AI still has some limitations in the tax world
Artificial intelligence (AI) is here to stay and this author uses AI extensively. Nevertheless, this article was written in response to an awful piece of tax advice from one of the well known AI programs which we were asked to review. So what are the pros and cons of AI in the tax field?
What does AI do well?
We are accountants not software engineers. To the best of our limited knowledge, AI can gobble up huge amounts of information with a view to answering complex questions and carry out boring tasks fast and well. That doesn’t mean human beings are fired. It means they can apply judgment to the AI answers and do physical things that AI cannot do, such as supply goods, medical services, court judgments and much more. Judges, like King Solomon, cannot yet be replaced by AI.
What AI does badly:
The old adage regarding computer software still applies: garbage in, garbage out. AI has to be “trained” on information, but sometimes AI somehow “hallucinates” by scooping up wrong information such as non-existent court case precedents. AI translates but tends to have poor Hebrew.
What about AI and tax?
In our experience, some AI “agents” (programs) are trained only on tax material, some are more general such as Chat GPT, Claude and Gemini.
When it comes to Israeli taxation, some AI agents are trained on Hebrew tax legislation, some merely rely on English summaries. Imagine, for example, an AI agent using a article in a newspaper column 10 years ago – the article may not go into smaller details and may not be up to date.
As for AI agents are trained on Hebrew tax legislation, they still need to connect tax laws and regulations to tax circulars and court cases all in Hebrew, then give their answers in good English (for example).
Some AI agents can’t yet do all of this, some are out of date in our experience.
Moreover, in our experience, AI is not very good at analyzing “chain reactions” – if event A happens that may trigger event B which may trigger event C.
And no AI agent knows the unpublished positions of Israeli tax officials – accountants find these out on the job or in tax audit meetings.
What do taxpayers need?
Take for example a family making Aliya to Israel from the US. They need an AI tax agent that is trained on US federal laws, US state laws, and Israeli laws. If changes are proposed, the AI tax agents need to factor in the knock-on impact on the tax law in both countries.
The awful AI tax advice mentioned above failed to appreciate that a proposed change of legislation abroad would have adverse consequences in Israel. We humans did appreciate the adverse consequences and were able to suggest some legitimate tax planning clarifications in some of the legal documents.
In another instance, the AI agent was European and simply missed out the USA as too complex! This was no help to a US-European-Israeli family.
Will a judge agree?
As mentioned, judges have been highly critical in cases where hallucinated non-existent precedents were cited by AI agents. Nobody is proposing to replace judges with AI agents.
What about the Israeli Tax Authority (ITA)?
The ITA system uses “big data” i.e. it cross checks personal details of people in different systems. The ITA relies on accountants, Israeli banks and the VAT authority to check that the people exist and have legitimate motives.
Only after these existence checks can a business register and legally invoice a customer, get paid, and pay its tax!
As for claiming an Israeli tax refund, above a certain (low) level, AI is not used, that requires multiple human approvals.
Israel has a system of “Israel invoices” which requires businesses to get an “allocation number” immediately from the ITA computer system when issuing an invoice to an Israeli customer over NIS 5,000. Otherwise, the customer cannot recover the VAT charged by the business. The EU and other countries have plans to copy these Israeli VAT procedures.
Other issues:
Protection is still needed against hacking and personal data leakage. If you hold personal data on your computer e.g. salaries, can you be sure that AI won’t read and remember the salary data?
To sum up:
Don’t write off us human beings quite yet. Our role is to apply judgement to AI output and to look ahead. Some of the AI tax agents lack Hebrew skills, some have trouble stringing together multiple sources of tax law in countries like the USA – federal and state laws, regulations, pronouncements and so forth. When will AI improve and will it keep up with human ingenuity and emotions?
As always, consult experienced professional advisors in each country concerned at an early stage in specific cases.
© Leon Harris, Sep 11, 2026
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