Discovery and Recovery: Identifying Unrecovered Revenue

Maximizing compliance is growing more difficult for local government agencies — and local governments lose vital revenue when taxes and business license fees go uncollected. Is there a seamless solution that can both increase tax revenue for local agencies without overloading the current staff?

Millions of dollars in escaped taxes and business licenses go unrecovered every year.  Since local government funding is inextricably tied to proper taxation, this means that governments are missing out on funding for important public programs. Unfortunately, with small staffs and ever-mounting responsibilities, local governments are often not staffed to perform discovery and recovery on this uncollected revenue.

For local governments, finding escaped taxes, improperly reported use taxes, and licensing errors is a tedious and manual process. However, city governments are experiencing a year-over-year slowdown in tax revenue and the growth in service costs and other expenditures outpacing it. It’s now more important than ever to stave off the impact of

  • Loss of funding
  • Incorrect reporting
  • Poor capability to project funding for future projects
  • An uneven playing field for the business community

It’s a catch-22 problem with real repercussions for the local community. Luckily, there’s a solution.

Revenue Recovery

The most effective solution for a government to secure lost revenue is to perform an analysis on the current state of compliance and take necessary steps to recover this lost revenue. The discovery piece of the solution means searching out businesses that have not paid one or more local tax or license fee. Then the next step is to work with these businesses to collect revenue owed, thus frequently securing new and recurring revenue.

By identifying anomalies in existing taxpayer fillings, these discovery tactics lead to recovered revenue for the city, which can lead to lasting benefits including:

  • Newly expanded tax base
  • Fair and uniform application of ordinances and ensured compliance
  • Uniform enforcement of compliance: level playing field for all businesses
  • Improved record keeping

The biggest downside to handling discovery and recovery internally is the time it takes. Is there another way?

Partnering with Avenu

Our team of experienced analysts identifies compliance issues, provides detailed reporting, and recovers lost taxes and licenses on governments’ behalf. As an added benefit, our approach is performance-based, therefore clients only pay once funds are successfully recovered.

We start by compiling an inventory of entities subject to taxation and compare them with your business registry. Our focused approach identifies these non-compliant entities with nexus based on local ordinance; general business, itinerants, contractors, home-based, rental income, short term rentals, and more.  With your approval Avenu takes next steps to notify the businesses and recover the tax revenue. This mix of technology and skills results in both immediate and future revenue because of better compliance from your taxpayers.

Avenu in Action

Case Study: Richmond, CA

When Avenu was brought in to access the situation in Richmond, licensing fees weren’t rising at the same rate as rent pricing, which led to an increasing number of complaints on the conditions of rentals. The city did the work of reaching out to these non-compliant landlords about conditions and licensing fees but they received little to no response.

Avenu joined to help discover all rental property owners and short-term rentals and created programs to educate them about current statutes and proper licensing. Through these efforts, Richmond was able to:

  • Identify 2,795 unlicensed businesses
  • Collect more than $2.2 million in new revenue
  • Anticipate a $360,000 annual increase in business tax revenue
  • See an increase from 24% compliance to 70% compliance with Avenu’s help
  • See incremental increases in revenue due to additional taxes, penalties, and interest

Discovery and recovery is no small job, but taking actionable steps towards establishing a level playing field can have major benefits for local governments. In Warren, Kentucky, Avenu was able to recover over $370,000 and more than 930 new registrations in the first 6 months. In Vestavia Hills, Alabama, 2,927 previously unregistered businesses now pay required taxes and fees and $1,669,750 has been recovered since 2004.

By revealing and claiming escaped revenue sources, cities can start adding more revenue to the General Fund.

Getting Started

Curious how much revenue your jurisdiction is missing out on? Avenu regularly provides jurisdictions with a FREE ASSESSMENT that identifies potential revenue that can be recovered. With a few basic data points, we can deliver an assessment within two weeks that will give your jurisdiction an estimate of the tax revenue that is going unrecovered. Knowing the additional and collectable amount is the first step toward making a difference in maintaining service levels, adding new services, and balancing the budget.

Ongoing Benefits

  • Enrich your community: Fund projects that otherwise wouldn’t have been possible
  • Level the playing field: Decrease the burden on honest taxpayers who pay more with higher tax rates to cover shortfall

This process offers local leaders an alternative to difficult and unpopular tax increases, giving them a powerful and practical tool for funding improvements to meet rising citizen expectations. Level the playing field today by decreasing burden on honest taxpayers who pay more with higher tax rates to cover shortfall. Request a free assessment today!