Artificial intelligence in automated decision-making in tax administration: the case for legal, justiciable and enforceable safeguards

HM Revenue & Customs (HMRC) has a broad range of powers, which can be divided into powers which (i) are administrative or mechanical in nature, and (ii) require the exercise of an element of discretion or subjectivity (including the imposition of penalties). 

Automated decision-making (ADM) is any decision or process where the whole or part of the decision or process is made without human intervention (through technology), irrespective of whether the decision or output is subsequently reviewed by HMRC. Broadly, the technology underpinning ADM can be divided into:

• artificial intelligence (AI), and 
• algorithmic systems developed through conventional programming (i.e. algorithmic systems or rules-based systems).

Although there is no comprehensive list of ADM technology published by HMRC, it is understood that, at present, HMRC employs both types of technology. This paper focuses on the use of AI in ADM in tax administration to make discretionary or subjective decisions.

This discussion paper was written for the Tax Law Review Committee (TLRC) by Kunal Nathwani. The Committee has authorised its publication to inform and promote debate in this area. The views expressed do not necessarily represent the views of the Committee. The Institute for Fiscal Studies has no corporate views.