THE ROLE OF ARTIFICIAL INTELLIGENCE IN ENHANCING TAX COMPLIANCE AND FINANCIAL REGULATION

Abstract

Artificial Intelligence (AI) has emerged as a transformative force in various domains, including tax compliance and financial regulation. This review explores the pivotal role of AI in enhancing these critical aspects of governance and economic stability. In the realm of tax compliance, AI-driven solutions offer unprecedented opportunities for governments to streamline tax administration processes, detect non-compliance, and mitigate tax evasion. Machine learning algorithms can analyze vast volumes of financial data with remarkable speed and accuracy, identifying patterns indicative of tax fraud or evasion. Furthermore, AI-powered predictive analytics enable tax authorities to anticipate taxpayer behavior and allocate resources effectively for enforcement purposes. By leveraging AI, governments can enhance revenue collection efficiency while minimizing compliance burdens on taxpayers. In financial regulation, AI technologies play a crucial role in monitoring and enforcing compliance with complex regulatory frameworks. With the exponential growth of financial transactions and the increasing sophistication of financial instruments, traditional regulatory mechanisms often struggle to keep pace. AI systems equipped with natural language processing capabilities can sift through immense volumes of regulatory documents and financial data to identify potential violations and assess systemic risks. Moreover, AI-based risk assessment models enable regulators to proactively identify emerging threats to financial stability, thereby facilitating timely interventions to prevent crises. However, the integration of AI in tax compliance and financial regulation also presents challenges and ethical considerations. The reliance on algorithmic decision-making raises concerns regarding transparency, accountability, and bias mitigation. Moreover, the proliferation of AI-driven solutions may exacerbate existing socio-economic disparities, as access to advanced technology remains uneven across jurisdictions and economic strata. While AI holds immense promise for enhancing tax compliance and financial regulation, its implementation must be accompanied by robust governance frameworks and ethical guidelines. Collaborative efforts between policymakers, regulators, and technology developers are essential to harnessing the full potential of AI while safeguarding against unintended consequences. Through responsible deployment and continuous refinement, AI can serve as a powerful tool in promoting fiscal transparency, regulatory effectiveness, and economic resilience.
 Keywords: Artificial Intelligence, Tax, Financial, Compliance, Regulation, Review.