The Federal Revenue Service is using artificial intelligence (AI) to identify irregularities and tax and customs fraud. The new tools are developed by tax auditors and tax analysts from the IRS itself, who use the data they have to feed the analysis of the new algorithms.

Among the utilities are the monitoring of cryptocurrencies, the detection of irregularities in imports and economic groups and the analysis of compensation requests. To this end, the new applications manipulate the available data, monitor the market and research relationships between entities and their location.

According to the IRS, its database has “a very large range of data and the need to build a tool capable of combining different processing techniques was identified.” The goal, says the IRS, is to increase the efficiency of the process of transforming data into information. “Each declaration submitted, each invoice issued, each cryptocurrency transacted, etc., everything is input that can be processed,” says the agency.

In principle, since the IRS already has the data and uses it for the purpose of combating fraud, these activities do not violate individual rights guaranteed by the General Data Protection Law (LGPD). This is the assessment made by constitutional lawyer and specialist in freedom of expression and digital law André Marsiglia. A violation would only occur in cases of commercial use of data, which does not fall within the scope of the IRS's actions.

The IRS maintains a group of 12 auditors and analysts who meet weekly to assess the needs for developing dashboards. Based on the diagnosis, opportunities for improving the technology are also identified.

Among the next steps, the tax authorities plan to enhance the tool with generative AI and knowledge graphs, in addition to other technologies. The technicians use algorithms in the Python language, which they consider to be the most advanced in data science and artificial intelligence. For each task, the most efficient algorithm or a combination of several of them is chosen.

On its Instagram profile, the IRS published a video talking about the project, in which it states that the new Analytics technology "is transforming tax administration". "With the use of artificial intelligence and complex network analysis, the platform already detects tax fraud with greater precision and efficiency", says the text.

Law does not restrict use of data by government agencies and investigations

One of the questions raised every time the use of data is discussed is the violation of individual rights. As the publication on the IRS's social media pages states, the Analytics program uses the manipulation and observation of data that the agency already has and that is analyzed by artificial intelligence systems.

In this regard, lawyer André Marsiglia states that the LGPD deals exclusively with the commercial use of citizens' data and that, therefore, in this specific case of the Federal Revenue systems, it does not apply.

“So investigations, inspections, even the press, they are not subject to the LGPD. At least in general terms, that is the case. Why? Because the LGPD aims to subject those who make economic use, that is, those who seek to profit and obtain economic advantage from the use of databases,” he says. “So, in this case, this cross-referencing of data with artificial intelligence, since it would have a supervisory purpose, I understand that the LGPD would not apply or would not regulate these cases or these cross-referencings carried out by the government,” he explains. The jurist also states that the citizen's privacy is protected by the Constitution, but that this is a principle, not a specific law. “If the use of data exposes, in some way, the person's financial privacy to third parties, this could be questioned,” he stated.