Efforts to streamline tax processes through technology have been ongoing for years, with tax administrations frequently incorporating various tools such as Enterprise Resource Planning (ERP) systems into their operations. Similarly, many accounting firms have significantly invested in expanding their IT capacities. One major example of technological integration into tax administration is the use of Artificial Intelligence (AI).
AI has greatly assisted tax bureaus in handling the massive amount of data received from various parties including taxpayers, other tax administrations, and financial institutions, among others. An exemplar of AI use in Europe is the Irish tax administration, which has reportedly been successfully running a chatbot since 2022, addressing approximately 600 queries a day. The chatbot use has facilitated more accurate content classification and faster expert assignment for taxpayer queries. You can learn more about this application on their portal.
In Latin America, countries are also adopting AI within their tax systems, though they face various hurdles concerning taxpayer rights, data accuracy and transparency. For instance, Argentina’s tax administration, namely AFIP, employs AI through a grading system that classifies taxpayers based on their tax history. The system rates taxpayers on different factors, such as failure to file certain affidavits, involvement in criminal cases or being labelled as non-reliable by a tax official.
Meanwhile, Colombia utilises AI for taxpayer education, deriving value from a 24/7 chatbot called DIANA. While other nations like Mexico have incorporated AI into their audit procedures, it is unclear whether Colombia will follow suit.
AI advancements in taxation have not been without criticism. Concerns have been raised that AI’s speed and decision-making capacities could potentially threaten fundamental taxpayer rights. Rapid AI judgments based on online sources could create reputational risks if incorrect tax characterisations become public. This necessitates swift dispute resolutions to guard taxpayers against potential violations.
While AI brings significant value in terms of data gathering and transparency, its rapid operation speed presents institutions with the challenge of having to match that speed in terms of legal and administrative response. This has stirred calls for the creation of new emergency tools that can operate as quickly as technology in coping with AI-induced taxation issues.
Details about the implementation of AI tools in Latin Americas’ tax policy can be found in Bloomberg Law.