Advanced technology may be utilized to address a significant issue in the UK. Members of Parliament were informed that HMRC leaders are exploring the potential of artificial intelligence to combat the tax gap exploited by fraudsters in the system.
Tax avoidance involves manipulating regulations to gain a tax advantage. The UK Government reportedly lost £0.7 billion due to tax avoidance between 2023 and 2024.
HMRC defines tax avoidance as engaging in artificial transactions solely to achieve a tax advantage. It often involves adhering to the law’s literal interpretation but not its intended spirit.
In contrast, tax evasion is characterized as a deliberate effort to evade paying owed taxes, which is illegal. Authorities intend to pursue individuals involved in evasion, with penalties ranging from financial consequences to criminal prosecution and imprisonment.
The government’s losses from tax evasion were estimated at £5.5 billion in 2022-23, increasing to around £6.5 billion in 2023-24, as per reports from The Express. Shaun Davies, the Labour MP for Telford, questioned Exchequer Secretary Dan Tomlinson on December 23 regarding the potential of AI and digital technology in combating tax evasion and avoidance.
Davies highlighted HMRC’s strategy to enhance compliance efforts through new risk-targeting capabilities for investigation selection. The use of AI aims to swiftly address emerging tax system issues to prevent their escalation.
HMRC is leveraging artificial intelligence to provide a more efficient and professional customer service experience. The integration of new technology is intended to enhance operational effectiveness and streamline administrative tasks.
Increased AI utilization will allow staff to dedicate more time to assisting taxpayers and enable HMRC to focus its efforts on combating fraud and evasion, ultimately generating more revenue for public services.
While AI supports various processes, human decision-making and oversight remain essential. HMRC emphasizes the secure and ethical implementation of technology, with stringent data protection measures in place.
In scenarios where AI may influence customer outcomes, HMRC ensures transparency and human supervision. Ultimately, human case workers make final decisions, even when AI aids in decision-making processes.