AI in taxation: Transforming or replacing? – Times of Malta

At the launching of his latest book titled Our Planet Powered by AI, Mark Minevich, a renowned AI pioneer and strategist, reaffirmed his belief that in the coming years several jobs, among which, book-keeping and accounting, will be at risk of being replaced by AI.

AI is already advancing rapidly and demonstrating its ability to successfully complete tasks just like a human, particularly where it involves repetitive book-keeping and accounting tasks that algorithms can handle more efficiently than humans. Such advancements in AI have fuelled anxiety and uncertainty, but is the outlook all that gloomy?

Notwithstanding the writing on the wall, the author strongly believes that humans can nevertheless thrive alongside AI in the workplace rather than being replaced by it. The fundamental key to avoiding such replacement would be for humans to focus on developing their most innate capabilities: creativity, emotional intelligence, flexibility and strategic thinking.

Although this is not a tech article, it is pertinent, for this article, to understand the different categories or stages of AI. Artificial general intelligence or AGI, is the science fiction type of AI, whereby a machine will be able to think and develop the same cognitive abilities as a human being.

It is not yet fully developed but is predicted not to be that far away either. Artificial narrow intelligence or ANI is a specific type of artificial intelligence that is goal-oriented and that tackles a particular set of tasks.

Machine learning is a type of AI that can automatically adapt with minimal human interference, whilst Deep learning is a subset of machine learning which is based on artificial neural networks that mimic the learning process of the human brain. Tech over, let us now have an insight into how AI can transform the tax function for stakeholders in general.

Although the arrival of AI in taxation is inevitable, certain barriers to its adoption remain

In the recently launched document Delivering Transformation - Strategic Plan for 2023-2025, the Commissioner for Tax and Customs stated that our transformation is going to be primarily technology-led we need to have an organisation that is using the latest technology in tax and customs administration using advanced data analytics, business intelligence and artificial intelligence.

AI can significantly boost the capabilities of the Malta Customs and Tax Authority (MCTA) in terms of fraud detection and risk analysis by analysing large amounts of data to identify patterns that indicate potential fraud or in terms of compliance by flagging taxpayers that habitually fail to comply. The mandatory cross-border and (optional) domestic e-invoicing reporting regime planned as of 2028 will provide key real-time data for MCTA and further strengthen its capabilities to combat fraud and ensure timely compliance.

On the other side of the fence, taxpayers and tax practitioners are also desirous to move forward in line with the developing AI technology. Whilst it may be true that some jobs or functions, such as bookkeeping and accounting, will be taken over by AI, other openings are on the horizon. Starting with redundant staff, who may be retrained and developed to be utilised to fulfil other tasks.

For higher-level tasks, such as tax planning and advisory, AI would require machine learning involving an expert (or a panel of experts) who would, gradually and over time, train the machine to output the correct conclusions following an analysis of the information related to the case at issue.

In other words, once fully trained, and updated with the latest developments, the machine will be able, on its own, to analyse the facts against the myriad tax rules and settled case law to indicate the correct tax treatment and resultant implications. Whilst a redundancy in basic bookkeeping and accounting staff is foreseen, this would be offset by the expected high demand for expert tax practitioners.

Although the arrival of AI in taxation is inevitable, certain barriers to its adoption remain. First and foremost, the costs, not merely initial but ongoing, then the benefits and the downsides, not least the fear of experimenting with new technologies.

In conclusion, one may have to agree that while there will certainly be some replacements, there is an expectation that ANI would overall transform the way we look at and handle taxation matters. Provided that, as Mark Minevich stated, humans focus on developing their most innate capabilities: creativity, emotional intelligence, flexibility and strategic thinking then they can never be fully replaced by a machine. And when AGI arrives and takes over? The future beckons.

Charles Vella is a Senior VAT Advisor at Zampa Debattista and former Director General of the VAT Department.

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AI in taxation: Transforming or replacing? - Times of Malta