John F. Kennedy famously said “It is a paradoxical truth that tax rates are too high today and tax revenues are too low,” and with April 15 right around the corner, chances are your tax returns leave you hoping that everyone else is planning on paying their fair share like you.
The difference between what is legally owed and what is actually collected by a government in taxes each year is called the “tax gap.” The IRS estimates that figure to be around $385 billion, but others see it being much higher. The University of Wisconsin-Madison for instance, calculated it as nearly $600 billion.
However, finding fraud, or even honest mistakes, is difficult because tax codes are complex and many tax evaders are clever. Tax violations are difficult to uncover, especially among business taxpayers, who have many justifiable expenses and exemptions that are harder to track.
Big Data and analytics provide a method to find anomalies, possibly leading to predicting where these anomalies may happen again.