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Artificial intelligence: Can a chatbot give tax advice? | accountingweb
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Can a chatbot give tax advice?

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The new ChatGPT chatbot has made headlines around the world, and accountants have been busy exploring how to use its full potential – including for tax advice. Paul Aplin gets to grips with the new AI tool and asks if there will still be a role for human tax advisers.

14th Dec 2022
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At the end of my last piece for AccountingWEB, I touched on the potential for artificial intelligence (AI) to impact on advisory work. I mentioned H&R Block’s use of IBM Watson and the way AI is being used to analyse complex legal documents for tax-sensitive points. There is more.

Earlier this year for example, KPMG partnered with Blue J to launch an AI-powered tax tool in the UK. Blue J is already well-established in the USA. It is a predictive analysis tool designed to conduct – and speed up – technical analysis and navigation of complex legislation. It claims the ability to predict tax scenario outcomes with over 90% accuracy and gives a confidence level for the predicted outcome. It provides a detailed report to set out its analysis, so placing it at the “transparent” end of the transparent/opaque scale (a see-through box rather than a black box). Where exactly a product sits on that scale is important when assessing who is responsible if something goes wrong.

Advanced AI doesn’t simply rely on being able to analyse legislation, information in documents or case-specific facts; it can take account of factors such as seasonality and past experience. The technology is already being deployed on a range of platforms, from smartphones running document scanning apps to the complex systems used by multinational businesses. It has the ability to identify tax-critical information in government guidance or legislation as it is issued and to rapidly alert those who need to act on it. This is especially useful to businesses operating across multiple jurisdictions.

Identifying non-compliance

Tax authorities are using AI to identify potential enquiry cases. Tax administrations in over 70% of Organisation for Economic Co-operation and Development (OECD) member countries are now reportedly using AI and machine learning for data analysis. France, for example, was recently reported to have used AI to analyse aerial photographs for dwellings with swimming pools in order to ensure that the related local property taxes were being paid. India has incorporated AI into the administration of the Goods and Services Tax (GST). Brazil has trialled the use of AI to select the most appropriate letter to send to taxpayers and Singapore has used AI to personalise tax guidance. 

Just ask

What prompted me to write more on this topic was reading about ChatGPT. This newly released chatbot employs AI that has been trained using reinforcement learning from human feedback (RLHF). It operates in a conversational way and I couldn’t resist trying it. Initially, I asked it to explain the difference between tax avoidance and tax evasion and then whether AI could give tax advice. Both answers were concise and on the button. 

I then asked two questions that I posed in my last article (it seemed only fair to ask for an opinion from, as it were, the horse’s mouth): here they are, along with ChatGPT’s answers.

Q: If AI gave tax advice and the advice was wrong, who would be responsible for the consequences?

ChatGPT: If AI gave tax advice and the advice was wrong, the responsibility for the consequences would depend on how the advice was used and who was relying on it. If the advice was provided by a tax professional or a company offering tax services, and the advice was followed without verifying its accuracy, the tax professional or company could potentially be held liable for any resulting errors or losses. However, if the advice was provided by an AI system that was not trained or supervised by a qualified tax professional, and the advice was followed without verifying its accuracy, the individual or business relying on the advice would likely be held responsible for any errors or losses. In general, it is always important to verify the accuracy of any tax advice, whether it is provided by a human or an AI, before relying on it to make decisions.

Q: If AI can give tax advice, will there still be a role for human tax advisers?

ChatGPT: Yes, even if AI systems are able to give tax advice, there will still be a role for human tax advisers. While AI systems may be able to process large amounts of data and identify patterns, they may not be able to provide personalised advice or take into account an individual's specific circumstances. Human tax advisers, on the other hand, are able to provide personalised advice and take into account an individual’s unique situation, which can be important when it comes to making tax decisions. Additionally, human tax advisers are able to provide guidance and support throughout the tax process, which can be particularly valuable for individuals and businesses who are new to the tax system or have complex tax situations. In short, while AI systems may be able to provide some assistance with tax advice, there will always be a need for the expertise and personalised service provided by human tax advisers.

What the future holds

I remember listening to a programme on the radio many years ago about expert systems – systems that would allow a layperson asking questions in plain language to obtain an answer on a technical area such as tax. It made me wonder whether I would have to change career, but in the event expert systems did not intrude on tax advice to any material extent. Part of the reason was that expert systems were both costly and time-consuming to design, involving complex decision matrices.

AI is a very different proposition. It is already making inroads both for tax advisers and for tax authorities. ChatGPT shows just how much of a game-changer it could be. 

It is reassuring though that ChatGPT reached broadly the same conclusion as I did in my last piece: that there will always be a need for a human’s expertise when giving tax advice.

Replies (28)

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By NotAnAccountant2
15th Dec 2022 07:32

Can a chatbot give tax advice?

https://en.wikipedia.org/wiki/Betteridge%27s_law_of_headlines

Slightly longer answer - it will be able to give very persuasive tax advice but that advice will often (usually) be wrong.

The slightly more worrying thing is that it will be able to overwhelm the people who actually know about this stuff:

Pick an accounting fact where people often get it wrong and there are plenty of wrong opinions on the internet to be found.

Ask chatGPT to produce a 50 page "legal opinion" paper on why the wrong opinions are correct.

Estimate how much effort it would take to rebut the paper.

This has been a problem when humans are writing the opinions - smoking causing cancer and climate change are two where scientists spent (and are still spending) huge resources playing "whac-a-mole". ChatGPT will just make the situation worse.

There is a reason that stackoverflow has banned chatGPT generated code from being posted

https://www.zdnet.com/article/stack-overflow-temporarily-bans-answers-fr...

But Open AI also notes that ChatGPT sometimes writes "plausible-sounding but incorrect or nonsensical answers."

"The primary problem is that while the answers which ChatGPT produces have a high rate of being incorrect, they typically look like they might be good and the answers are very easy to produce," says Stack Overflow moderators in a post.

StackOverflow imposed the temporary ban because answers created by ChatGPT are "substantially harmful" both to the site and to users looking for correct answers.

"Overall, because the average rate of getting correct answers from ChatGPT is too low, the posting of answers created by ChatGPT is substantially harmful to the site and to users who are asking or looking for correct answers," it said.

Stack Overflow says that ChatGPT answers have "swamped" its volunteer-based quality curation infrastructure because there are so many poor quality answers pouring in.

So far, Stack Overflow has detected posts generated by ChatGPT in the "thousands". The other problem is that many answers require a detailed analysis by someone with experience in the subject to determine if the answer is bad.

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Replying to NotAnAccountant2:
ghm
By TaxTeddy
15th Dec 2022 09:00

A very interesting comment. I think there are considerable parallels with engineers writing code and tax accountants looking for precision in legal and numerical solutions.

This type of tool may be useful for redesigning a website as SXGuy has pointed out, because the look of the website is primarily subjective and it's very difficult to say it is "wrong".

Meanwhile in the world of tax and accounting, where precision is required, this tool will be a complete disaster. But of course, it will be wideley adopted because, as someone pointed out elsewhere on this site, software developers and HMRC have cloth ears. So I don't doubt for a moment that it will be introduced, probably in several formats as "phone apps" and people will merrily use it thinking they are correct.

What remains to be seen is whether HMRC will have the ability to actually start making corrections to the errors. On current form probably nothing will happen for five or six years and then enormous penalties will be levied. A great brouhaha will then ensue with lots of finger-pointing.

Rinse and repeat as the next "improved / failproof" AI system is introduced.

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Replying to NotAnAccountant2:
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By TBro4iuABEW6Qmh74nRteQz3
15th Dec 2022 11:32

Very high quality post, much appreciated.

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By SXGuy
15th Dec 2022 07:36

I got it to rewrite my website to be more SEO freindly. I think it's brilliant

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123 Sheets
By 123Sheets
15th Dec 2022 09:24

Example:

Hey computer, here are my accounts. Please tell me something:

Computer: ok, thanks for the accounts, please wait...

...You should incorporate, it will save you £350 a year, you should stop being a sole trader.

OK, I'll do that, thanks.

18 months later: I incoporated, and its cost me thousands in extra admin costs and taxes.

I am a pub landlord, I am no good at admin, so I now have to pay someone else through the nose to do the accountants and bookkeeping with a full P&L and Balance sheet, my director's loan account is overdrawn with s.455 tax to pay, its all costing me much more than me just me doing my own much more simpler income/expense self assessment tax return.

Also, I live above the pub and as I've incorporated, I now have to pay P11d living accomodation which is an extra £5k in tax a year, thanks computer!!!!

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Replying to 123Sheets:
Tornado
By Tornado
15th Dec 2022 11:12

... and it now looks as though I will have to file a Profit & Loss Account at Companies House so the the whole world (literally) can see what I am earning.

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By Duggimon
15th Dec 2022 09:27

There's a trend just now for programmers to try using it to generate their code. The general feeling is that the chatbot will write in two minutes what takes them two hours, however it takes them three times as long to verify what the chatbot has written compared with their own work rendering the whole thing more laborious.

Tax advice works the same way.

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By Mr J Andrews
15th Dec 2022 09:41

Very reassuring to read that human expertise will always be needed when giving tax advice. Whoever would have thought that ?
But looking at the two ChatGPT convoluted responses, perhaps a political role may be what the future holds for AI

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By jamesgeorgeball
15th Dec 2022 10:22

An excellent piece. I should add that the effort made by the questioner often clarifies the question. In a sense, it's the difference between the old plastic bag of invoices and bank statements against a proper ordered piece of paper or computer file.

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John Toon
By John Toon
15th Dec 2022 11:24

Even before ChatGPT made the headlines firms have been using chat bots to assist in the tax return preparation process. Whilst I still believe the human element of advice is hugely relevant many tax decisions (outside of consideration of wider business impacts) are gated binary processes that have been able to be coded. How many accountants use spreadsheets, essentially following these binary processes to decide on the most tax efficient salary/dividend split for director/shareholders or to attain a certain take home pay? No reason why a bot couldn't do this instead but a human advisor can advise on the wider implications aside from the raw output.

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By TBro4iuABEW6Qmh74nRteQz3
15th Dec 2022 11:30

It still astonishes me that a computer can write English copy so fluently, making the answers highly readable and engaging. The output makes you actually *want* to read tax advice.

That, in itself, could be a huge win. Imagine HMRC producing tax documentation that's actually stimulating, accurate, concise, easy to understand and a pleasure to read.

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By TBro4iuABEW6Qmh74nRteQz3
15th Dec 2022 11:44

Apropos the question "..whether there is still a role for tax advisers", to double mis-quote Mandy Rice-Davies, "Well AI would say that, wouldn't it?"

At a deeper level, could AI remove our ability to get access to original source information, or even to break our cognitive capability to know what is fact and what is fiction because it makes everything in the spectrum of information highly plausible and difficult in human brain compute time to distill?

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By Hugo Fair
15th Dec 2022 11:56

The trouble is that AI gets bandied about as a label by people who either don't know what it really is or, worse, are deliberately setting out to confuse. For instance:

"Tax authorities are using AI to identify potential enquiry cases."

But the 'examples' mentioned are not really AI-based, just simple algorithms that could've been produced (by humans) well before the advent of deep-learning & other AI techniques.

"France, for example, was recently reported to have used AI to analyse aerial photographs for dwellings with swimming pools in order to ensure that the related local property taxes were being paid."
That's straight forward procedural programming.

"Brazil has trialled the use of AI to select the most appropriate letter to send to taxpayers."
No idea what they did, but most places (including HMRC) do this without resorting to AI.

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By Paul Crowley
15th Dec 2022 12:08

'The new ChatGPT chatbot has made headlines around the world, and accountants have been busy exploring how to use its full potential – including for tax advice. Paul Aplin gets to grips with the new AI tool and ...................................asks if there will still be a role for human tax advisers.'
Difficult to take this seriously
Tax law is an unknown until interpreted
Paul, you put your name to the idea that you think human tax advisors no longer needed?
AI is just a big lie

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Replying to Paul Crowley:
Tom Herbert
By Tom Herbert
15th Dec 2022 16:21

Hi Paul C, me again. I'm afraid having edited Paul A's sarticle, I'm the guilty party who provided the standfirst you've taken against. The question was merely intended to bring the reader up to speed with the overall tone of the piece, rather than provide definitive proof that we've reached the singularity.

You can console yourself with the fact that when the robots do take over, journalists are likely to be against the wall before accountants!

Cheery note to end the week on ;-)

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Replying to Paul Crowley:
Paul Aplin
By Paul Aplin
19th Dec 2022 08:40

Not what I put my name to at all Paul (and never would): My last line was "It is reassuring though that ChatGPT reached broadly the same conclusion as I did in my last piece: that there will always be a need for a human’s expertise when giving tax advice." Technology would have to develop a very long way indeed for there to be no place for human tax advisers, but as it does develop, we need to ensure we get the best from it and in part that will be by ensuring that we understand what it does. Experience, judgement and a sense of what is right and what is wrong (qualities you and I both believe are core to what we do) will, I think, be even more, not less, important.

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By moneymanager
15th Dec 2022 12:11

"It has the ability to identify tax-critical information in government guidance or legislation as it is issued"

Which is at the root of the problem, government has taken to using the tax authority to influence and disctate personal and business behaviour only to ammend or reverse that policy later, diesel cars being a point in case. If tax must be raised for esential public goods then it should be done as simply as possible.

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Replying to moneymanager:
Tornado
By Tornado
15th Dec 2022 12:30

"It has the ability to identify tax-critical information in government guidance or legislation as it is issued"

Who decides what is tax-critical information?

It will be the person/people who programs the AI and their interpretation of what is tax-critical which may not be correct or be the same as other people. AI will always be a clone of the person that programmed it. (I know that is a very simplified way of looking at it, but overall I think this is the ultimate result).

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Tornado
By Tornado
15th Dec 2022 12:21

It all sounds to me like another one of those idealistic dreams that will never work in practice.

It would be far better to simplify the Tax Code so that it is easier to understand and implement rather than trying to think up complex solutions to problems that should not be there in the first place.

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Profile
By indomitable
15th Dec 2022 13:57

If anyone has ever tried to use any chatbot for anything, that should tell you the answer!

How absurd. Good luck to any punters trying it! And really would any PI insurer let any tax professional provide tax advice via a bot? I think not!

Absurd

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By flightdeck
15th Dec 2022 15:13

Bad idea. We have all used chatbots for far simpler services. Yes they can answer the simple questions - are you open on Tuesdays - but they're are hopeless at anything more complicated that that. I hate them with a passion.

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Replying to flightdeck:
John Toon
By John Toon
15th Dec 2022 16:10

Unfortunately this just demonstrates a lack of knowledge and experience with truly capable chat bots. Admittedly most chatbots in use are cheap implementations which are pre-loaded with a few questions, your example being a prime one.

But for a good few years now chatbots have been able to "learn", the implementor has been able to see the types of questions being asked and adapt answers, and bots can be connected into other business systems to provide certain insights.

With the advent of AI (mainly machine learning and natural language processing) being brought into the mix, which ChatGPT demonstrates, there are some really fascinating use cases that could be explored. You can already link ChatGPT and other bots to thinks like Zapier to start automating process flows and responses.

Even prior to ChatGPT I've been esposing the potential use cases of proper chatbots for accountants to better serve their clients. Ones that could, for example, check how much tax a client had to pay, of if their accounts had been filed on time, or even provide them with copies of their accounts/returns. All of that has been doable for a good few years now and are simple use cases that take time for human advisor to deal with and create little value. I had a chatbot in use when MTD for VAT rolled around to assist with checking eligiblity, getting ASA auhtorisations sorted etc

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Mark Lee headshot 2023
By Mark Lee
17th Dec 2022 18:33

Great article Paul.
I too recall early expert tax advice systems - dating back well over 20 years.

One developer was a white haired guy already well into his 60s. I had seen him demo his system at various events. He had vision but no commercial credibility or contacts.

I was then asked to introduce the idea to my colleagues at BDO. We were invited to provide the tax advice and review to give the systems credibility. I fear I was more enthusiastic than was justified at the time. My partners were less keen on us giving the enormous amount of time that would have been required to get the project to a commercial stage. I have no ideas what happened after that but am sure the system didn't get produce or sold commercially.

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Head of woman
By Rebecca Cave
18th Dec 2022 07:52

My concern about ChatGPT and similar chatbots being used to give tax advice, is that it may deliberately lie when it can't find an answer, or even when it can find the answer. - See this article about getting a chatbot to write an obituary:
https://slate.com/technology/2022/12/davinci-003-chatbot-gpt-wrote-my-ob...

In the live demonstration on Channel 4 news when the chatbot was asked for a brief biography of Krishnan Guru-Murphy, the computer introduced a completely false and unnecessary fact.

If the chatbot is lying in its tax advice, how can the receipient of that advice determine if the advice is correct without completely undertaking the research the computer has done.

In the obituary exmaple the chatbot was asked to provide references for the facts, but it made up the references!

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Replying to Rebecca Cave:
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By Hugo Fair
20th Dec 2022 20:34

Terrifying ... "a computer program that would be sociopathic if it were alive".

But hold on, this sounds familiar ... "Computer programs are optimized not to solve problems, but instead to convince its operator that it has solved those problems."
Ah, got it ... that's a perfect simulacrum of the average HMRC helpline operator!

Not sure which would be worse ... finding out that those helplines are currently being answered by chatbots, or that the human skill levels are being deliberately diminished to a bar which AI can meet sooner.

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By Rgab1947
19th Dec 2022 09:07

HMRC will soon be using it to answer queries LOL. Goodbye tax advisors HMRC will say.

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Replying to Rgab1947:
Tornado
By Tornado
19th Dec 2022 09:35

I hope AI is intelligent enough to assess what level of advice the recipient can understand.

When we give advice to people, the advice is tailored to their level of understanding, so there is no point in quoting a particular section of legislation as an answer thinking that is it. For some people, providing a link to an answer will be enough but many of my clients need an answer that is easy to understand with perhaps background information and explanations.

For example, if someone who has been paying their tax in dribs and drabs phones me up and asks how much tax do they owe at the moment, it is not good enough to point them to their business or personal tax account. Most of my clients have not set up such accounts yet, or have set them up and lost log in details and those that can get into their accounts find the HMRC statements of account unintelligible, mainly because the figures change daily and the format is not at all like a bank statement which they are familiar with (another arrogant example of systems being designed by programmers for programmers and not for the people that will need to use them).

How would AI deal with this. Would AI take the time to answer the questions of the person making the enquiry, so that the communication is only ended when that person has an answer that they can understand. In short, can AI truly replicate the way that a real person communicates with another person.

I would say that this is impossible and the other big question is - Why would you want to try to replicate a Human Being when it is better to train a real Human Being who will be able to the job better anyway.

Clever Algorithms are one thing but true AI is a much different matter.

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By mydoghasfleas
19th Dec 2022 13:21

I have no doubt the advice would be appropriate to the question. The problem would lie with the questioners, who may not understand exactly what they are asking. The future fees may come from helping phrase the questions.

I assume the greatest advantage of AI will be it will answer exactly the question it asked. The greatest disadvantage of AI will be it will answer exactly the question it is asked.

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