AI and the Modern Tax Agency

On behalf of the IBM Center for The Business of Government, in collabo­ration with the American University Kogod School of Business Tax Policy Center, we are pleased to present this new report, AI and the Modern Tax Agency: Adopting and Deploying AI to Improve Tax Administration, by Caroline Bruckner and Collin Coil of the Kogod Tax Policy Center.

Artificial intelligence (AI) has surged across government. National and international legislation has been proposed, and U.S.Federal agencies are now implementing requirements set forth in the new Executive Order on AI. Such policy and progress affect government work across civilian and defense sectors—including work done by tax agencies with the public and business communities.

Driven by common access to AI and the potential benefits of generative AI, the U.S.Internal Revenue Service (IRS) and tax agencies around the world are now focusing on how the technology could improve tax administration while minimizing some of the risks. (Listen to our interview with Karen Howard, Executive Director, Office of Online Services at the IRS and a 2024 Federal 100 Winner!) To better understand opportunities and considerations, the IBM Center, in collaboration with the Kogod Tax Policy Center, recently hosted a global discussion on AI and the Modern Tax Agency. The findings inform the release of this new report, focusing on three key topics:

• How can AI and related technologies better enable taxpayers, including small businesses, to navigate tax filings and address emerging areas of concern?
• Where is AI today in terms of streamlining operations, and what is its potential to improve tax administration?
• What are key considerations for governance and developing transparent and ethical AI?

Based on insights from roundtable participants and research by the authors, the report provides analysis and makes recommendations for the IRS and tax agencies around the world to leverage AI to improve customer service and education, compliance and enforcement, and risk management—and to do so while mitigating risk and building trust through the use of AI.

This report builds on the Center’s extensive research over several years to help government adopt AI in a way that leads to better outcomes in terms of public service, agency operations, and risk management. Related reports include Pathways to Trusted Progress With Artificial Intelligence, Artificial Intelligence in the Public Sector: A Maturity Model, and More Than Meets AI (published with the Partnership for Public Service).

We hope that this report provides leaders and stakeholders of tax agencies with insights on how best to apply AI to improve results for taxpayers.