HMRC’s use of artificial intelligence to profile people’s social media activity will increase tax compliance, according to leading audit, tax and business advisory firm Blick Rothenberg.
Fiona Fernie, a partner at the firm, said that HMRC’s CONNECT system has been deploying advanced analytics since the early 2000s to spot underpaid tax. “CONNECT uses (and has always used) advanced analytics such as pattern recognition, predictive modelling, and machine learning, which are all forms of AI. Social media is just one of the many sources CONNECT reviews,” she explained.
CONNECT, developed by BAE Systems Applied Intelligence at an estimated cost of between £45 million and £100 million, has reportedly helped recover more than £3 billion in unpaid tax.
Fernie highlighted the efficiency gains such technology offers HMRC investigators. “CONNECT can identify the patterns and anomalies in the data it reviews in seconds where human investigation would take months,” she said. “It not only enables real-time risk profiling; it also supports the work carried out by HMRC staff during the course of investigations.”
However, she stressed that AI outputs are not used in isolation. “The information gleaned and analysed by the CONNECT system is always also looked at by human investigators. As long as there is appropriate human oversight and safeguards, I do not see any problem with the use of AI to identify possible indicators that tax is not being paid at the correct levels.”
HMRC has recently confirmed it uses publicly available online data to support compliance activities, including social media posts, blogs and other internet content without privacy restrictions. This mirrors the approach of other government departments such as the Department for Work and Pensions.
Fernie suggested HMRC may be underplaying the extent of its AI usage. “It is strange for HMRC to state that AI is only used as part of criminal investigations into tax fraud, as CONNECT uses real-time risk profiling as a tool to help determine targets for investigation.”
The growing use of AI in tax enforcement comes as governments worldwide deploy technology to close compliance gaps and secure revenues — a trend that places increasing importance on digital footprints, even in everyday online activity.
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AI profiling of social media will boost HMRC’s tax compliance, say advisers