Score: 2

Can LLMs Identify Tax Abuse?

Published: August 10, 2025 | arXiv ID: 2508.20097v1

By: Andrew Blair-Stanek, Nils Holzenberger, Benjamin Van Durme

BigTech Affiliations: Johns Hopkins University

Potential Business Impact:

AI finds new ways to save money on taxes.

We investigate whether large language models can discover and analyze U.S. tax-minimization strategies. This real-world domain challenges even seasoned human experts, and progress can reduce tax revenue lost from well-advised, wealthy taxpayers. We evaluate the most advanced LLMs on their ability to (1) interpret and verify tax strategies, (2) fill in gaps in partially specified strategies, and (3) generate complete, end-to-end strategies from scratch. This domain should be of particular interest to the LLM reasoning community: unlike synthetic challenge problems or scientific reasoning tasks, U.S. tax law involves navigating hundreds of thousands of pages of statutes, case law, and administrative guidance, all updated regularly. Notably, LLM-based reasoning identified an entirely novel tax strategy, highlighting these models' potential to revolutionize tax agencies' fight against tax abuse.

Country of Origin
🇺🇸 United States

Repos / Data Links

Page Count
9 pages

Category
Quantitative Finance:
Computational Finance