Stuart Tait looks at some of the emerging use cases for generative AI in global tax functions, and how to identify the most promising applications.
We know that generative AI is set to revolutionise global tax functions. My last blog set out the technology’s five key capabilities, which will have powerful applications for tax functions. Namely, content creation, information extraction, chatbot production, language translation and code generation.
So what will these capabilities mean in practical terms for how tax professionals do their jobs? What are Gen AI’s truly transformative use cases?
Sweet spots
There’s no doubt that Gen AI is being embraced by an expanding number of tax functions. From the work KPMG is doing with clients, I’m seeing applications emerge in three core areas of tax operations:
- Technical research
Researching technical tax matters in order to advise the business means pouring through huge amounts of content: regulation, case law, guidance from authorities, expert viewpoints and more. You then need to capture and summarise the relevant points, usually for a non-tax audience.
That might take hours, days or even weeks. Appropriately trained Gen AI tool can do it in seconds – and with greater accuracy than a human being. The Blue J solution, for example, is 92% accurate when answering queries about US Federal tax rules.
Generalist AI software like ChatGPT isn't suitable for such tasks. But the large language models (LLMs) behind gen AI can be trained, using specific tax data, to answer the less complex queries that frequently come in from the business.
Tools like Blue J will still need an element of human oversight to spot and resolve the errors they occasionally produce. But for tax teams, the efficiency gains are obvious – as are the productivity benefits of being left to focus on more strategic work.
These advantages will only grow as Gen AI advances. Over time, its ability to answer standard tax queries will reach the point where business stakeholders can self-serve. And as tax increasingly goes digital, it won’t be long before authorities also begin to adopt gen AI solutions, making it easier to ascertain their positions on uncontentious issues.
- Content intelligence
Gen AI’s natural language capabilities can be deployed to capture and act on the complex information contained in tax documents.
This has several potential applications in global tax functions, such as designing standardised templates for transfer-pricing documentation. Tax teams across different jurisdictions are all likely to have their own templates. Gen AI can very rapidly digest these and produce a common version for use in all countries, with the necessary adaptations for local requirements.
Similarly, Gen AI could dramatically streamline task-risk reporting by quickly understanding the firm’s tax positions and summarising them for the board.
What’s more, it could handle disputes from tax authorities, which are on the rise – and becoming more targeted – in the digital tax era. AI software might be used to manage and answer large volumes of queries from authorities and ensure consistency of responses between jurisdictions.
At KPMG, we’re unleashing this potential by integrating Gen AI into Digital Gateway, our tax and legal technology platform. Clients can upload their tax documents to the portal so that our experts can run their calculations, complete their returns and provide advice.
- Data interrogation
Sophisticated data analytics is no longer the preserve of data scientists. Gen AI has lowered the barriers, if not eliminated them entirely.
That's because it removes the need for programmers to write code in order to run data analyses. The technology can do that for you – and produce a dashboard on which to display the results. It can also adapt that dashboard in an instant as your analytics requirements change.
For tax teams, this has many possible uses. It will allow them to analyse transfer-pricing data, for instance, to identify issues such as mispricing between entities.
Or they could identify the jurisdictions whose effective tax rate is higher than the statutory rate and investigate why this is happening. Gen AI can write the script needed to answer the query, correlate the results with potential causes, and create a dashboard to show the outcomes.
It can also develop dashboards to help the business understand your tax returns by visualising the answers to stakeholders’ questions.
Do’s and don’ts
The applications outlined above – just a few examples of how Gen AI will make life easier for tax professionals – have something significant in common.
Each of them involves high-volume, low-complexity tax work. These are the activities with the greatest potential to be transformed by Gen AI; they’re the'sweet spot’ where you’ll find the most promising use cases.
My advice is to give your team members working on such tasks access to gen AI tools and let them find ways to do their jobs faster and more efficiently.
Of course, you’ll need to make sure you do so securely. You must be certain that the data you use to train gen AI software won’t leak outside the organisation and that using it respects privacy regulation. Using a trusted solution like KPMG’s Digital Gateway will provide that reassurance.
You’ll also need to know when Gen AI isn’t the answer. There will be instances where it offers limited value over and above traditional automation technology.
Transfer-pricing documentation is a case in point. Yes, Gen AI can produce a standardised template. But from there, there’s not much it can bring to the table, for two reasons:
- Most of what’s in master and local transfer-pricing files gets transferred unchanged, or with only minor changes, year to year – a job most global tax functions have already automated.
- Transparency and auditability are crucial when it comes to transfer pricing. But Gen AI is inherently opaque; very few of us understand how it actually works. Using it to set transfer pricing policy may leave you unable to explain your decisions, should tax authorities look into them.
In short, there’s a lot to consider when it comes to harnessing the power of Gen AI to transform tax operations.
Our experts can help you identify and deploy the use cases with the greatest potential for your function through KPMG and Microsoft’s unique AI Accelerator. This gives you access to Azure OpenAI APIs in a secure, dedicated environment, plus Microsoft and KPMG resources to support your use-case development.
Please get in touch if you’d like to know more about our AI Accelerator or find out how KPMG can help you realise the full value of generative AI.
