Enhancing Tax Administration, Compliance, and Public Services Through AI

Tax and customs administrations play a critical role in automating risk management processes. Whether combating tax fraud or unlawful cross-border trade, AI significantly strengthens their effectiveness. AI algorithms automatically flag suspicious transactions in tax filings and customs declarations, enabling authorities to detect fraud, underreporting, and non-compliance far more efficiently than traditional methods. Machine learning further improves algorithm accuracy over time, delivering greater precision. For instance, many customs agencies now integrate smart devices, such as cameras, scanners, and X-ray machines, into their automated risk management systems.

Although auditing is not the most conventional application of AI, many administrations have proven its value in taxpayer and post-clearance audits. Audits require reviewing vast amounts of documentation, and AI can rapidly analyze these documents to identify anomalies, accelerating the process and improving accuracy.

Delivering exceptional citizen services is a strategic priority for every administration. AI elevates this effort by enabling real-time, AI-driven support systems that resolve citizen concerns instantly. This approach benefits both citizens and administrations: automated processes free resources for higher-value activities. AI can also review and process applications for tax registration, customs clearance, refunds, and other services—reducing human error and bias, speeding approvals, and ensuring consistent decisions. Moreover, AI analyzes user data to anticipate needs (e.g., filing deadlines, missing documentation) and sends timely reminders or alerts, reducing non-compliance.

Integrating AI into information systems gives administrations several distinct advantages. AI automates processes such as tax registration and customs clearance, reducing manual work, accelerating approvals, and minimizing errors—leading to higher satisfaction for taxpayers and importers. It also provides 24/7 access to government services across multiple channels. With natural language processing, users can interact in their preferred language, improving access for non-native speakers and individuals with limited literacy, and reaching marginalized and vulnerable groups.

AI monitors taxpayer and importer activity in real time, offering personalized guidance and timely reminders for deadlines and documentation. By analyzing data, it anticipates user needs and helps prevent mistakes and compliance issues. AI systems enforce consistent rules and maintain audit trails, ensuring transparent decision-making. This reduces opportunities for corruption, strengthens accountability, and builds public trust in government processes.

Finally, AI automates routine tasks and enables targeted audits, freeing skilled staff to focus on complex activities. Predictive analytics optimize resource allocation, maximizing efficiency and impact.

Like any new technology, implementing AI introduces specific risks that must be addressed. Mishandling sensitive taxpayer and importer data can lead to lawsuits and costly settlements, making strict compliance with data protection laws and robust security measures essential. Relying solely on AI-driven digital channels risks excluding individuals without internet access or digital skills, so alternative non-digital service options must remain available to ensure equitable access. Over-automation can erode public trust, particularly in complex or sensitive cases where empathy and human judgment are needed; human support should always be available in such situations.

AI systems also require specialized skills and ongoing investment. A shortage of expertise or underestimating costs can result in failed implementations or wasted resources.

Finally, poor or inconsistent data undermines AI effectiveness, making strong data governance and interoperability critical for reliable outcomes.

Implementing AI platforms is an ongoing process, not a one-time project with a fixed completion date. By making AI a core part of their organizational strategy, administrations ensure platforms continue to evolve and remain sustainable over the long term.

Design thinking workshops bring together government, industry, and civil society to co-create AI adoption roadmaps. Tools such as empathy mapping, journey mapping, and rapid prototyping help ensure solutions are user-centered and aligned with sector needs.

Ensuring legal compliance is critical, so existing legislation must be reviewed and amended where necessary. Since many administrations have already deployed AI platforms, gaining a thorough understanding of these implementations helps clarify AI capabilities and prevents costly mistakes during deployment.

A comprehensive assessment of implementation readiness is essential, considering digital skills, data quality, available infrastructure, and financial resources.

Since AI technologies are relatively new and outcomes may not always meet expectations, creating pilot programs is advisable to test features and address issues before full-scale implementation.

AI offers transformative opportunities to enhance public service delivery (making it more targeted, efficient, and inclusive) and to strengthen compliance management through automation, prediction, and data integration.

By leveraging international best practices, engaging stakeholders through design thinking, and aligning with national strategies, governments can maximize AI’s benefits while managing risks.

Establishing a robust baseline, piloting innovative solutions, and fostering ecosystem collaboration are essential steps toward sustainable, inclusive, and impactful AI adoption.

^[1] On 11 November 2025, Islamabad hosted an AI Ideation and Co-Design Workshop organized by the Federal Board of Revenue (FBR), the Ministry of IT & Telecom (MoITT), and the Asian Development Bank (ADB). The event was part of the National AI Workshop series and ADB’s Transforming Revenue Administration through Digital Innovation (TRADI) initiative, which aims to integrate responsible AI into ADB’s operational pipeline for Pakistan. It was facilitated by ADB’s Public Sector Management and Governance team.