Artificial Intelligence has become an integral part of various sectors, including public administration. HM Revenue and Customs (HMRC) is leveraging AI to enhance its operations in identifying and mitigating tax avoidance.

AI Integration in HMRC

HMRC has introduced an AI tool named the Fraud Risk Assessment Accelerator, which has successfully recovered over £480 million within a year. This system cross-references governmental data to detect suspicious activities and assesses potential vulnerabilities in new policies before implementation.

Impact on Tax Evasion

The utilization of AI is part of the efforts to address the fiscal deficit reported by Chancellor Rachel Reeves in August 2024, which amounted to £22 billion. Tax evasion in the UK was estimated to cost £5.5 billion in lost revenue for the fiscal year 2022-23, alongside over £7 billion lost due to Covid-related fraud.

Previous AI Applications

Previously, HMRC employed AI to monitor social media for potential tax evasion indicators. This technology has also facilitated approximately 13 million transactions in 2024/25, equating to the workload of 400 full-time staff.

Potential Implications

The increasing use of AI in public administration raises concerns about over-reliance and potential biases. While AI can efficiently process extensive data sets, it may also present challenges related to privacy and accuracy.

Future Prospects

AI is poised to remain a significant component of HMRC’s strategy, aiding in financial audits and ensuring compliance. However, balancing technological reliance with privacy and fairness remains a crucial consideration.