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Author: Varahasimhan Srinivasan
In recent years, artificial intelligence (Artificial Intelligence)
While human oversight plays an integral role in ensuring trust and accuracy in the financial sector, artificial intelligence in its current form augments human capabilities and increases efficiency. Additionally, the adoption of AI is becoming increasingly important as businesses expand into new markets and meet complex cross-border compliance requirements such as the Harmonized System (HS) Code.Businesses aiming to improve financial efficiency and streamline tax-related tasks can harness the potential of AI technology
AI Support Harmonized System (HS) Code Classification
In 2023, the scale of global cross-border e-commerce will exceed US$1 trillion, making the importance of a balanced trade system more prominent than ever. The Harmonized System (HS), a standardized method of classifying traded products, plays a key role here, but classifying and assigning the correct HS code can be challenging for businesses. Using artificial intelligence, companies can automatically classify HS codes, and the technology can learn as HS code rules change. The integration of artificial intelligence into HS coding management is transformative, leveraging its learning capabilities to make accurate predictions.
In addition, artificial intelligence also enhances the product classification process and reduces the time required to seek guidance from tax experts. This enables businesses to benefit from increased classification efficiency and speed, as well as a reduced risk of misclassification often associated with human error.
Helps improve tax management efficiency
The current global tax landscape requires greater transparency and collaboration among tax authorities around the world, resulting in a surge in corporate compliance burdens. This high level of complexity and potential tax exposure requires a more robust solution. Artificial intelligence is an important tool in solving these obstacles and can improve data efficiency and productivity.
As businesses large and small embrace tax digitization, the use of artificial intelligence-driven tax automation systems is becoming standard practice. For examplein India
Automation and artificial intelligence are gradually replacing manual processes, transforming organizations into more service-oriented entities. While human involvement remains critical to trust and accuracy in finance, artificial intelligence can increase human efficiency.
Support end-to-end tax compliance
The tax process is complex, but AI and ML (machine learning) are increasingly focusing on this complexity. Many aspects of the tax function rely on human expertise developed over many years to master the nuances of regulations and administrative rulings. Artificial intelligence and machine learning are finding their way into tax-related activities due to the complexities involved.
However, artificial intelligence can significantly improve efficiency by consuming large amounts of tax information and leveraging extraction techniques. This can save businesses up to 30-40% of the time typically spent on such tasks. Artificial intelligence powered by machine learning algorithms can classify entities into different groups, similar to automated customer segmentation. In addition to this, AI can also classify tax notices, letters or contract clauses, thereby saving time in reading these documents.
Additionally, AI-driven product classification enables precise classification predictions based on category IDs and classification tags. Employing machine learning for product classification can prevent costly human errors. It’s easy to make mistakes when dealing with a large number of products from different countries and retailers. The AI-driven system leverages data such as manufacturer details and product descriptions to automatically ensure customized classification and accurate tariff codes. Machine learning classification modules adapt to the codes of each country in the Harmonized System, promoting flawless shipping worldwide.
Additionally, advanced artificial intelligence has found its way into the tax function, providing numerous practical applications for academic research and professional services firms. While it seems unlikely that AI bots will replace human tax accountants, AI applications may play an important role in assisting tax professionals. These applications can help with error detection, transaction classification, audit risk assessment, and proposing favorable tax strategies within complex global legal frameworks.
what’s next
Globally, the integration of AI assistants in tax compliance is likely to increase, handling tasks as diverse as data analysis and exception auditing, and supporting tax research and filing processes. Artificial intelligence helps automate manual cross-border compliance activities to improve operational efficiency, minimize errors and facilitate business development.
We are still in the early stages of the development of artificial intelligence in tax, which means that as we develop, businesses can expect to gain more value from the technology. For companies looking to enter new markets, AI will become another key tool, such as automation, to streamline tax administration and relieve teams of time- and resource-intensive work.Businesses that want to succeed in the global economy
The author is Avalara Engineering Director
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