13th December 2019
Here at 6CATS, we’re always observing the latest developments in tax and compliance in order to provide the best service possible to clients. Recently, one change that is increasingly gathering steam is the use of AI and other technologies to crack down on tax evasion.
This week, reports have suggested that India – a country extremely popular with contingent workers – is set to begin using machine-learning to fight tax evasion – following the lead of the UK, the US, Australia and Denmark. Compliance will need to be a top priority for anyone looking at contracting in India.
Contracting in India: AI crackdown
According to The Financial Express, the government of Delhi is set to use a machine-learning tool to fight tax evasion, with initial estimates suggesting the Exchequer is likely to gain up to £32 million annually by doing so.
The AI tool has been researched and developed by two US-based researchers – Dr Aprajit Mahajan, Associate Professor, University of California, Berkeley, and postdoctoral scholar Dr Shekhar. The tool identifies firms created by traders to evade taxes, and has scrutinised a vast dataset of VAT returns registered in Delhi from 2012-17.
The first set of findings will be submitted to the government this month. Researchers have spoken highly of the project – suggesting that it is the first-ever systematic study of its kind.
Researchers commented that ‘given this data exists in many tax jurisdictions, and anecdotal evidence suggests that false paper trails are a common problem, our work should have high policy relevance within India and elsewhere.’
The piece also highlights high profile examples of other countries using similar tactics. In Denmark, for instance, artificial intelligence helped the government bring in around £2 billion in added tax revenue.
A global trend
As we’ve mentioned before, workers looking at contracting in India should know that the country is not alone in leveraging the power of technology to crack down on tax evasion. In a report from KPMG the company stated that ‘robotics, automation and artificial Intelligence will revolutionise the way tax technology operates.’
In fact, a whole host of countries have begun introducing state of the art methods of tax collection. In the last decade alone:
- The Tax Office in Australia has employed an entire team of ‘data doctors’ tasked with developing models of ‘non-compliers’ so programs can automatically track social channels that fit these profiles.
- HMRC’s Connect system, which interfaces with over 60 other OECD countries globally, along with a wealth of previously untapped information streams, has enabled it to reclaim £4 billion in tax.
- Thailand’s tax collection agency has turned to blockchain technology to fight evasion. Ekniti Nitithanprapas, director-general of the Revenue Department, suggested that the tech will verify whether taxes are paid with far more accuracy than before.
- France has put forward plans to allow authorities unprecedented access to social media to identify tax evaders. Currently, the legislation would give authorities the ability to review profiles, photographs and posts, and use computer algorithms to detect tax evaders.
- India has begun another AI tax collection, ‘Project Insight’. The program will have the ability to thoroughly check hundreds of millions of social networking profiles, and scour through photos, events, and relationship details to spot any indicators of tax evasion.
What does it mean for those contracting in India?
With many governments using cutting-edge technology to catch evaders, tax compliance has become more scrutinised than ever before. As these advances show no signs of slowing – it’s safe to assume the trend will continue. For international contractors, this means that there is a far greater chance that a small oversight could lead to serious ramifications – this makes getting it right hugely important.
As it stands, if you are looking at contracting in India, or anywhere else, compliance will be getting stricter. Ignorance will not be deemed a defence. However, this shouldn’t stop you from chasing your dream opportunity. In order to ensure you are compliant in any destination, speak to an expert – contact us today.