Balancing innovation and integrity - AI in tax administration and taxpayer rights

Oct 22, 2026

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Balancing innovation and integrity addresses how artificial intelligence is reshaping tax administration while affecting transparency, accountability, and taxpayer rights. The study evaluates AI-driven impacts on legal fairness, due process, and the integrity of tax procedures, highlighting risks such as algorithmic bias, opacity, and weakened safeguards. It also proposes an independent AI oversight mechanism to explain and review tax decisions, supporting legal accountability. Regulatory frameworks are recommended to embed oversight and preserve public trust while enabling efficiency gains.

LanguageEnglish

CategoryResearch & Report

FormatPDF

Pages8

Reading Time20 min

AccessFree to download

Introduction

AI and tax administration

ARTICLE [https://doi.org/10.1057/s41599-025-06099-7](https://doi.org/10.1057/s41599-025-06099-7) OPEN Balancing innovation and integrity: AI in tax administration and taxpayer rights Evgeny Guglyuvatyy1,2✉ Artiﬁcial intelligence (AI) is transforming tax administration by improving efﬁciency, compliance, and decision-making. However, this shift raises critical concerns about transparency, accountability, and taxpayer rights. This paper examines how AI-driven systems impact legal fairness, due process, and the integrity of tax procedures. It highlights risks such as algorithmic bias, opacity, and weakened procedural safeguards, while acknowledging AI’s potential to streamline enforcement. To safeguard taxpayer rights, the paper proposes an independent AI oversight mechanism to explain and review tax decisions. This system would enhance transparency, reinforce trust, and ensure legal accountability. The paper calls for regulatory frameworks that embed oversight, uphold public trust, and balance innovation with fundamental legal protections. 1 Monash University, Subang Jaya, Malaysia. 2 Faculty of Law, University of Technology Sydney, Sydney, Australia. ✉ email: [evgeny.guglyuvatyy@monash.edu](evgeny.guglyuvatyy@monash.edu)[ ](evgeny.guglyuvatyy@monash.edu)HUMANITIES AND SOCIAL SCIENCES COMMUNICATIONS | (2025)12:1818 | [https://doi.org/10.1057/s41599-025-06099-7](https://doi.org/10.1057/s41599-025-06099-7) 1 Introduction A rtiﬁcial Intelligence (AI) has become increasingly pervasive across diverse sectors, leveraging expansive digital repositories and sophisticated algorithms to process complex queries, generate conclusions, and simulate human-like interactions. In tax administration, AI progressively automates decisions, analyses datasets, and enhances compliance monitoring (Aslett et al. 2024) . The evolution of AI in taxation began several decades ago with foundational systems like ‘Taxman’ (McCarty 1977) . Since then, applications have expanded to include taxpayer education, fraud detection, and compliance monitoring. By the late 1990s, machine visioning technology facilitated automated customs inspections, while the last three decades have seen widespread adoption of advanced analytics and machine learning (ML) techniques due to expanding electronic tax data (Bruckner and Coil 2024; Witten et al. 2016) . Asigniﬁcant recent development is Generative AI (GenAI), which enables the creation of human-like content, including text, images, and videos. The integration of GenAI into tax administration coincides with broader digital transformation initiatives, reshaping compliance dynamics for both taxpayers and authorities (Brynjolfsson and McAfee 2017). The implications of automated systems, particularly generative AI, in the ﬁeld of taxation are multifaceted and complex. While it can provide individual taxpayers with real-time advisory support to improve compliance and reduce reliance on costly professional services, these same capabilities pose risks when exploited for illicit purposes. AI-driven tools can optimise tax fraud schemes by providing guidance on jurisdictions, business structures, and legal frameworks with minimal detection risk (Zheng et al. 2024). AI-assisted fraud may further evade scrutiny through strategic document modiﬁcation based on AI-generated insights (Zheng et al. 2024). As AI transforms tax administration, it presents both opportunities and challenges. AI-driven automation, predictive analytics, and natural language processing enhance administrative efﬁciencyand revenue collection but raise concerns regarding data security, legal accountability, and algorithmic bias. Policies balancing innovation with robust governance mechanisms are essential to harness AI’s beneﬁts while mitigating risks (OECD 2025) . Within this context, the protection of taxpayer rights emerges as a central issue. Taxpayer rights generally refer to the legal guarantees ensuring fairness, transparency, and due

FAQs

What benefits does AI bring to tax administration?

AI improves efficiency, compliance, and decision-making, including automation, predictive analytics, and natural language processing that support enforcement and taxpayer services.

What main risks does the paper identify for using AI in taxation?

Key concerns include transparency and accountability gaps, algorithmic bias, opacity, and weakened procedural safeguards that can undermine legal fairness and due process.

How does the paper propose protecting taxpayer rights in AI-based tax decisions?

It proposes an independent AI oversight mechanism to explain and review tax decisions, reinforcing transparency and legal accountability while strengthening public trust.

Oct 22, 2026

Uploaded by Helloiii