The arrival of OpenAI’s ChatGTP last year is well documented, and its impact (both positive/negative) is being widely discussed, but what does this mean for the tax profession? I “sat down” with the chatbot earlier this month and posed some clear and simple questions……

Hi ChatGPT, how’re you?

I don’t have feelings as an AI language model, but I’m here and ready to assist you! How can I help you today?

OK, let’s keep it simple…tell me, who are you, and what do you do?

I am ChatGPT, a large language model developed by OpenAI. I aim to assist users like you in generating human-like text responses based on the prompts or questions provided. I have been trained on various internet text sources to provide information, answer questions, engage in conversations, and assist with various topics. Feel free to ask me anything; I’ll do my best to help!

How can ChatGPT positively impact the tax profession?

ChatGPT can positively impact the tax profession in several ways:

• Enhanced Efficiency: ChatGPT can automate repetitive and time-consuming tasks, freeing valuable time for tax professionals to focus on more complex and value-added activities, such as tax planning, analysis, and client interactions.
• Access to Information: ChatGPT can serve as a knowledge repository, providing quick access to a wide range of tax-related information, such as relevant tax codes, regulations, case laws, and other resources, enabling them to stay updated with the latest developments in the field and make informed decisions.
• Support in Research and Analysis: ChatGPT can assist tax professionals in conducting research and analysis by helping them gather relevant data, identifying key patterns or trends, and suggesting potential tax strategies or solutions. This can enhance the accuracy and depth of research, leading to more robust tax advice and compliance practices.
• Improved Client Service: ChatGPT can respond immediately to client inquiries, improving the overall client service experience.
• Training and Professional Development: ChatGPT can support tax professionals’ training and professional development efforts. It can provide interactive learning experiences, offer simulations or case studies, and assist in reinforcing tax concepts and principles.
• Standardisation and Consistency: ChatGPT can promote standardisation and consistency in tax advice and processes.
• Collaboration and Knowledge Sharing: ChatGPT can facilitate collaboration among tax professionals by acting as a virtual assistant for knowledge sharing and problem-solving by storing and retrieving information shared by multiple professionals.

What risks does ChatGPT pose to the tax profession?

While ChatGPT can offer significant benefits to the tax profession, it also poses certain risks:

• Accuracy and Reliability: ChatGPT is a language model trained on vast amounts of data but can still generate incorrect or unreliable information. In the context of tax advice or compliance, relying solely on ChatGPT without human oversight or validation can lead to inaccurate advice, potential non-compliance, or errors in tax filings.
• Lack of Contextual Understanding: ChatGPT may struggle with understanding the full context and nuances of specific tax situations. ChatGPT’s responses may not consider all relevant factors, leading to incomplete or inadequate advice.
• Data Privacy and Security: ChatGPT requires access to data and information to generate responses. This raises concerns about data privacy and security, mainly when sensitive financial and personal information is involved.
• Overreliance on Technology: Depending heavily on ChatGPT or other AI tools may lead to an overreliance on technology and reduced human judgment.
• Ethical Considerations: ChatGPT learns from the data it is trained on, which may include biases or unethical practices present in the training data. There is a risk that ChatGPT could inadvertently propagate or reinforce biased or unfair tax practices, impacting fairness and equity in tax advice.

How will ChatGPT reduce the need for companies to hire tax professionals?

As an AI language model, ChatGPT can aid tax preparation and filing information. Using its vast knowledge base and natural language processing capabilities, ChatGPT can answer common tax-related questions, explain tax concepts and regulations, and even offer personalised guidance to individual users.

By leveraging ChatGPT’s expertise, individuals and businesses may reduce their reliance on tax professionals, especially for routine and straightforward tax matters. For example, ChatGPT can assist with filling out tax forms, identifying tax deductions and credits, and explaining the tax implications of different financial decisions.

Let’s dig deeper – What are the critical considerations for the tax function to consider concerning ESG?

The increasing focus on Environmental, Social, and Governance (ESG) considerations has implications for the tax function:

• Tax incentives and credits: Evaluate tax incentives and credits available for activities aligned with ESG goals. Research how tax regimes promote and incentivise environmentally friendly initiatives, social impact investments, or sustainable practices. Identify opportunities to leverage these incentives and credits to support ESG objectives and maximise tax benefits.
• ESG reporting and transparency: Recognize the growing importance of ESG reporting and transparency. Collaborate with other functions, such as sustainability or corporate social responsibility teams, to ensure accurate and reliable ESG data is captured for reporting purposes. Assess tax-related implications of ESG reporting, including potential tax implications arising from public disclosure of ESG performance.
• Supply chain and transfer pricing: ESG considerations can impact transfer pricing and supply chain arrangements. Evaluate the alignment of transfer pricing policies with ESG goals and sustainability objectives. Assess the impact of ESG-related risks, such as reputational risks or supply chain disruptions, on transfer pricing arrangements and consider the potential tax implications.
• Tax implications of renewable energy and carbon pricing: Understand the tax implications of renewable energy investments and carbon pricing mechanisms. Evaluate tax regimes related to renewable energy production, energy-efficient investments, or carbon pricing schemes. Consider the impact of these factors on tax planning strategies, including potential tax benefits or costs associated with ESG-related investments.
• Tax risk management: Assess tax risks associated with ESG activities and consider incorporating them into the tax risk management framework. ESG-related initiatives may introduce new tax risks, such as changes in tax regulations related to sustainable practices or potential challenges related to social impact investments. Ensure appropriate tax risk mitigation measures are in place.
• Collaboration with stakeholders: Foster collaboration with internal and external stakeholders involved in ESG initiatives. Engage with sustainability teams, legal departments, and external advisors to ensure alignment between ESG goals and tax strategies. Stay informed about ESG-related regulations, guidelines, and reporting frameworks to ensure compliance.
• ESG-related due diligence: Consider ESG factors during M&A transactions or other business activities. Assess potential tax risks and opportunities arising from ESG-related aspects of target companies or assets. Evaluate the impact of ESG-related contingencies, such as environmental liabilities or social compliance issues, on tax considerations.

Considering these factors, the tax function can actively contribute to the organisation’s ESG efforts, identify tax-efficient opportunities, manage tax risks, and ensure compliance with ESG-related tax requirements. Collaboration and integration with other functions involved in ESG initiatives are crucial for successful ESG integration within the tax function.

Comment – Jan-Jaap Gobius du Sart

Associate Partner Tax Technology & Transformation, EY Netherlands

“ChatGPT is a great and exciting new technology that can benefit tax departments. One thing to consider is that a solution never starts with the technology but with the question. The first question anyone should ask themselves is, what problem do I want to solve? Once that is clarified, you dive into questions like:

What kind of data do I need? Can I access the data? Is the data quality up to the preferred standard? Etc.

After that comes the question of which technology to use, this could be ChatGPT, but it could also be that Robotics Process Automation, Data-analytics or a data processing tool or a combination of these tools better suits the functions’ needs. I would also recommend using ChatGPT out of the box and training it for your specific use case on your own data”.