Artificial Intelligence in Corporate Tax Administration: Emerging Legal Challenges and the Need for Regulation

Abstract

The increasing use of Artificial Intelligence (AI) in corporate tax administration has introduced a set of unique challenges. As governments look towards AI-based technologies, machine learning systems, automated risk assessment tools, data analytics, and algorithmic decision-making mechanisms to address the problem of tax evasion, identify areas of non-compliance, and enhance tax collection efficiency, there arise serious questions about how to ensure legal accountability while maintaining the effectiveness of such initiatives.With the ever-increasing sophistication of corporate taxpayer structures and the corresponding rise in their data-intensity, AI offers tax authorities a powerful means at their disposal to uncover anomalies within financial flows and mitigate against related risks. But where this technology begins to replace more traditional forms of manual audit processes – especially where algorithms are used to make decisions regarding taxpayer status and obligations – important issues around transparency, accountability and the nature of taxpayer rights become paramount considerations.This paper explores the implications arising out of the growing involvement of artificial intelligence as part of tax administration strategies and identifies several ways forward to deal with some of the resulting complexities. These include advocating for increased transparency in algorithmic processes, implementing mechanisms for providing explanations, introducing independent auditing of AI systems, ensuring adequate levels of data protection, and assigning clearly defined responsibilities for AI-assisted decisions. A key focus throughout the discussion is on achieving balance between the use of cutting-edge technologies and the need for upholding basic legal rights.