Companies seem to be thinking about tax reform almost in relation to almost everything — except artificial intelligence. But hear me out.
There are some good reasons why the recently adopted U.S. tax reform legislation may be a tipping point for AI adoption. One of the biggest has to do with money. Thanks to the new tax law, a lot of businesses suddenly have more of it. They would be wise to spend some on their future.
Since companies have the money to make big-ticket investments, why not make one of them in a technology that may drive $15.7 trillion in economic gains by 2030? Employees and shareholders might enjoy a one-time bonus or dividend payout. But they also need the company to have a prosperous future in the digital economy. A proof-of-concept pilot around AI in tax and finance will both help benefit companies as they adapt to tax reform and be a down payment on that future.
Why Invest in AI Now?
Let’s start with the tax system itself. It’s complicated, and in the short term, tax reform is going to trigger a new set of challenges, especially for multinational companies. AI can help. Here’s why:
- Global companies need to sift through 20 years of earnings. With the new “toll charge” on the foreign earnings that many U.S. multinationals have kept abroad, these companies suddenly have to revisit 20 years of global bookkeeping. The reward — a low tax rate — is high, but tax functions have a big job ahead. AI tools like machine learning and natural language processing can perform a lot of that job quickly and reliably.
- The answers to supply chain questions just changed. Where should you locate a factory, office, or research center? Where are you going to buy supplies and products? Tax reform changes the answers. AI deep learning, with the help of cloud computing, can perform the incredibly complex calculations — where every tax on every product, service, and part is a variable — so companies can make better choices.
- Money: where to earn and raise it. If you’re a global firm, odds are that you’re not just making money all over the world. You’re also raising it. Where’s the best place to sell bonds or make a bank loan? How should you structure cash flow? Once again, tax reform changes the answer, but it’s more complicated than simply saying, “it’s now cheaper in the United States.” AI can cut through that complexity.
- Tax and finance still can’t break the bank. For tax and finance organizations, tax reform’s challenges add to an ongoing imperative: be leaner than before. How do you answer the complex questions asked above without securing massive new resources — or making costly errors? AI’s capacity to automate work and build out the controls environment is the answer
Of course, the benefits of AI stretch far beyond tax and finance. To take just one example, AI can create digital twins to simulate everything from offshore drilling to how financial institutions’ customers behave.
Start Harnessing AI’s Potential
It’s possible to start small with AI — in tax and finance or other parts of the business. For example, AI can scan and analyze employee expense reports to identify available deductions. That doesn’t require a big investment.
Yet AI’s true potential is in automating complex processes, spotting trends, and making forecasts. Want to anticipate if a tax audit is likely? As part of a digital tax function, AI can tell you the odds by analyzing sales and expense data, internal tax data, and external data such as state revenue needs, audit frequency by jurisdiction, legal changes, and even election results.
Is your legal team spending hours poring over a lengthy sales contract? AI can read it in seconds and see if the document holds legal or taxation risks for your organization.
Do you have dozens of businesses on your balance sheet, competing for capital? AI machine learning and agent-modeling techniques can analyze data from all those businesses and find the best combination of performance and risk.
To make finance, tax, and other functions digital and ready for AI, organizations need to make sure employees gain basic data science skills. Companies also have to make both teams and data more multidisciplinary, since AI’s needs and potential cut across functions. All that costs money.
Luckily, in response to tax reform’s deemed repatriation, some companies have already announced that they’re bringing home billions in cash. Then there’s the cut in the corporate tax rate, to 21% from 35%, as well as other pro-business measures — which AI can help companies maximize. That will lead to a further windfall.
AI and tax reform really were made for each other. It’s time for businesses to take advantage of both of them, together.
Michael Shehab is tax technology process leader for PricewaterhouseCoopers.