How AI is reshaping the tax workplace
Artificial intelligence (AI) technology is fundamentally changing the way that every sector operates, including taxation.
According to EY, over the past five years, the biggest single source of US Securities and Exchange Commission restatements has been due to tax-related mistakes. Tax provisioning is a minefield of regulatory requirements and is expensive to manage. However, AI and technologies such as robotic process automation (RPA) are making a big difference in how professionals are meeting these rising challenges.
AI allows a machine to understand its environment and perform operations that in the past required human intelligence. When it comes to interpreting complex rules and procedures, robotic systems can outperform even the most industrious and intelligent human.
Global tax reforms and pressures to reduce costs are pushing tax advisers to embrace innovative predictive and calculation models. They also need to think about methodologies for collecting and processing financial data that are far beyond the capabilities of traditional manual processing.
For our part at GTU, we have developed an engine that can search tax legislation for context, concepts and keywords. This engine runs 24/7 and provides us with the relevant legislation that we afterwards analyse to inform our clients of the latest developments.
Staring with small steps
According to research from PwC tax professionals typically spent more than 50% of their time on collecting tax data and less than 30% on strategic tax analysis. Using AI to automate repetitive tasks such as filtering key data from spreadsheets, scanning long tax reports and organising the data or identifying tax deductions can alter that balance and enable them to handle larger volumes of more complex work.
The best results achieved so far are those that took small steps rather than large corporate-wide initiatives. Such “small automation”, which can be implemented without requiring the bureaucratic involvement of centralised IT departments, might start with extract, transform and load (ETL) tasks where data is copied from one or more sources into a destination system that represents the data in a different way.
In its 2019 report ‘How Tax is Leveraging AI’, PwC highlighted four common use cases - tax notice processing, account classification, tax compliance and reporting and tax guidance. These are all tasks that can benefit from the “small” AI approach.
The benefits of AI in action
Take tax notice processing as an example. This activity starts with unstructured data. This is usually information that either does not have a pre-defined data model or is not organised in a pre-defined manner. Unstructured information is typically text-heavy, but may contain data such as dates, numbers, and facts as well. Natural language processing can be used to convert scanned tax notice images to text and machine vision to understand the text and extract the required data.
But AI can do far more than simple ETL tasks. More intelligent technological analytics and linkages have brought numerous efficiencies to the corporate tax function, improving tax governance, preventing costly errors, and saving professionals’ time along the way.
As with any transformational initiative, it is important to identify the problem that you are trying to overcome when devising an AI strategy for tax work. The AI champion will also need to address the fear that AI will people lose their jobs.
The future for AI and tax
The truth is that AI will help tax professionals work smarter and more efficiently. Rather than having to focus on the drudgery associated with low-level work, automation will allow them to concentrate on value-added work. Implementing AI systems will also encourage digitally native, highly skilled workers to consider a career in taxation, something that the industry habitually struggles with.
AI will help to revolutionise the tax industry. Ultimately it is not about replacing people - but rather it should enable tax advisors to be freed up to focus on more complex tasks. AI should not be feared but embraced as a vital component of the tax workplace of the future.
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Andre Teixeira is CEO and chairman of Global TaxUpdate (GTU), an international online tax platform headquartered in Lisbon that gathers legal and tax information about the oil & gas Industry from around the world.
He is senior partner of Escritório André Teixeira & Associados, a law firm specialising in corporate law and...