The AI landscape for tax in Europe today

How Tax Authorities use AI and machine learning to facilitate their tax process.

By: Steef Huibregtse and Jasper Verkamman.

European tax authorities are using AI and AI-related techniques like Machine Learning for specific tasks only. A focus on the ‘compliance by design’ approach, as explained in the 2020 OECD publication on ‘Tax Administration 3.0 - The Digital Transformation of Tax Administration’, will be crucial for tax authorities to succeed in their digital transformation process, as well as the collaboration through publicprivate initiatives. This article addresses the status of tax authorities as well as corporates in their digital transition and transformation processes. It provides a long list of digital initiatives adopted by European as well as non-European tax authorities. However, the fragmentation could mean tax authorities move at a different pace in the digital journey, leaving opportunities to coordinate between tax authorities and to collaborate with taxpayers unused. The ‘building blocks’ for Tax Administration 3.0 to take a holistic approach are (i) define your digital identity (ii) clarify the taxpayers’ touchpoints (iii) create data management and data standards (iv) develop tax rule management tools & applications (v) drive new skill sets of tax officials and (vi) provide a proper governance model.

Benefits for both tax administrations and taxpayers include: Corporates share data with tax authorities, who, through “compliance by design,” deal with all tax-related compliance; AI offers tax authorities real-time insight into the completeness and accuracy of tax-relevant data; corporates obtain (almost) real-time security regarding their tax positions, i.e., can release todays’ provisions reported on the uncertain tax positions; tax authorities can use secure and trusted vendors for tax-driven (middleware-base) solutions to accelerate the roll-out on the “Tax Made Digital” world and almost half of the international disputes between parties can be resolved through the use of AI between tax authorities without taxpayer involvement.

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STEFF HULBREGTSE The AI landscape for tax in Europe today (WI.pdf

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