The Ethics of Generative AI in Tax Practice

Abstract

The integration of generative artificial intelligence is beginning to have a profound effect on various industries, including knowledge industries such as law and accounting. Professional services firms are capitalizing on AI technologies for a host of applications, such as tax research, memo drafting, contract analysis, due diligence, document review, predictive analytics, and the list goes on. Recently, AI’s sharply increasing competence, most evident with OpenAI’s GPT-4, has made it a valuable tool for firms looking to improve their operations and deliver more effective and efficient tax planning and advisory services. In-house tax departments are starting to explore using generative AI to assist them in their work as well.

Despite the power of these new tools, their implementation by professional services firms has been highly heterogeneous, ranging from strident bans to enthusiastic interest, adoption, and even direct investment in their development. The potential equity and efficiency gains of AI in the legal field are extraordinarily promising. Still, the adoption of AI tools by professional services firms raises critical concerns regarding data privacy and ethical usage.

This article provides an in-depth exploration of the ethical concerns arising from the proliferation of generative AI tools used for legal research and, especially, for tax research. We examine the challenges concerning the quality and accuracy of output, the potential for biased answers, the lack of verifiability, liability considerations, and privacy risks. We also explore the regulatory measures, technological advancements, and professional solutions being pursued to address these challenges, along with practical recommendations to help tax professionals effectively mitigate risk and safely use AI tools in their work.

Keywords: ChatGPT, OpenAI, generative AI, artificial intelligence

JEL Classification: H0