Cutting-edge strategies are being considered to address a pressing issue in the UK. During a recent session, Members of Parliament were informed that leaders at HM Revenue & Customs (HMRC) are exploring the application of artificial intelligence to combat the exploitation of the tax gap by fraudulent entities.
Tax avoidance involves manipulating regulations to gain a tax benefit. It is estimated that between 2023 and 2024, the UK government suffered a loss of £0.7 billion due to tax avoidance schemes.
HMRC defines tax avoidance as the use of contrived and artificial transactions that offer no real value beyond obtaining a tax advantage. This practice involves adhering to the literal interpretation of the law while disregarding its intended purpose.
In contrast, tax evasion is described by the government as a deliberate effort to evade paying owed taxes, constituting a violation of the law. Penalties for engaging in tax evasion range from financial fines to criminal prosecution and imprisonment, according to a spokesperson.
Reportedly, the UK government’s losses from tax evasion amounted to £5.5 billion in 2022-23, increasing to around £6.5 billion in 2023-24, as per the Express. Shaun Davies, the Labour MP for Telford, raised inquiries with Exchequer Secretary Dan Tomlinson on Tuesday, December 23.
Davies inquired about the potential of artificial intelligence and digital technology in curbing tax evasion and avoidance. In response, the Labour MP for Chipping Barnet emphasized the importance of utilizing emerging technologies alongside human expertise to enhance tax compliance efforts.
He highlighted HMRC’s expansion plans, focusing on leveraging new risk-targeting capabilities to pinpoint cases for investigation and using AI to detect emerging tax issues promptly to prevent their escalation.
The integration of artificial intelligence is aimed at improving the efficiency and professionalism of HMRC’s services, enabling staff to allocate more time to assisting taxpayers rather than administrative tasks. Additionally, AI will enhance HMRC’s ability to target fraudulent activities and tax evasion to generate more revenue for public services.
While AI supports various processes, human decision-making and oversight remain crucial and irreplaceable. HMRC is committed to the responsible use of technology, ensuring adherence to stringent data protection, security, and ethical standards.
Where AI may influence outcomes for customers, HMRC guarantees transparency and human supervision in decision-making processes. Ultimately, the final decisions are made by experienced and trained case workers, even when AI aids in decision-support tasks.