The Ministry of Finance has highlighted the use of data analytics, big data, and AI/ML in tax administration. Both direct and indirect tax departments employ these advanced technologies to make tax administration more effective, free of official discretion, business and taxpayers friendly.
The flagship analytics project for Indirect Taxes is Project ADVAIT (Advanced Analytics in Indirect Taxes). ADVAIT has been rolled out by Central Board for Indirect Taxes and Customs (CBIC) in 2021, and it uses capabilities of big data and AI as well. The project has a threefold objective of enhancing Indirect Tax revenue, increasing taxpayer base, and supporting data-driven tax policy.
ADVAIT provides business outputs in reports, interactive dashboards, and analytical models. The functionality of each output is specifically designed to aid and assist officers in their day-to-day operations, ranging from reporting and ensuring tax compliance to detecting tax evasion. The portal has advanced analytical capabilities, including data matching, network analysis, pattern recognition, predictive analytics, text mining, forecasting, and policy studies. ADVAIT has been designed and developed in a knowledge-driven data ecosystem using some of the most advanced data warehousing business intelligence solutions.
The Central Board for Direct Taxes (CBDT) is using data analytics, big data, and AI/ML techniques to revolutionize tax administration. These techniques are being used for identifying high-risk cases with a high likelihood of tax evasion, sending reminders for advance tax payments, prompting specific taxpayers about apparent mismatches in ITRs and transactions made, using big data techniques for storage and effective search of information by income tax officers, visualizing taxpayers’ relationships and flagging potential high-risk transactions, and segmenting taxpayers to focus campaigns on high-risk cases from a tax evasion perspective.
Benefits of Using Data Analytics, Big Data, and AI/ML in Tax Administration
The use of data analytics, big data, and AI/ML in tax administration has several benefits. These technologies can help identify fiscal risks, suspicious trends, and patterns, and risky entities in Customs and GST by leveraging big data. They can also help increase tax revenue, expand the taxpayer base, and support data-driven tax policy. Additionally, these technologies can help reduce official discretion, promote transparency and accountability, and create a business and taxpayer-friendly environment.
Furthermore, the use of data analytics, big data, and AI/ML in tax administration can help streamline the tax collection process and reduce the burden on taxpayers. Taxpayers can benefit from the use of these technologies by receiving prompt reminders for advance tax payments and being notified of apparent mismatches in their tax returns and transactions.
The use of data analytics, big data, and AI/ML in tax administration is a game-changer for tax departments worldwide. These technologies have the potential to revolutionize tax administration by increasing revenue, expanding the taxpayer base, supporting data-driven tax policy, and reducing official discretion. The benefits of these technologies are numerous and can lead to a business and taxpayer-friendly environment that promotes transparency, accountability, and efficiency.