Legality of Artificial Intelligence (AI) in tax crime investigations 

The legality of using AI in tax crime investigations is inspired by a combination of international laws, regional regulations, and national laws. 

International Guidelines and Standards on AI and tax include the following: Financial Action Task Force (FATF) has issued guidelines on the use of technology, including AI, in financial crime investigations. These guidelines encourage the use of innovative technologies to enhance compliance and detection capabilities while ensuring proper safeguards are in place to protect data privacy and prevent misuse. Additionally, the Organisation for Economic Co-operation and Development (OECD) emphasises that AI tools must be used in a manner that respects taxpayers' rights and adheres to data protection laws.

The European Union Framework has also provided relevant rules on tax crime and AI, including the following: The General Data Protection Regulation (GDPR) imposes strict requirements on the processing of personal data, which applies to the use of AI in tax investigations. Tax authorities must ensure that AI systems comply with GDPR principles, including data minimization, transparency, and the right to access and correct data. In addition, the Directive on Administrative Cooperation (DAC) framework facilitates the exchange of information between EU member states for tax purposes. AI tools can be used within this framework to analyse and share data more effectively, provided they comply with GDPR and other relevant regulations. The EU AI Act seeks to regulate AI applications, including those used by public authorities. It categorises AI systems based on risk levels and imposes specific obligations to ensure safety, transparency, and accountability. This Act provides necessary measures to determine the legality and approaches for using AI to investigate tax offences 

In terms of National Legal Frameworks, individual countries have their own laws and regulations governing the use of AI in tax administration albeit most of them have no dedicated laws on AI as it is an emerging tool. These laws typically address data protection, transparency, and the legality of automated decision-making. 

Challenges and responses include the following: AI systems must be designed and monitored to prevent bias and ensure fairness in tax investigations. Authorities must ensure that AI does not disproportionately target specific groups or individuals. Additionally, ensuring that AI systems comply with data protection laws is a major challenge. Tax authorities must implement robust data security measures and ensure that AI tools do not infringe on individuals' privacy rights. Furthermore, it is imperative that tax authorities maintain transparency about how AI systems are used and ensure accountability for decisions made by AI. This includes providing taxpayers with information about how their data is processed and offering mechanisms to challenge AI-driven decisions.

The use of AI in tax crime investigations offers significant potential for improving efficiency and effectiveness. However, it must be carefully regulated to ensure compliance with international laws, regional regulations, and national legal frameworks. Authorities must address challenges related to data privacy, bias, transparency, and accountability to ensure the responsible use of AI in tax enforcement. International cooperation and adherence to established guidelines and best practices are crucial to leveraging AI's capabilities while protecting individuals' rights and maintaining the integrity of the tax system.

In the nutshell, while AI can significantly enhance the efficiency and effectiveness of tax crime investigations, its use must be carefully regulated to ensure compliance with international laws, regional regulations, and national legal frameworks. Authorities must address challenges related to data privacy, bias, transparency, and accountability to ensure the responsible use of AI in tax enforcement.

Adam Abukari