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Lowering the burden on citizens
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Politicians don’t score many political points by lauding the achievements of tax collectors. But it is important to note the efforts of the Georgia Department of Revenue over the past few years. Over the course of the current recession, protecting education and other critical areas from funding cuts was prioritized. Services considered non-essential were cut at higher rates in order to preserve those critical areas.

The Department of Revenue (DOR) was one of the areas considered non-essential and funding cuts resulted in significant decreases to its customer service, revenue processing, and tax compliance activities. Cuts to DOR totaled 18.4 percent from 2008-10. Customer service wait times of more than four hours became common and taxpayers waited for long periods for their returns to be processed. In retrospect, this may have not been a wise place to take significant reductions since DOR interacts with the majority of Georgia citizens at least once a year.

DOR — Wide responsibilities
The Department of Revenue has a wide-ranging mission. They are responsible for the collection of over 90 percent, or $16 billion, of the state’s revenue including individual and corporate income taxes, sales and use taxes plus alcohol and tobacco taxes. This is a massive operation that handles millions of forms and mailed items.

As a part of these collection responsibilities, the law requires that DOR conduct hearings on tax disputes as well as provide policy makers with information on revenue collections. On the motor vehicle side, they are responsible for the coordination and supply of car tags, registrations and salvage vehicle inspections as well as the verification of car insurance.

For their regulation responsibilities, they have sworn officers who regulate the licensing and enforcement of alcohol and tobacco sales as well as coin operated amusement machines. DOR still conducts raids on illegal stills, but mainly they make sure that businesses are not selling alcohol and tobacco to minors and that proper licenses are obtained.

Local governments are very dependent on DOR for the compilation of tax digests and those with forgotten safe deposit boxes can contact their unclaimed property division to see if they have their belongings. Of course, DOR must administer any tax exemptions granted by the state as well.

Putting funding into tax collection may not be a popular decision, but if done right, it indirectly helps law abiding citizens to pay lower taxes and still enjoy essential government services. By collecting taxes already owed the state, elected officials are not put in a position where they are forced to make further budget cuts in order to balance the state budget if not pursuing other revenue sources.

In fiscal year 2011, legislative budget writers came to this realization and revisited the resource allocations to DOR. In FY11, approximately $10 million was appropriated annually to increase the number of revenue agents to decrease tax fraud, collect owed taxes, and increase overall compliance. It was expected that this investment would yield approximately $40 million or a four-fold return in revenue collections. A similar investment was made in FY2012 and emphasized customer service and additional fraud prevention.

Investment yields great returns in fraud control
Data collected by the Department of Revenue and independently analyzed by the Senate Budget and Evaluation Office (SBEO) shows that the increase in compliance funding has been successful in both stopping fraudulent refunds from being issued by DOR and recovering delinquent and unpaid taxes. The FY11 estimated collection of $40 million appears to have been conservative because collections for these new hires yielded approximately $114 million or a ten-fold return. Almost $30 million of these collections came from blocking fraudulent returns.  Combined with the agents added in FY2011, the new agent hires in FY2012 were expected to generate $145 million in revenue collections for the 2012 fiscal year that just ended.

It was again shown that the estimated return on investment was overly conservative. SBEO analysis reveals that these compliance agents quickly surpassed this expectation and collected approximately $212 million in revenue collections for the year. This is 50 percent more than what was expected. These collections are on top of the $240 million collected by DOR staff who were on board prior to the FY11-12 additions.

There will be a point of diminishing returns, but to date, these investments in the Department of Revenue appear to have been a good decision.

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