|If governments can collect taxes from citizens quicker and minimize the number of tax defaulters, the effectiveness and efficiency of tax collection will be greatly enhanced. In general, robotics and AI are used to prevent tax default and provide services to taxpayers / Photo by: danielvfung via 123RF|
Governments nowadays are harnessing the power of AI and robotics in various sectors such as healthcare, transport, defense, and national security, Naveen Joshi stated on business news website Forbes. They are also rapidly accepting AI use, making it easier to seize new opportunities for innovation in public services like taxation. The government’s source of money is tax, which is used to support public sector functions.
If governments can collect taxes from citizens quicker and minimize the number of tax defaulters, the effectiveness and efficiency of tax collection will be greatly enhanced. In general, robotics and AI are used to prevent tax default and provide services to taxpayers. For example, AI and robotics can be used to identify defaulters who are paying less tax or not paying their taxes at all by analyzing and monitoring their financial data.
Automation and Taxation Statistics
In the US, more than 25% of jobs are experiencing high levels of disruption due to automation, according to think tank Brookings Institution, as cited by Goran Dautovic of market analysis website Fortunly. In 2016, this amounted to 36 million jobs, with more than 70% at high risk of being replaced by automation. The research also forecast that 36% of Americans will experience medium-level exposure to disruptive technologies by 2030 while 57 million jobs or 39% will face low-level exposure.
Insurance company Willis Towers Watson mentioned that 57% of employers said the main goal of automation is augmenting worker performance and productivity. Analyses of automation and job loss showed that most employers wish emerging technologies can support their workers in accomplishing business operations, with 11% of them intending to automate their operations to a great extent. Additionally, 15% will invest in automation to minimize mistakes and reduce risks.
In the US, the net tax collected was $3 trillion in 2018, according to the Internal Revenue Service, as cited by Julija Andjelic of Fortunly. More than 52% of the net amount was collected from individual and estate and trust income taxes, amounting to a total of $1.57 trillion. This was followed by employment taxes with $1.12 (37.6%) of the net total.
There was a total of 2,886 cases of criminal investigations done by the IRS for the 2018 fiscal year, with 2,130 of them up for prosecution. For tax fraud, there were 1,099 cases, illegal sources of finances with 1,064 cases, and narcotics-related tax crimes with 723 cases.
In 2017, the median amount of evaded tax was $277,576, according to independent agency the United States Sentencing Commission. This has grown since 2013 when the median tax loss was estimated to be $160,000.
How AI and Robotics Change Taxation
1. Process Automation
Processes can be automated, thanks to robotics and AI. Each day, a tax professional’s tasks consist of repetitive processes such as processing documents, reporting, etc. Having AI-powered robots can automate these tasks to allow people to accomplish more intellectually challenging tasks. For example, robots can be deployed to input account numbers or asset ID numbers on spreadsheets. They can also be used for reporting and financial closeouts.
Since tax professionals use accounting software to compute a firm’s financial data, robots can automatically enter information from spreadsheets to the software. Robots can also speed up lengthy operations and get precise tax amounts faster.
2. Draw Data from Tax Documents
A tax team needs to classify documents, find the source of the documents, and extract key data from them. AI can accelerate these processes thanks to ML (machine learning) algorithms. ML algorithms can aid AI-enabled robots to detect a company’s capital gains and charitable contributions, take care of assessment notices and other matters that can be used to classify documents.
Key data like account number, number of payments on the tax bill, discount on the tax bill, and the like can be extracted accurately by robots. This data can help optimize tax payment and file the tax returns.
|Processes can be automated, thanks to robotics and AI. Each day, a tax professional’s tasks consist of repetitive processes such as processing documents, reporting, etc / Photo by: kenishirotie via 123RF|
3. Detect Tax Evasion
Tax evasion is an issue in most countries. Auditors attempt to detect fraud in documents, but it’s like trying to find a needle in a haystack. With ML algorithms, AI-empowered systems can be developed to identify anomalous entries in large datasets. These systems can identify fraud based on various aspects like the person’s employment status, whether they have been audited in the past or not, and allegations of illicit sources of revenue.
4. Promote Transparency
Bribing in taxation slows down the growth of a country. While there are laws enforced by the government to curb corruption, monitoring every citizen in the tax sector is next to impossible. With automated processes, robots can be deployed to stop corruption and foster transparency in the tax sector.
5. Analyze Tax Deductions and Tax Credits
Robots are capable of performing in-depth data analysis, thanks to using previous tax documentations for learning and predictive analysis. They can acquire a thorough knowledge of taxes, helping them stay abreast of yearly changes.
The widespread use of robotics and AI don’t mean they will replace human tax professionals. In fact, they will help ease the burden of these professionals to allow them to focus on more challenging tasks. Not only will these technologies accelerate repetitive processes, but they will also improve the tax sector.