Innovative strategies are being considered to address a significant issue in the United Kingdom. Members of Parliament were informed that HMRC officials are exploring the potential of utilizing artificial intelligence to combat the tax gap exploited by fraudsters.
Tax avoidance involves manipulating regulations to gain a tax benefit. It is estimated that the UK government lost £0.7 billion due to tax avoidance between 2023 and 2024. HMRC defines tax avoidance as engaging in artificial transactions that serve no real purpose other than to gain a tax advantage.
On the other hand, tax evasion involves intentionally evading tax payments, which is illegal. The UK government reported losses of £5.5 billion from tax evasion in 2022-23, projected to increase to around £6.5 billion in 2023-24. Labour MP Shaun Davies questioned Exchequer Secretary Dan Tomlinson about the potential of AI and digital technology to combat tax evasion and avoidance.
HMRC is expanding its capabilities to focus compliance efforts by utilizing new risk-targeting tools for case investigations and employing AI to detect emerging tax issues promptly. The agency aims to enhance efficiency and professionalism by incorporating artificial intelligence into its operations while ensuring that human oversight remains essential.
The integration of AI is expected to streamline processes, allowing staff to dedicate more time to assisting taxpayers and enhancing efforts against fraud and tax evasion to generate additional revenue for public services. HMRC emphasizes the importance of upholding data protection, security, and ethical standards in utilizing AI technologies to ensure transparency and accountability in decision-making processes.