Finance ministry introduces AI-powered software to detect tax evasion

A new AI-powered software will be used by tax authorities to alert them when a person or business's declared income does no tally with their wealth.

The finance ministry announced the use of this software during a press conference on Tuesday. 

The system will allow the Commissioner for Revenue to be able to extract data concerning taxpayers from all tax departments, as well as link it to data received from third-party sources.

“This will make it far easier and quicker for the authorities to immediately detect tax evasion and act on it,” Caruana said when announcing the software.

Already in use in the UK, New Zealand, the Netherlands, Ireland and Canada, the software will be analysing VAT returns by the end of this year and all other forms of taxes within the next three years.

The AI software will draw data from different registries and bank accounts to assess the individual's cash deposits and illiquid assets in a bid to help the tax department keep tabs on income and tax dues far more quickly and efficiently. 

"I understand some people will not appreciate this effort. They will even say it's an attack on business and that I have a grudge against business people or that I am attempting to stifle economic growth," Caruana said.

The Minister said the Commissioner for Revenue is seeking ways of modernising Maltese tax administration by integrating all different tax types and supporting processes. The software will cost the government €3 million.

During his announcement, Caruana explained how the software marks the beginning of “a much-needed” culture change.

Such software, he added, will not wait for people to be investigated because someone else reported them anonymously, or because they were randomly picked and probed.