In the UK, advanced strategies are being considered to address a significant issue. Members of Parliament were informed that HMRC officials are exploring the potential of utilizing artificial intelligence to combat the exploitation of the tax gap by fraudulent entities.
Tax avoidance involves manipulating regulations to gain tax benefits. It is estimated that the UK Government lost £0.7 billion between 2023 and 2024 due to tax avoidance practices.
HMRC defines tax avoidance as engaging in contrived transactions solely for tax advantages, operating within legal boundaries but not the intended spirit of the law. On the other hand, tax evasion involves intentionally evading taxes, which is illegal and can lead to severe consequences, including financial penalties and imprisonment.
According to reports from the Express, 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. Labour MP Shaun Davies raised questions to Exchequer Secretary Dan Tomlinson regarding the potential of AI and digital technology in reducing tax evasion and avoidance.
HMRC’s approach includes leveraging AI to enhance compliance efforts, improve case selection, and address emerging tax system issues promptly. The agency aims to deliver more efficient services by utilizing AI as a supportive tool alongside human expertise.
The increased use of AI is expected to streamline processes, allowing HMRC staff to focus on assisting taxpayers and targeting fraud and evasion effectively to generate more revenue for public services. While AI aids in various tasks, human oversight remains essential, ensuring decisions are explainable and backed by experienced case workers.