By Aleksandra Bal
More and more tax administrations are using algorithms and automated decision-making systems for taxpayer profiling and risk assessment. While both provide benefits in terms of better resource allocation and cost-efficiency, their use is not free from legal concerns from the perspective of EU data protection and human rights legislation. Since 2017 the Polish National Revenue Administration has been using STIR—a data analytics tool to detect VAT fraud in nearly real-time. STIR calculates a risk indicator for every entrepreneur on the basis of his financial data. If an entrepreneur is considered at high risk of being involved in VAT fraud, the National Revenue Administration may impose severe administrative measures. From the taxpayer perspective, STIR operates in a black-box manner as the way in which the risk indicators are calculated is not disclosed to the general public. Although STIR’s effectiveness in fighting VAT fraud would be reduced if the algorithms that it uses were publicly known, it is questionable whether STIR complies with the principle of proportionality and the right to explanation, both of which are mandated under the EU data protection regulation and human rights legislation.
Source: springer.com
