Can the Integration of AI Technologies Help Curb Tax Evasion While Fostering Greater Digital Awareness Among Business Entities?

Imran Hussain Shah

International Journal of Economics & Business Administration (IJEBA), 2025, vol. XIII, issue 3, 48-75

Abstract: Purpose: This study investigates the influence of artificial intelligence (AI) adoption on tax evasion and digital awareness among business entities across Europe. As tax authorities and firms increasingly implement intelligent technologies, AI's potential to improve compliance and transparency has gained significant attention. Design/Methodology/Approach: Using a quantitative research design and multiple regression analysis, this study examines whether AI-enabled systems—such as automated accounting, audit analytics, and digital tax platforms—can reduce tax evasion while enhancing digital awareness. Survey data were collected from 120 SMEs across various European Union member states. Findings: The results reveal a strong negative correlation between AI adoption and tax evasion, and a positive relationship with digital awareness. These findings highlight the strategic value of AI in promoting fiscal responsibility and advancing digital maturity across Europe’s corporate landscape. Practical Implications: Governments should provide tax credits, grants, or accelerated depreciation for firms adopting AI-based tax and compliance systems. Policymakers must invest in secure broadband, e-government platforms, and cybersecurity frameworks to maximize AI’s effectiveness. Regulators could require AI-powered reporting in industries prone to evasion, ensuring uniform standards across the EU. Originality/Value: This study is among the first to provide firm-level empirical evidence on how artificial intelligence (AI) adoption directly reduces tax evasion while simultaneously fostering digital awareness within European businesses. By integrating Technology Acceptance Model (TAM), Deterrence Theory, and Digital Maturity Theory, the study develops a novel conceptual framework linking AI adoption, digital literacy, and tax compliance. The originality lies in demonstrating that digital awareness acts as a mediating mechanism, showing that AI’s impact is not only technological but also behavioral and cultural.

Keywords: Artificial intelligence (AI); tax evasion; digital awareness; corporate tax compliance; AI adoption; digital transformation; intelligent automation; financial technology (FinTech); SME compliance; UAE tax system; regression analysis; business transparency. (search for similar items in EconPapers)
JEL-codes: C55 H26 H30 M15 O33 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:ers:ijebaa:v:xiii:y:2025:i:3:p:48-75

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