6th February 2020
Here at 6CATS, we observe the latest shifts in tax and compliance to assist recruitment firms when placing contractors abroad. One notable development that has been gathering pace is the rapid adoption of digital technology by tax authorities. According to KPMG, ‘robotics, automation and Artificial Intelligence will revolutionise the way tax technology operates.’ So, what are the latest AI tax advances, and what effect will they have on recruitment firms?
AI tax advances: What does it mean for recruitment firms?
Automating repetitive processes
From a purely practical standpoint, AI tax advances will automate the most routine and monotonous tasks – creating a far more effective service. There are many time-consuming, repetitive tasks that comprise a tax professional’s workday, such as processing documents and reporting. By deploying AI-enabled robots to automate these tasks, professionals would be enabled to focus far more energy on intellectually challenging tasks – such as pursuing tax evasion.
Extracting data from tax documents and identifying evasion
AI will also help tax authorities scan documents faster than ever. With robots, the exchequer can effortlessly extract key data such as account numbers and quantity of payments. This will make it far easier to identify discrepancies – and prevent evasion.
There are a number of applications available to do this already. Types of machine learning such as ‘predictive modelling’ can enable authorities to take all past fraud cases and create models based on common correlations. Other techniques are also growing in popularity, such as ‘clustering’, where machine learning programs sort returns into groups that have similarities – ‘clusters’ – and identify groups falling outside these bands for additional investigation.
One notable example of this is HMRC’s ‘Connect’, which sifts through enormous quantities of information — more data than the British Library — in its hunt for unpaid tax. It combines a variety of disparate information sources to uncover evasion. In fact, in its first four years of operation, the tool enabled HMRC to reclaim £4 billion.
Social media
A final AI tax advance that recruitment firms should be aware of is the fact that authorities will also be able to use technology to leverage the power of social media. In France, the government has recently gained permission to start searching social media accounts to investigate the general public.
In India, Tax authorities have been working on a scheme called Project Insight over the last seven years, which will use data captured on and offline, including social media, to assess whether or not an individual is paying the right taxes.
The system can target citizens in a number of ways. For instance, it has a ‘Geographic Information System’ that can zero in on specific areas and location, and can also filter its whole database based on income, profit, capital and gains. The aim is to eventually introduce advanced systems that can predict and flag future risks.
Also, as far ashore as Australia, the Tax Office has employed ‘data doctors’ to develop models of ‘non-compliers’ so that programs can automatically track social channels for them.
What does it mean for agencies?
With AI advances in tax showing no sign of slowing down, authorities are sure to become far more effective at spotting discrepancies. The chances of a small oversight or bit of carelessness leading to serious ramifications for recruitment firms are higher than ever.
However, this is not the only risk factor increasing for agencies. Legislation like the Criminal Finances Act 2017 is explicitly clear that an offence will be committed whenever a corporate fails to prevent an ‘associated’ person criminally facilitating the evasion of tax, in the UK or abroad. This means that the actions of just one non-compliant contractor or recruiter could lead to serious negative ramifications.
The international tax and compliance landscape is complicated, and only becoming more so. However, this shouldn’t stop recruiters from flourishing in international markets. By employing the services of international contractor management experts – you can rest easy that compliance is under control.
Contact us today.