Predictive Analytics and the Tax Code

Abstract

Congress last reformed the nation’s current tax penalty regime approximately three decades ago, long before the rise of big data and the advent of predictive analytics. With predictive analytics now gaining preeminence and its accuracy constantly improving, it is time for Congress to weave this technological innovation into the fabric of the Internal Revenue Code and, more specifically, the civil tax penalty regime. Doing so would enhance taxpayer compliance, augment transparency, and simultaneously ease many administrative burdens commonplace under the tax law.

Keywords: tax, tax policy, taxation, predictive analytics, artificial intelligence, big data, tax penalties, tax compliance

JEL Classification: E62, H20, H21,H22, H24, H25, H26, H29, H30, K34, A12, K42, K34, O33, O35, O38, J38, J30