By Alan Kasibwa & Anita Allela

In today's business landscape, embracing digital transformation has become crucial for driving growth and enhancing operational efficiency. Digital transformation entails reconfiguring an organization's operations with the aim of generating value through the ongoing adoption of technology on a large scale.

Over the past decade, digital transformation has radically altered how companies’ function which has immensely contributed to providing value to customers. Artificial Intelligence (AI) is one of its key technologies. Al has evolved as an important part of digital transformation. It enables extensive and accurate data extraction from sources, allowing for more in-depth queries, responses, and analysis that were previously difficult, time-consuming, or even impossible to complete. AI can do structured or unstructured tasks that imitate human actions but with greater speed and precision. Organizations may use AI to automate regular processes, analyse massive amounts of data, and get useful insights that can fuel innovation. 

Most business owners find tax operations challenging and time-consuming. However, with the disruption caused by the COVID-19 pandemic, many organizations in developed countries have embraced artificial intelligence (AI) to automate tax processes and improve efficiency. This has enabled them to optimize processes, reduce errors, and obtain real-time tax compliance information. As a result, an increasing number of tax professionals in the western world are leveraging the potential of AI to effectively manage tax operations. AI's transformative capabilities are applicable throughout the entire tax lifecycle, including planning, compliance, reporting, and litigation. Some notable applications of AI in this context include:

1. Tax return preparation and filing automation

 Automating repetitive tasks, like tax filing, is one of the many applications of AI in tax operations. With the help of AI-powered software, data extraction and organization from source documents can be done accurately, saving time and resources. These systems can also detect errors or discrepancies in tax returns using machine learning algorithms, reducing the need for manual data entry and allowing staff to concentrate on more important responsibilities. 

2. Monitoring tax compliance and improvement: 

Artificial intelligence (AI) plays a crucial role in helping businesses stay compliant with tax rules and regulations. In providing timely alerts on modifications or updates to tax regulations, AI ensures firms are aware of new developments. Monitoring changes in tax regulations can be challenging, but AI serves as a reliable tool to keep businesses updated on a frequent basis. This helps prevent noncompliance, which can lead to severe tax assessments and damage to their reputation. Additionally, AI aids in enhancing tax compliance by analysing large datasets for trends and patterns that may indicate potential tax issues. This enables businesses to address compliance concerns before they escalate, reducing the risks of costly and time-consuming tax assessments. 

3. Improving the tax audit process and detecting fraud:

AI plays a crucial role in helping firms prepare for and enhance the audit process. By analysing past audits and identifying areas of weakness, AI can assist firms in improving their compliance and reducing the risks associated with tax audits. 

4. Predictive analytics and forecasting 

Another area where AI might be useful is in the study of tax data to develop corporate strategies and make better tax planning and forecasting decisions. Historical data may be analysed using predictive analytics to detect trends and patterns. Algorithms, for example, can examine sales data to find trends across several tax filing periods – yearly, quarterly, or monthly. These trends may then be utilized to estimate what's likely to happen next, which can assist provide improved sales predictions and corresponding tax requirements. Businesses may obtain insights into their operations and discover opportunities for development by studying this data. 

Conclusion 

The increasing demand for AI in tax operations, highlights the adaptability of businesses to incorporate new technologies and stay competitive in the aftermath of the pandemic. As technology continues to advance, we can expect further advancements and opportunities in the field of tax operations, enabling businesses to enhance efficiency and reduce costs. Embracing digital transformation and AI will position companies favourably in the digital age and the post-pandemic landscape. This presents an opportune time for the Kenya Revenue Authority (KRA) to explore the potential of AI in tax operations and leverage it to optimize processes and drive revenue growth.