Artificial Intelligence in Tax Administration: Room and Risks

The study’s subject is the models, forms, and risks of using artificial intelligence (AI) in tax administration (TA). The rapid digitalization and incorporating AI across all societal sectors, including TA, dictates the importance of this work. The goals are an attempt to ascertain the possibilities of using AI to implement the concept of «Tax Administration 3.0»; this research employs a methodology rooted in tax theory, using TA’s forms and methods to ensure compliance with tax laws. The study’s results show Russia is among the global frontrunners in tax administration digitalization, a result of its steady adoption of the TA 3.0 approach. The authors defined the key directions for further development of AI in the service of TA, including: technological complication of TA procedures with simultaneous simplification and development of interaction personalization between taxpayers and tax authorities; scaling of predictive AI models, further automation of internal processes of tax authorities; deep integration of databases of state agencies, organizations, and digital platforms, transforming them into tax “agents” implementing tax processes within their systems; state legal regulation of implementing AI in the tax system, ensuring the reliability, transparency, and accountability of the implemented AI; and the use of AI solely as decision-making support while retaining the function of making management decisions by humans. To reform tax systems, the conclusion is that AI needs to be a core element within a larger tax ecosystem that incorporates regulatory structures, organizational setups, existing IT, and human skills. The authors advised increased application of both local and global AI usage insights. This would help detect undisclosed property changes, streamline internal tax authority workflows, and offer a service for the automatic pre-filling of personal income tax returns using data that the tax authority receives from third parties.

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