How technological innovation reshapes multinational tax management – Prospects and challenges of artificial intelligence in taxation

Perspectives for AI applications in taxation

1. Automating the Process from Invoice Management to Tax Filing

Leveraging the implementation of the Chinese State Taxation Administration on full digitalization of invoices, invoice data can be automatically captured, authenticated, and archived. Integrated with corresponding interfaces in financial software, AI allows for direct completion of accounting entries and report generation. During the tax filing process, AI helps automatically extract and organize invoices, accounts, and report information through its flexible data processing capabilities, generating tax return forms for all tax types. Furthermore, by incorporating “Golden Tax System validation rules”, it performs data comparison between filing entries during submission, ensuring accuracy and compliance.

2. Tax Regulation Interpretation and Risk Assessment Analysis

AI systems can be connected to legal and publishing databases. Through semantic searches, AI systems find relevant tax regulations and prepare these regulations in a way that is tailored to the target audience. Companies can create risk matrices and decision rules for specific tax administration requirements and use AI to identify risks in various transactions, propose decisions, and generate corresponding reports.

3. Assessment of Tax Incentives

Application for tax incentives often involves complex assessment criteria and documentation preparation. AI systems can assist enterprises intelligently matching relevant tax incentive regulations, automatically collecting and organizing required supporting materials, and guiding enterprises through the relevant procedures. This helps prevent omissions caused by manual operations that could result in failure to apply for or miss enjoying the tax incentives.

4. Tax Documentation Generation

During communications with Chinese tax authorities, enterprises usually need to prepare extensive documentation to record transactions or explain risk aspects for compliance purpose. With help of AI technology, data can be automatically extracted from corporate financial and tax systems, structured data analysis can be performed, and the documents meeting the requirements from tax authority can be generated.

5. Big Data Analytics and Tax Planning

The AI system can query and analyze the data across all corporate departments, cleaning, transforming, and integrating data from diverse sources to form a unified tax data portfolio. Simultaneously, the AI system can promptly identify abnormal indicators, forecast tax costs, generate visual charts, and produce multidimensional operational analysis reports. This empowers enterprises to proactively engage in tax planning, optimize corporate strategies, and enhance resource allocation.

Challenges with AI

The application of AI in the tax field, while enhancing efficiency, also presents numerous challenges:

• Data Protection and Privacy: Tax data contains sensitive information such as personal identities and financial positions. Consequently, enterprises have to invest significant compliance costs in this area.
• Accuracy of analysis and empirical guidance: AI systems are prone to false conclusions and inaccuracies. Additionally, although AI systems can efficiently search legal databases, they may not directly track or reference certain non-public tax practice cases. In practice, judgments should be made by combining AI system analysis with professional experience and guidance.
• Tax-AI Talent Shortage: Tax-AI professionals for enterprises need expertise in taxation, data analysis, and AI technology. However, such multi-skilled professionals meeting these standards are extremely rare in the market. Furthermore, this demand also requires companies to invest significant resources in providing AI application training for existing tax personnel.

Furthermore, while enterprises are improving efficiency through AI technology, tax authorities are also actively seeking to enhance their supervision and monitoring methods with AI. Consequently, the application of AI technology in tax administration by tax authorities imposes higher compliance requirements on taxpayers.

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