the financialtransactional functions of tax agenciesshown in Illustration 3. In his paper “AQuiet Revolution: Government’sTransactional Services”(1), GrahamWalker set out a simple genericmapping of the transactional process.

Financial transactions can be readilymapped on to this process andtypically take place in the publicsector for three main reasons:

•Where the citizen fulfils financialobligations to the state – forexample, the payment of incometaxes, municipality taxes, sales taxes,excise duties, road taxes, fines &penalties, health & social insurances.

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1A. Infoself-serve

2A. Inforequest

3A.Register

4A.Transact

5A.Statusrequest

6A.Correcterror

7A.Appeal /complain

1B. Auto-respond

2B. Inforespond

3B. Openaccount

4B. Ack-nowledge

5B.Statusresponse

6B. Inforequest

7B.Trans-actionresult

Pre-transaction Transaction Fulfillment

8A.Changeofcircum-stances

8B. Ack-nowledge

9B. Newservice info

Customer

actio

nsProv

ider

actio

ns

Illustration 3: An example of a transactional process

(1) A Quiet Revolution: Government’s TransactionalServices, Graham Walker at the UK’s Institute of PublicPolicy Research

Adding Complexity to this Environment:

Financial Transactions in the Public Sector



So when we look across the publicsector, we have found that there aresignificant overlaps in the functionsresponsible for these financialtransactional processes (Table 1).

At a global level, the public sector isfaced with real pressures to becomemore cost efficient, but this can onlybe achieved by innovative thinking inwhat are generally seen as these moremundane areas of the public sector.The barriers between the layers ofgovernment and between agencieshave to be broken down. So there hasto be a move away from problemsolving based on individual agencies,towards a pan-governmental approach(both centrally and locally) to meetthese challenges.

We believe that there is a need for afresh look at how financialtransactional services are managed.

Public sector agencies with financialtransactional services need to look atthe underlying processes and considerif they are still fit for purpose. If theyare still highly manual processes, isthis sustainable? If processes are goingto move towards automation, thenthey should be re-engineered first, toavoid inefficiency creeping into thechanged process and therebyreinforcing higher cost. Technologywill be a critical enabler and sosolution sets will depend on ServiceOriented Architecture (SOA) as well ason ‘out of the box’ or ‘commercial off-the-shelf’ (COTS) solutions that enablepublic sector agencies to introducestandardized processes with cheaperstandardized products. But for this tosucceed, it requires the IT market andvendors of standardized packages toprovide solutions that are stable andscalable to ensure they have theconfidence of public sector agencies.

FFiinnaanncciiaall PPrroocceessss TTaaxx SSoocciiaallSSeeccuurriittyy

SSttuuddeennttFFuunnddiinngg

MMuunniicciippaall &&RReeggiioonnaall GGoovvtt

Receivable & PayablesManagement

� � �

Financial Accounting � � � �

Collection, Debt Management& Enforcement

� � � �

Online Financial Services � � �

Financial Risk Management � � �

Loan Management �

Inter-Bank Clearing � � �

Business Intelligence � � �

Records Management � � � �

Table 1: Typical financial business processes and where they occur in the public sector

The SAP Tax and RevenueManagement for Public Sectorpackage is a holistic tax and revenueadministration solution that providesa single view of the taxpayer andsupports multiple revenue types,helping tax agencies increasecollections and maximize compliance.It is configurable, upgradeable,standardized, commercial off-the-shelfsoftware that supports the tax andrevenue management life cycle atlower risk and cost than custom-developed solutions.

In the United States, COTS means thesame thing as “standardization” asused in other parts of the world, andis an acronym commonly used in thepublic sector. Both COTS andstandardization refer to things one canbuy (for sale) from a provider that arepre-integrated and available fordeployment. These deliver moreavailable functionality, while loweringthe risk of both initial and ongoingcosts of custom-developed solutions.

What are the problems associatedwith non-standardized systems? • Many existing tax agency ITenvironments are comprised ofstand-alone, custom-built, and/orlegacy systems that are literallyisolated islands of automation, eachsupported by separate staff for eachtax and revenue type. This fostersfraud and reduces compliant taxpayments because there’s novisibility into taxpayers’ overall taxand payment status.

• High maintenance costs to update,integrate and adapt these systemswith ever-changing technologyadvancements, or to change businessprocesses mandated by legislativeaction or constituent demands

• Poor customer services fortaxpayers, who must communicatewith separate offices for each taxtype or fee and have to crossorganizational boundaries to solveproblems.

8

A Tax & Revenue Management Solution to Reduce

the Tax Gap

Note that these problems are notisolated to the CIO, but impact theentire organization, including theexecutives, management and staffwithin a tax agency. So given theseverity of these problems, and themagnitude of the tax gap, how does astandardized solution address thesepains and problems?

Illustration 4 below represents a viewof how the SAP Tax and RevenueManagement solution supports thekey business processes across the taxand administration lifecycle. Note thatthe complexity, inefficiency andredundancy of Illustration 2 are gone.This graphic represents the same taxand revenue lifecycle but with theimprovements and benefits deliveredby SAP to tax agencies.

Each of the green boxes represents acapability and benefit that SAPdelivers to the tax agency, associatedwith the pains and problems fromIllustration 2.

Provide multiple taxpayeraccess points

Supportmultiple tax,revenue andreceivabletypes

Improved voluntarytax compliance andrevenues

Higher enforcedrevenues,increased % ofreceivablescollected

Collect money faster, lowered cost ofoperations, make payments faster

Foster“constituent”orientedservice

Accelerate revenuereconciliation togeneral fund

Demonstrate publicaccountability, increased revenueper dollar spent

Standardized solution connecting the tax& revenue management lifecycle process

Lowered cost perreturn filed

Offer “single view oftaxpayer” across taxtypes and tax lifecycle

Collections & Disbursements

Audits, Inspection & Detection,

Taxpayer Case Management

Revenue Accounting, Performance Benchmarking Registration,

Account Maintenance and Service Support

Online Forms,eFiling, Returns

Processing

Filing Compliance

Florida: 2nd year ~15%

Florida: 2nd year(~15%)

Florida: 49types; 95% ofall taxes

Florida: 2nd year (~4%) Florida: 2nd year ~10%

Florida: 2nd year ~ 2%

Illustration 4: Benefits of the SAP Tax & Revenue Management Solution


First, SAP provides multiple taxpayeraccess points that help speed up,simplify and reduce barriers totaxpayer interaction by integratingcommunication channels andproviding ‘one-stop’ registration andaccount maintenance capabilities.Some examples include contact via ataxpayer portal, telephone, email,face-to-face and fax. This integratedonline registration process ensuresthat complete and up-to-date taxpayerinformation is included in theautomated follow-up processes suchas taxpayer validation and back officeprocesses like fee collection.

Secondly, SAP TRM supports manytax, revenue and receivable typesacross the tax and revenue lifecycle,such as taxes, permits, licenses, tolls,duties, etc. This is particularlyimportant as tax agencies considerproviding revenue collection serviceswithin and across the governmentorganization. SAP’s single, unified,integrated solution can flexibly adaptto changing tax rules and laws andcan easily add new tax types and taxschemes.

Thirdly, a single view of the taxpayershows the taxpayer’s total obligation,both to the taxpayer and thegovernment agency, regardless ofcommunication channel or tax type.This helps to capture additionalrevenues and improve voluntarycompliance.

Fourth, multi-channel filing andeFiling lower costs per dollar collectedand reduce processing costs via on-line filing and taxpayer self-serviceaccess capabilities, along with linkedimage retrieval so taxpayers andemployees can quickly accessdocuments. eFiling and onlinepayments provide pre-populatedfields, real time calculation and


validation of return data; while theself-service portal allows 24/7management of taxpayer accounts andlowers administrative and paperprocessing costs.

Fifth, voluntary compliance isimproved by streamlining processesthrough a one-stop collection screendetailing taxpayer obligations, status,case documents, payment history, etc.In public sector value terms,increasing or maximizing voluntarycompliance means maximizing theratio of taxpayers who complete theirtax returns in compliance with thelaw, file and then pay the full amounton time. This capability increasesvoluntary compliance by simplyensuring that people are aware ofwhat they owe.

Sixth, with integrated taxpayer casemanagement, tax agencies can achievehigher enforced revenues andincreased “percent of receivablescollected”, while reducing tax revenueleakage and maximizing tax recoveries.Tax agencies can accurately selectcases for audit and quickly determinetreatment streams for collection.Agencies can manage, track and reporton the activities, appeals, ruling andresults of investigations to ensureenforcement and compliance. Moneynot collected within 90 days is muchmore difficult to collect, but by usingBusiness Intelligence to focus onefficient collection methods, anddeciding when to pass receivables tocollection agencies, tax departmentsincrease the chance of collectionsuccess. A single view of receivablesallows the taxpayer’s agent to moreefficiently assess and act on doubtfulaccounts across tax regimes. Integratedcall center capabilities improveefficiency and effectiveness throughthis consolidated view of receivables.

An example, in the case of theFlorida Department of Revenue(FDOR), USA, increased voluntarycompliance revenues by ~ 10%within the second year ofimplementing SAP. Making it easierto pay and allowing multiplepayment methods and supportingsingle/multiple payments on sum ofall obligations, contributes toaccurate and timely billing. Thislowers the cost per dollar collectedthrough accurate, timely andautomated billing and collectionprocesses.

The FDOR also lowered operatingcosts by ~ 3% by the second year ofimplementing SAP.

The FDOR uses SAP to support over49 different tax types, representing95% of all Florida State taxes.

Finally, built-in business intelligencehelps demonstrate publicaccountability and operationaltransparency. Tax agencies can trackand measure against specific KPIs andperformance metrics, such asincreased revenue per dollar spent,score against internal servicestandards (such as first-call response,process x% of returns by deadline,etc.), ‘cost per dollar collected’, or‘number of taxpayer cases closed’,‘cost per return filed’, ‘% of electronicfiling’, ‘dollars collected per revenueagent’, ‘tax cases closed per revenueagent per month’, ‘average days toissue refund’, ‘% of returns filedelectronically’.

SAP provides a standardized tax andrevenue management solution thatunifies and automates the entire taxlifecycle, from registration throughremittance processing and audits torevenue posting and distribution. Thisavoids the cost and inefficiency ofmultiple, redundant, custom-built,legacy and/or stand-alone systems.Each step along the tax and revenuemanagement lifecycle is linked andintegrated to the other, resulting inunified data stores, complete taxpayerrecords, and efficient services. SAP’sCOTS solution delivers more availablefunctionality than custom-builtsystems, while lowering the risk andcost of custom-developed solutions.Such solutions help tax agenciesremain current with new technology,provide standardization across theenterprise, and avoid the high costs ofcustom-built solutions, whilesupporting adaptable configuration tochanging business rules and ever-changing tax policy.

The SAP solution also helpssynchronize multiple sources oftaxpayer data, whether it’s captured inthe federal or central government taxdepartments or even in social servicedepartments. For example, eitherconstituents have a job (tracked bythe tax agency) or they depend onsupport from the Government(Department of Health and HumanServices). Or other agencies from boththe federal and state or local leveldepend on these databases. SAP’sMaster Data Management (MDM)capabilities help keep taxpayer data insynch, to maintain a ‘single version ofthe truth’ and ensure master dataconsistency across disparate systems.Each agency needing to accesstaxpayer data, whether it is the localtax, social services, housing agencyetc, can do so. This fosters inter-departmental processes to maximizegovernment efficiency.

The ultimate value of the SAP Tax andRevenue Management solution is thatit helps tax agencies increase revenuesand taxpayer compliance. Thispromise is built upon the capabilitiesand benefits identified in thepreceding pages.

From a business perspective, there is afit between the wide offering andexperience of SAP for tax agencies andthe experience of Capgemini toimplement the solution and managethe change process to a 21st centuryagency.

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Seventh, by providing the taxpayerwith a single point of contact,governments foster improvedconstituent-oriented services. Taxagencies can quickly post paymentsand returns to taxpayer accounts, andgenerate refunds on a timely basis.Multi-channel enablement andknowledge management ensureenquiries that are answeredconsistently and on the first contact.Activity management ensures thatenquiries levels are met and builds acomplete taxpayer history. Outboundcampaigns allow proactive educationof taxpayers to improve voluntarycompliance, and segmentation ensuresthe targeting of only relevanttaxpayers.

Eighth, integrated financialmanagement accelerates revenuereconciliation to the general ledger,and lowers the time for financialreconciliation and closing, whilespeeding up revenue distribution tosupport government programs andservices.


The standardized Tax and Revenuesolution from SAP has been designedwith a specific approach in mind: toallow flexibility to better followtaxation demands as they arise. Thebenefits that come from a unifiedtaxation platform are based on thecapability to make the frameworkbehave in the way that fits the taxregime and future plans.

To be able to do this, processes mustmake use of common services andstandard transactions. It also points inanother direction. Governance takes acentral position in the design. SAPTRM can easily be configured to adaptto changing business rules and ever-changing tax policy. It allows a shortimplementation time for new tax rules—months not years. This leads to alower Total Cost of Ownership. A lotof skills are needed to create thestructure of the framework so that itfits in with the tax agencies’ nationallegislation, know-how and workingpractices.

The core component of TRM is basedupon business rules in a structure thathas been developed specifically forexecuting taxation and handlingsubsidies. The rules can be changedsimply and re-used.

•Rules are used to check and validatedata on a filed tax form or on asubmitted application form.

•Rules are used to perform complexcalculations that reflect specificlegislative circumstances or legalprecedents.

•Rules can filter out cases forexception handling. In cases wherethe filing does not fit the basic rules,a case will be made and the case willbe handed over to an expert.


The Concept behind SAP Tax and Revenue Management

•Rules determine how the accountingpostings take place, and incorporateautomatic handling of changes whenevents occur in the life of a citizenor company. All changes andcorrections are booked and arealways linked back to the originalpostings.

The way SAP uses rules in the TRMbusiness component offers a high degreeof flexibility in taxation. TRM is an openplatform that can be adapted andadopted to levy any type of tax or evenfor providing subsidies. By being able tomanage the transient models and ever-changing parameters of a tax regime,TRM can closely track the politicaldecision-making cycle on regulationsand taxation rules. In this way, SAP TRMis a multi-purpose tax framework thatcan accommodate parallel sets ofconfigurations within a commonprocess. Managing these rules is a newbusiness function for the agency.

One key to the transformation of theagency is the development of the newbusiness function with the associatedprocesses to manage the new wealth offrameworks. The variable components(transient) that directly identify how atax is levied or a benefit is provided, isbound to change endlessly—theresponsiveness to new regulation,creating new handling, exceptions,terms and conditions are crucial.These must be developed in its ownenvironment, in what we like to callthe policy cycle time. The agency inthis way can easily change states: SAPTRM is a component of the newsystem’s structure designed to deliver ahighly scalable handling while stillallowing a fast turn-around to changea regime or implement new taxation.Taxation excellence builds on thecapability to effectively manage thisgovernance of tax business rules in linewith the policy development cycle.

• Tax Rules are shared betweenmass handling processes and themanual handling process so, thereis no confusion about which ruleis valid.

• Tax Objects are shared betweentax types so, there are noredundancies in data.

• Changes in circumstances can beautomatically evaluated for theirimpact on current or even oldtaxes. These events can triggerhandling in more than one taxtype.

• Tax payers have the possibility touse on-line and interactiveelectronic forms to file their taxesso the burden of complying withtax ruling is reduced.

• Forms are personalized and pre-filled to be client-friendly andreduce filing errors.

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SAP CRMEn

terp

rise

Port

alSAP ERP

Budget

Returns ProcessingFinancialCustomer

Care

Tax EstimationTax Analysis

Case/Records Management

SAP NetWeaver

Business Intelligence

Documents

Rules Engine Workflow

Registration

Receivables & Payables

Management

Revenue Accounting

Collections Management

Controlling

Financials

PSCD EA-PS

Audit CaseBankruptcy

Case

Online Bill Presentment & Payment

FSCM Biller Direct

*

* Enterprise Application Public Sector

tailoring to a specific product, serviceand regulatory domain. These best-in-class components bring specificknow-how to the table. Capgeminihas close relationships with SAPsolution partners and has integratedmany external applications in SAPenvironments.

Implementing a new solution is not aone-off project in a greenfieldsituation. There is a need to integratemany existing systems in a larger,unified environment. Capgemini hasthe industrial knowledge and leading-edge capabilities in developing servicearchitectures around SAP in the publicsector and in many industrydeployments. Capgemini provides theinsight from global projects, thenecessary skills as a leader in SAPintegration, the capabilities and thecapacity to manage the change neededto allow tax agencies to stand up tothe transformational challenge.

market. PSCD is a world standard andproven in high volume environmentsin the primary process. Scenarioscater to the needs of specific groups ofconstituents or enterprises. Back-officehandling can be unified into a corecompetence across tax regimes. It isoptimized for fast handling of largevolumes of data. SAP CRM has beencreated to map the large array ofrelationships between customers. Itcan easily capture the types ofrelationships between taxpayers andtheir tax obligations and handle thehistorical situations of developingevents in the lifecycle of a taxpayer –or his/her relevant environment –related to a tax obligation.

The SAP business platform can beextended with external applicationsdesigned to deliver specificfunctionality and style of execution orcan be used to leverage the embeddedknow-how. These solutions containdomain knowledge and haveconfigurable parameters that allow

Illustration 5 above shows anoverview of the SAP Tax and RevenueManagement solution with its keycomponents. The basic solutioncomes with a wealth of components:customer interaction solutions toprovide access to citizens orbusinesses. The office worker makesuse of the existing frameworks forfinancial customer care and casemanagement of Customer RelationsManagement (SAP CRM). The PublicServices Collection andDisbursements (SAP PSCD)component is used for high volumehandling of all payment obligations.Common functions are available forfiling the tax documents, managingthe taxation rules, setting up andmanaging the workflows.

TRM is based on Public SectorCollections and Disbursements. Itmakes use of the common industrycapabilities that are in widespread usein the insurance and banking sectorand on the utilities and telecom

Illustration 5: The SAP Tax and Revenue Management Solution


Governments are understandablyreluctant to increase taxes and duties.The need to support legislation,policies, and spending requirementsin such areas as education andhealthcare, drives these agencies tocapture all appropriate revenues dueto the government and to increasecompliance.

SAP and Capgemini are workingcollaboratively to help tax agenciesface and overcome these challenges.Together, our industry expertise,comprehensive solutions and provenresults will ensure that your taxagency is able to achieve one coremission: to increase revenues andimprove taxpayer compliance. Thismission is to increase revenues andimprove taxpayer compliance, thusmaking the transition to a 21stcentury government agency.

In this paper Capgemini and SAPhave discussed the complexchallenges facing tax agencies aroundthe world. This complexity is drivenby:

• globalization,

• citizen demands for better serviceand easier access,

• the compliance challenge ofreducing the tax gap,

• the complexity of technologicalchange,

Government agencies are undertremendous pressure to provideresponsive services to constituents,while financial support for theseservices is limited or diminishing.


Conclusion: Collaboration and Working Together

(

14

Appendix

Capgemini References

• “Global CIO Survey 2008” (2008)

• “Rising to the Challenge of Financial Transactional Services in the Public Sector”(2008)

• “More for Less. A Reality for Tax Agencies” (2007)

• “Compliance: Different Tax Systems, Common Challenges” (2007)

• “Strategic Sourcing of IT Services” (2007)

• “Capgemini’s Enterprise SOA Adoption Program for the Public Sector” (2007)

SAP References

• “SAP Tax and Revenue Management for Public Sector” (2008)

• “The Power of Community” (2008)

• “SAP Tax and Revenue Management for Public Sector” (2006)

Capgemini Contacts

• Ian Pretty, VP, Global Public Sector, Tax & Customs Lead [email protected] – +31 (0)30 689 9602

• Mario Halfhide, VP, Public Sector Business Development and Sales [email protected] – + 31 (0)30 689 0380

• Renate Radon, VP, Global Alliance Executive [email protected] – +49 (0)69 9515 2909

SAP Contacts

For further details about the SAP TRM offering, please contact:

• Gilad Gans, VP, Head of SAP Public Services Industry at SAP EMEA [email protected] – +33 (0)1 44 45 21 16

• Markus A. Werling, VP, Head of Business Unit Tax, Revenue and Customs Management, IBU Public [email protected] – +49 (0)62 2776 2228

• Russ LeFevre, VP, Head of Industry Solution Marketing, Public [email protected] – +1-202-361-9757

For further details about the partnership between SAP and Capgemini at EMEA:

• Guy Danon, Director, SAP EMEA Ecosystem and Partner [email protected] – +33 (0)6 63 31 23 20

Public Sector the way we see it

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Capgemini, one of theworld’s foremost providers

of consulting, technology andoutsourcing services, enables its clientsto transform and perform throughtechnologies.

Capgemini provides its clients withinsights and capabilities that boost theirfreedom to achieve superior resultsthrough a unique way of working - theCollaborative Business Experience® -

and through a global delivery modelcalled Rightshore®, which aims to offerthe right resources in the right location atcompetitive cost. Present in 36 countries,Capgemini reported 2007 globalrevenues of EUR 8.7 billion and employsover 83,000 people worldwide.

More information about our services,offices and research is available atwww.capgemini.com/public

The Industry Value Network group forpublic sector brings together leading-edge independent software vendors,technology vendors, system integrators,SAP, and customers to focus on keypriority business needs and opportunitieswithin the public sector industry.

The group drives strong collaborationamong members to accelerate co-innovation on SAP’s common platformand to provide integrated, multivendorsolutions and services that support keyend-to-end public sector businessprocesses for our customers. This enables

our customers to maximize their publicvalue through increased interoperability,reduced total cost of ownership, andimproved transparency.

With a focus on the business process oftax and revenue management, membersof the Industry Value Network group forpublic sector – customers, partners, andSAP – are collaborating to deliverinnovative solutions and new, extendedintegration scenarios that help governmentsmaximize taxpayer compliance andincrease revenue collection.

About Capgemini and theCollaborative Business Experience®

About SAP & the Industry Value Network

www.capgemini.com/public

AuthorsIan Pretty – CapgeminiMario Halfhide – CapgeminiRuss LeFevre – SAP

Copyright © 2008 Capgemini. All rights reserved.