Artificial intelligence (AI)-generated tax audits

An executive or his company learns that they are going to be subject to a tax audit. Why them and not someone else? What factors can trigger an audit? And what if artificial intelligence (AI) had a lot to do with it?

Tax inspections: "traditional" triggers

Missed deadlines. Whether it's paying taxes or filing tax returns, it's important to be strict about deadlines if you want to go as unnoticed as possible. In the event of a delay in filing a tax return or paying a tax due, the taxpayer should contact the tax office immediately.

Inconsistencies. The administration's task is to critically examine the declarations submitted to it, and to verify their consistency with all the documents at its disposal. The results of the company's activities must be consistent with those of other companies in the same sector, but if there are any inconsistencies, they must be explained. If a data item in a declaration is likely to attract attention, it is advisable to add an explanatory note to the declaration: this way, the auditor has an immediate explanation and will not linger over the file.

AI: a formidable new weapon

Artificial intelligence can help tax authorities detect taxpayers who are not tax compliant. AI can be used to examine large-scale financial data and identify anomalies. For example, intelligent data analysis can be used to detect discrepancies between a company's tax returns and its accounting data, customs declarations or other sources.

The proportion of AI-targeted controls rose from 13% in 2018, to 22% in 2019, 32.49% in 2020, 45% in 2021, and the DGFIP's target was to reach 50% by 2022.

The use of AI in tax audits must be ethical and transparent. The Galaxie application, a new tool deployed by the tax authorities since April 2022 that enables computerized and automated processing of personal data, has been authorized by the Ministry of the Economy after a favorable opinion from the CNIL.