Artificial Intelligence Gets a Boost with Tax Reforms

The five new complications humans can't handle alone.

By Rick Telberg
CPA Trendlines

The tax reforms of 2018 may mean a lot more than a radical drop in the corporate tax. Because the reform reaches so far into and across transnational corporations, the power of artificial intelligence may leverage tax data into a driving force that pervades all aspects of operations—and not just at big companies.

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The slashing of the corporate tax rate from 35 percent to 21 percent opens all sorts of options for corporations. Five, to be exact:

  1. It is an unprecedented (and possibly temporary) opportunity to repatriate offshore earnings.
  2. It will drive decisions to move operations from one country or region to another.
  3. In some cases it will change the products a company develops and where it markets them.
  4. It will inform decisions to merge corporations or split off entities.
  5. It will generate invaluable conclusions about potential partners and competitors.

All of these possibilities will involve the crunching of huge amounts of data—more than any spreadsheet or human mind can deal with. To bring home foreign earnings, for example, companies will need to sift through, drill through, categorize and analyze twenty years of sales, production, and earnings data. That analysis alone, and the presumptions and decisions that must be made along the way, will justify investments in artificial intelligence. There will simply be no other way to deal with so much data.

As that data is converted to actionable tax figures, the tax function will increasingly pervade other aspects of the enterprise. It will shift from being historical/hindsight analysis to a predictive function. A.I. will be the only tool that can juggle the consequent impacts on cash flow, the generation and distribution of capital (and all its tax and regulatory implications), risk management, supply chain, transfer pricing, indirect costs and taxes, and general enterprise resource planning.

  • The first point here is that the tax reform is going to result in technological reform. Suddenly A.I. has become essential. Corporations cannot compete if they fail to process all the available data and quickly base decisions on it. In fact, the computers themselves will need to make some of those decisions.
  • The second point is that the corporate tax function, armed with A.I., will expand beyond mere calculation of taxes due. Tax-relevant data will also prove useful in the predictive component of governance, the identification of problems and opportunities, the development of solutions outside of tax areas, and the integration of cross-functional data as an integral part of operations.
  • If these two points aren’t enough to push corporate accountants into A.I., there’s a third point: The Internal Revenue Service is already developing self-teaching A.I. applications that will be able to tap into disparate sources of information to flag tax returns—corporate or personal—for audit. The day may come when the corporate A.I. will be needed to predict what the IRS A.I. is looking for.

With A.I. in hand, the corporate tax preparer is going to become an important contributor to decisions throughout an enterprise. We may soon see the day when the Chief Tax Officer joins the table in the C-suite.

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