Machine Learning Enables ‘Level 5’ Tax Analytics

  • September 22, 2017

Artificial Intelligence (AI) has had a checkered development history over the decades. Periods of heavy funding have alternated with stretches of diminished interest from academia, businesses and governments – until recently. Now that AI interest is white-hot and seems likely to sustain, it’s time to look at its impacts to a wide range of business functions, including tax.

A new PwC report puts it this way: AI “has arrived in the tax function, with many usable tax applications beginning to emerge from both academic research and professional service firms… it is highly likely that AI applications will find a role in the tax function of the future – and even the near future – assisting tax experts in detecting errors, classifying transactions, estimating audit risk, and proposing beneficial tax strategies within increasingly complex global legal frameworks.” The final phrase in the report’s title, Tax Analytics: Artificial Intelligence and Machine Learning – Level 5, refers to the highest of PwC’s performance levels for tax analytics.

The report includes a look at how tax departments can benefit from the major categories of machine learning – the branch of AI that enables computers to build models that can detect patterns in data – and then adapt them automatically as they receive new inputs. Three notable machine learning capabilities include:

  1. Forecasting: Advanced algorithms could be used to detect trends within filing cycles and even monthly trends in the data, helping companies to improve tax provision forecasting, free up capital and avoid end-of-year tax surprises.
  2. Clustering: Machine learning can identify groups of related transactions or events in multiple categories based on vast quantities of data. These algorithms could help organizations understand the expense-generating behavior of employees or business units or detect unusual behaviors in expenses or purchasing.
  3. Expert-Support Systems: While Siri- or Alexa-like systems for tax may still be a ways off, technologies that can assist experts by suggesting answers to detailed questions and complex problems are under active development.

Only time will tell how AI will continue to impact tax in the future, but we’ll help keep you up to date as new developments unfold.

Please remember that the Tax Matters provides information for educational purposes, not specific tax or legal advice. Always consult a qualified tax or legal advisor before taking any action based on this information.


About this Contributor

Jen Kurtz Headshot
Jen Kurtz
Chief Technology Officer

Jen Kurtz is the Chief Technology Officer focused on technology strategy and product innovation. Jen leads the Office of Technology responsible for bringing together the technology vision, strategy, architecture, and capabilities required to drive breakthrough innovations that will propel Vertex forward in seizing new market opportunities.

Previously, Jen served as a lead member of the software development and commercial enterprise architecture teams. Prior to joining Vertex, she was a software engineer at Verizon and Platinum Technology respectively bringing large scale business applications to the market.

Jen has been honored by Oracle for Women’s History Month and Working Mother Magazine at their annual Working Mother 100 Best Companies event. She regularly speaks at local and national technology conferences and has an M.S. in Computer Science from Villanova University and a B.S. in Computer Science from Bloomsburg University of Pennsylvania.

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