AI in the taxation domain consists of a wide variety of narrowly and sharply defined tools for particular tasks. In this section, we outline some of the applications of AI that may not be well known or expected.

Tax agencies can use AI systems to communicate differently with different groups of citizens for maximum impact. One analyst noted that if an individual “had a track record of not paying early, but their financial data said they were doing pretty well”, then they should be picked up by a specially designed model that says “X has a capacity to pay but not a propensity to pay”. In that case, rather than “starting with a weak letter, then moving a bit more firm and so on, [they] might jump to stage three of the intervention process and go harder earlier”.

Even low-risk scores can inform action. In these cases, “if you have a low risk score, then this might just encourage us to send an SMS, as we think you’re going to pay, but we could increase efficiency on this group [of individuals]”. This avoids spamming customers who would not respond to such approaches, and allows agencies to develop specific interventions tailored to a particular group. AI has opened up opportunities for new, simple policy options which were not possible before.

 

Report: How Artificial Intelligence Is Transforming Tax Administration