Finance and Accounting

The impact of artificial intelligence in the evolving tax landscape

Taxation is a time-consuming, complex process. Several factors contribute to this intricate system, such as:

• Laws and regulations
• Documentation
• Filings and calculations
• Compliance and reporting
• Reviews and audits
• Legal interpretations

At the core of every business is a robust taxation cycle updated with real-time developments. With multiple considerations and an ever-evolving tax regimen, the modern business landscape presents an intersection of artificial intelligence with taxation. Once an immense and time-consuming process, taxation has undergone a remarkable transformation with the advent of AI-enabled tax compliance. Tax professionals today have cutting-edge tools to streamline and optimise taxation for businesses, making this complex system fairly easy to navigate.

Taxation: Yesterday vs Today

The influence of globalisation, evolving regulations, and technological advancements are re-writing tax filing. What was true yesterday is not today.

AI in taxation is driving the digital transformation of this core vertical, thereby fostering collaboration, real-time compliance and transparency in the global tax landscape.

The transformative power of artificial intelligence in taxation

The core strength of artificial intelligence lies in its ability to process large volumes of data and automate repetitive tasks. This underlying strength translates into actionable insights previously limited by human capabilities alone.

Error-Reduction

Financial and non-financial transactional data is meticulously entered into tax forms using artificial intelligence for taxation. This repetitive but highly critical task undergoes automation by pulling data from financial statements, receipts and other digital records and then populating relevant fields in tax forms with near-to-absolute accuracy. This reduces human error during data entry and further reduces the errors in financial calculations. AI systems identify discrepancies and alert accounting professionals. These systems analyse patterns and anomalies and minimise the risk of audits triggered by inaccurate or suspicious entries.




Seamless integration with financial software

Artificial intelligence automates and streamlines individual steps in tax filing and seamlessly integrates with existing financial management systems. This cohesive integration creates a dashboard where all financial data converge and provides a holistic view of the taxpayers’ economic health.




Personalised deductions and credits

Going beyond basic automation, artificial intelligence personalises the tax preparation purpose. For example, it might identify travel-related expenses that qualify for tax deductions. This tailored advice maximises returns and increases savings.




Tax liability estimations

AI provides taxpayers with real-time estimates. This is particularly helpful in modifying strategies based on projected incomes throughout the year.




Compliance and audit assistance

The artificial intelligence database is up-to-date with real-time changes in tax regulations. This reduces the risk of non-compliance, which further reduces the risk of penalties. Another positive is that taxpayers take full advantage of new benefits and deductions comparatively sooner. AI also offers invaluable assistance to accounting professionals by highlighting potential areas that might attract scrutiny. It simulates audit scenarios to predict outcomes, which helps taxpayers prepare for various contingencies.

The modern tax landscape has been revolutionised with artificial intelligence. However, as with any new technology, there are several challenges associated with its adoption and deployment. Here's looking at a few:

Challenges with artificial intelligence in taxation

Data security

Misuse of financial information is every individual’s greatest risk factor. While artificial intelligence provides efficient digital tax solutions, data security measures must be in place to ensure no data leaks. Firms must incorporate ongoing security measures throughout the entire taxation cycle.




>Accuracy

Training AI systems on closed data sources ensures accurate outputs. Generic AI tools do not guarantee perfect accuracy, and relying solely on them is as good as handing taxation to an inexperienced accounting professional.




Liability

The direct effect of inaccurate tax filing opens firms to liability issues, leading to legal and financial consequences. The key is to embed auditing and transparency into artificial intelligence tools for tracking outputs.




Bias

Algorithmic bias is real. Identifying and reducing biases in algorithm design, training data, and decision-making processes is an ongoing practice to protect individuals and businesses.

While challenges are a part of every new technology adoption, the future of artificial intelligence and taxation is undeniably interwoven and beneficial. As leaders looking to boost business growth, reduce overheads and minimise errors, AI-driven digital tax solutions are your go-to systems in a modern business landscape. While businesses are evolving, the role of tax professionals remains at the core of business practices, and the adoption of the latest technologies give a competitive edge.

How can Infosys BPM help?

Tax compliance is complex and time-consuming, requiring strong expertise to navigate legislative changes. Infosys BPM offers digital tax solutions, leveraging advanced technologies like AI and RPA to automate tax processes for accuracy and compliance while reducing manual effort. By integrating these tools, we streamline operations and provide real-time insights for better tax management. Explore our services delivering value through:

• Operational efficiency through lean and six sigma processes
• Best-in-class workflows and internal controls
• End-to-end tax process support from coding to audit
• Automation, RPA, and AI integration
• Continuous reskilling and training on legal changes