Use of AI software in tax cases positive if litigation reduced

By Staff

News that the government has started a pilot project to use commercial artificial intelligence software in tax cases is a welcome development for taxpayers if it ultimately results in less unnecessary litigation, Canadian tax lawyer David J. Rotfleisch tells

As CBC News reports, Justice Canada launched an 18-month pilot project at the beginning of 2018, where its tax practitioners are using a software program called Tax Foresight to analyze thousands of court cases in order to predict how judges might rule on a given set of facts.

Rotfleisch, founding tax lawyer with Rotfleisch & Samulovitch Professional Corporation, says the software likely doesn’t have any downside for individual taxpayers. Indeed, although the project is still fairly new in terms of results, Rotfleisch adds he hopes it will reduce unnecessary litigation.

“I find that too often, the Department of Justice proceeds to litigate tax cases where they have a low probability of success. This incurs unneeded costs for both the taxpayer and the Department of Justice. If the artificial intelligence tax software will help settle cases that should not go to court then it is a very welcome development,” says Rotfleisch.

“If the software predicts that the Canada Revenue Agency (CRA) will win and taxpayers counsel disagrees, the case will proceed to trial. If the software predicts that CRA will lose then it should result in a willingness by the CRA to settle without having to proceed in front of a judge,” he adds.

In terms of whether AI is here to stay in tax litigation, ultimately, Rotfleisch expects the longevity of the software to depend entirely on its effectiveness. Although he says his firm made a decision not to try the AI software at present because they don't know how effective it will be, Rotfleisch says he does not know to what extent it is being adopted more broadly by the tax bar.

“In terms of the government pilot project, I would think the decision to continue or discontinue will be based on the history of settling tax cases based on the analysis of the software. If it increases the number of cases that settle, I would expect that the pilot project will continue into a permanent use of the software.”

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