By Nupur Shah, 5th year at Pravin Gandhi College of Law Mumbai University
Introduction
The ability of digital computers or computer-controlled robots to perform tasks commonly associated with intelligent beings is Artificial Intelligence (AI). It is concerned with projects on the development of systems endowed with the process, which performs functions that require human intellect. Since the advancement of computer technology in the 1940s, it has been demonstrated that these machines can efficiently carry out complex tasks. AI has become the center of attraction and attention and is continuing to tear up all the rule books for industries and professions. The Department of Tax has not been deprived of the application of new advancements in the technological field in this 4th Industrial Revolution.
Taxation is the means by which a government or the taxing authority imposes or levies a tax on its citizens and business entities. From income tax to goods and services tax (GST), taxation applies to all levels. In theory, Artificial Intelligence is allowing the machine to sense, think and act in ways that they can outperform the human capacity; it is about improving the tasks and not matching humans and ultimately replacing them. That is what theory says but many financial professionals are of the view that human touch would still be required and that machines won’t be able to serve that. The future of the taxpayers has endless possibilities of becoming technology-friendly, but the question is whether it would be convenient for them or not? Will taxpayers’ doubts regarding taxes be solved virtually? Will the tax returns be paid by intelligent machines giving relief to the taxpayer? Will there be no interference of officials for the verification process? These are some of the potential prospects offered by AI which must be given attention to.
Functioning of AI in Taxation processes
The Governments are extending their support for the inclusion of AI in different fields like healthcare, transport, defense, education, etc. The Governments have rapidly accepted the use of AI in their service; one such being tax and it is the primary source of money for the Government for supporting the public sector. Tax isn’t the first thing that comes to the mind when thinking about the association with the technologies; however, it is an industry within which AI has enormous potential and it is one such industry that traditionally deals with complex data intertwined with various regulatory bodies and frameworks. The inclusion of machine learning through AI will help to create opportunities for the companies who take advantage of these technologies; such as focusing tax advisor’s time on adding value and reducing the number of touchpoints tax advisors need to have with their clients. This will help the tax advisors lessen their burden, knowing that rather than putting their time into sifting data and sorting huge amounts of data, they can be handled with complete reports for their decision; the system will have consolidated all the relevant information and check it against whatever rules and regulations might apply.
More and more information can be extracted from the data sets as they keep increasing in size. Machine learning algorithms are the engines of machine learning, which turn the data set into a model. They can detect unknown and highly complex patterns in the databases and can establish semantic connections between them. Based on the information given and decisions then taken by the advisors, the algorithms improve over time, which enables the constantly improving systems that increase efficiency and quality.
Efficiency of AI
The introduction of AI has made complex processes simpler, less time-consuming, and a lot of things possible which were unthinkable before. It has also improved the efficiency and production of industries at large.
Why does Tax require AI?
The information needed by enterprises for taking business decisions as well as for complying with increasingly complex rules and calculations for tax jurisdiction for that internal and environmental challenges require tax to be nimble.
Key Challenges faced by Tax (Technology Disruption):-
Global tax reforms and complexity
Pressure to reduce cost
Need for better data
Enterprise's adoption of emerging technologies
Need for new skills and capabilities
The digitization of everything
Need for effective predictive and calculation models
Managing financial and reputational risks
Need for adaptability to change
New trade and customs considerations
Innovative ways like collecting and processing of financial data, moving away from manual manipulation and reconciliation to more forward-thinking analytics for real-time decision-making need to be considered by the tax. The present-day movements have shown that the small automation technologies empower tax professionals to be innovative without the help of the involvement of big IT; using Extract, transfer, and load (ETL) for pulling and analyzing source system data. To enhance the quality and dynamics of daily functions like presentations and dashboards, visualization tools are being used. However, AI and Robotics have the capability of doing all of these and much more.
Benefits of AI on Tax
AI has facilitated detailed and accurate data from new sources to drive more comprehensive questions, answers, and analyses that were previously highly time-consuming, difficult, or even impossible to achieve. The other tasks performed by AI are performing structured or unstructured tasks, mimicking the actions of humans, but with greater speed and accuracy. A more granular form of data is provided by AI, which is needed to respond to tax complexity, governments’ increasing demands for transparency, and to manage financial and reputational risk. The effectiveness and efficiency of the tax work process are increased with AI, wherein a digital workforce is constantly available to support finance and tax.
Application of AI
Tax Notice Processing
Tax notices are complex and unstructured data problems. With the use of AI, key terms are extracted from the unstructured notice from various federal, state, and global tax notices for the purpose of tracking and responding to the notice.
Account Classification
Using the algorithm, AI can predict trial balance and transactional account name, mapping to a taxonomy for a variety of purposes including the calculation of tax adjustments, where affected book income or expenses are spread across multiple accounts.
Tax compliance and reporting
AI here mimics human behavior on desktop or web-based applications to perform tax compliance and reporting problems. It is a standardization problem, where AI in combination with Robotic Process Automation (RPA) performs structured and unstructured income tax compliance activities.
Tax Chatbot
Tax guidance is solved using AI, which understands the natural language of tax questions and leads the user to the appropriate answer based upon the intent of the question. Deep learning is used to identify and answer questions through chatbots. The Chatbot is fed with the needed information and this knowledge is used by it to respond to doubts of taxpayers quickly and efficiently.
Developments in the field of science and technology have been quite fruitful. AI takes a step forward and supports industries to revolutionize by making complex tasks easy and less time-consuming. The wide spectrum of activities under that the tax consultant has to perform is incredibly complex and might not be completely replaced by AI. However, the experts who deal with both the fields will be in a better position to handle this situation and will be in great demand at helping to moderate the communication between the fields and find the best possible use of technology. Professionals are being trained as we move forward day by day by a number of companies. It is vital for companies to be in a position to leverage the benefits of AI technology. This type of shift has to be embedded in the business culture and people have to welcome it with open arms. As AI becomes handier, the tax officials and professionals will also begin to implement it and communication with them will become more digitally focused. The system will become more advanced, improved, and automated.
In the end, it is not about replacing humans but it is for the benefit of professionals to have more time at hand to focus on more complex issues that cannot be solved by the AI technologies and need a human touch to it. All of this collection will help companies to build a technology-friendly environment in the workplace and help businesses grow towards tax and finance.
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