How Artificial Intelligence is Transforming Tax

The Big Picture

There are no domains of finance that will not be affected by machine learning capabilities. Today, we see emerging technologies starting to impact traditional activities like tax accounting. While payments, wealth, and asset management, banking have been impacted in very visible ways.

Key challenges of the tax functions can be supported by a mix of AI/ML solutions and automation

• Automate repetitive tasks
• Extract key data from tax documents
• Classify tax-sensitive transactions
• Analyze notices from tax regulators
• Identify potential tax fraud cases
• Identify possible deductions and tax credits
• Compare pricing structures for more accurate transfer pricing
• Make tax forecasting more accurate

Be Smart

The following startups all tackle a different challenge of the Tax function:

• Boast.ai is specialized in R&D tax credit applications
• Bluedot helps read and correctly itemize expenses for tax purposes
• Tax Foresight can predict the likely outcome of a tax controversy
• MetaTaskerPT focuses on classification, taxonomy, and data extraction.

Tax and accounting are aspects of financial services that have not been truly disrupted yet. That’s not the case anymore with 2 recent fundraisings in the space:

Boast.ai The first is Boast AI who raised $100M from Brevet Capital in Feb 2021. Boast.ai, is a software company whose product automates the complex process of applying for R&D tax credits. This new financing is in addition to Boast.ai’s $23M Series A led by Radian Capital that was announced last December.

Bluedot The second is Bluedot, an Israeli start-up that uses AI to help companies handle their tax accounting. They have raised $32M from Ibex Investors in partnership with Lutetia Technology Partners, with past investors La Maison Partners, Viola, and Target Global also contributing. They specialize in building user-friendly tools to help read and correctly itemize expenses for tax purposes.

Blue J tax
Other players in the field include companies like Blue J Tax can predict the likely outcome of a tax controversy with at least 90 percent accuracy. The product uses AI — specifically “supervised machine learning” to analyze tax law and rulings and accurately predict the treatment of new tax situations. Blue J tax allows simulating the judgment of a court in a new situation. Using advances in artificial intelligence and extensive training by computer scientists and law professors from the University of Toronto, Tax Foresight helps you to navigate uncertainty when there are competing reasonable arguments. Blue J Legal analyzes fact situations using deep learning, discovering in seconds hidden patterns in the case law. It provides answers, links to relevant cases, and generates tailored explanations of its analysis. When using Tax Foresight, you can always have confidence in its conclusion, why it reached that result, and what to consider next.

Metatasker Property Tax software by Crowdreason.
One of their key features is to be able to answer one of the key challenges faced by tax practitioners. Classify documents.Define the taxonomy of the document. Extract the required data from the document. Over time, MetaTaskerPT begins to recognize documents and is able to replace those human data processes with machine-generated answers

CrowdReason’s MetaTaskerPT software uses machine learning algorithms and crowdsourcing to help the system get answers to questions that would otherwise require people to make those determinations:

Driving The News
The Internal Revenue Service is designing machine-built graphs to plot the relationships among participants in business deals, WSJ
The IRS recently signed a $99 million contract with Palantir Technologies Bloomberg law

Yes But
What about data privacy?
Kimberly Houser, a clinical assistant professor of business law, in WSU’s Carson College of Business, said the IRS is breaking federal privacy law that says citizens should be:
– Informed when the government is collecting data on them.
– Given the chance to review and correct the information.
Such policies are required by the fair information practices incorporated into the Privacy Act of 1974.“They’re not doing that at all, and they’re certainly not informing people when they’re doing it,” said Houser. She makes her case in a 55-page paper in the summer issue of the Vanderbilt Journal of Entertainment and Technology Law. WSU

Dig Deeper:
Beyond Predictions: Using Machine Learning To Inform Tax Planning Strategy
The Expanding Role Of Artificial Intelligence In Tax

AI Applied to Tax Systems Can Help Discover Shelters, Support Equality (Must read)
Disrupting Tax Processes with Artificial Intelligence Technology
How tax is leveraging AI — Including machine learning — PwC
Artificial Intelligence and Machine Learning — PwC

This post is part of Convergences by Melvine. A series exploring how software is changing every corner of human activities. Melvine Manchau