Thinking about dodging your taxes? Careful, because the Australian Taxation Office (ATO) is now using Artificial intelligence (AI) to detect tax-dodging behaviour. The ATO are going to be all up in your grill with their all-seeing bots in a new wave of futuristic AI tax patrols.
The use of such AIs have been used by the ATO since around 2018, according to an ATO spokesperson. They told The Chainsaw that they have harnessed the power of AI to tackle tax evasion and fraud, leading to the recovery of billions of dollars in unpaid taxes.
AI Tax: Leaked documents
The most interesting use of AI employed by the ATO is when it has used bots to scan data leaks such as the Panama Papers, Paradise Papers and Pandora Papers.
These leaked documents exposed hidden wealth, tax evasion and financial wrongdoing on a global scale. Published in 2016, the Panama Papers consisted of 11.5 million leaked documents from the Panamanian law firm Mossack Fonseca. The documents revealed how wealthy individuals, public officials and corporations used offshore tax havens and shell companies to hide assets and evade taxes.
Likewise, the Paradise Papers were 13.4 million leaked documents obtained by the International Consortium of Investigative Journalists. These documents exposed the financial dealings of numerous individuals and companies, including politicians, celebrities and multinational corporations using offshore financial structures and tax havens to conceal their wealth and avoid taxes.
And finally, the Pandora Papers, published in 2021, were the largest offshore data leak in history — 11.9 million documents. This leak exposed the hidden wealth, tax evasion and money laundering practices of more than 330 politicians, numerous celebrities and 130 billionaires, involving 29,000 beneficiaries among 27,000 offshore companies.
AI and data
It is this type of leak the ATO set its AI onto. The spokesperson from the ATO told The Chainsaw that using AI can turn “vast quantities of unstructured data into valuable data feeds for intelligence analysts by highlighting the most valuable documents to review and even where and what to look for in those documents”.
The ATO’s work with the Panama Papers, they say, “resulted in significant numbers of compliance actions against tax evaders and vast improvements in our understanding of how to approach these investigations”.
According to information sent to The Chainsaw by the ATO, the review of the Panama Papers, as of 31 December 2022 has seen “more than $242 million raised in liabilities, more than $60 million collected in cash and more than 535 audits and reviews finalised”.
The ATO is “using AI to amplify the capacity of staff”, the spokesperson said. This frees ATO employees to “concentrate on the tasks requiring human judgement and empathy”.
Underpaid superannuation
If you are an employer dodging out on your superannuation payments, the bots are looking for you, too. According to the spokesperson the tax office is using deep learning models to claw back $280 million in superannuation guarantee underpayments.
“The ATO has used stratified sampling to create models that are highly successful at identifying employers who are most at risk of underpaying superannuation. By targeting the highest-risk employers, we are able to more efficiently use resources to ensure employers are paying the correct amount of superannuation for their employees.”
The spokesperson added that by using artificial intelligence, they are “far less likely to contact or undertake reviews of employers doing the right thing, saving those businesses time and resources”.
Beginning in 2018, “these models have helped raise around $295 million in liabilities and have a success rate of around 90% in detecting underpayment”.
AI tax and fraud detection
Artificial intelligence used by the ATO also stopped $2.5 billion in fraudulent payments, helping the ATO staff to deal with the biggest GST fraud in Australia’s history, Operation Protego.
“The ATO has used gradient-boosting machine learning models to identify rapid evolution in GST fraud behaviour. Gradient boosting models work by building models in sequence where each successive model tries to reduce the errors in the previous model. In the case of the models used to address GST fraud, each model improves the ability to identify fraudulent GST lodgments more quickly, helping to stop any fraudulently claimed refunds from issuing.”
Ethics
The ATO’s success in combating tax evasion through AI is a testament to the growing potential of AI technology in government agencies worldwide. As AI continues to evolve, it is essential to balance its benefits with ethical considerations.
The spokesperson said that while AI is a tool to be harnessed, decision making is always in the hands of humans. “The ATO has highly trained and skilled data scientists who develop and deploy AI tools, but all ATO staff use data and analytics in their work and some use the outcomes of the AI tools. The ATO is approaching its exploration of AI tools and techniques with caution and every use case is tested against our data ethics principles.”
If you still want to try to dodge your taxes and not pay a fair cut, just be aware that the bots are here and they have their laser eyes on all of us.
