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

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  • Imran Hussain Shah

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.

Suggested Citation

  • Imran Hussain Shah, 2025. "Can the Integration of AI Technologies Help Curb Tax Evasion While Fostering Greater Digital Awareness Among Business Entities?," International Journal of Economics & Business Administration (IJEBA), International Journal of Economics & Business Administration (IJEBA), vol. 0(3), pages 48-75.
    • Handle: RePEc:ers:ijebaa:v:xiii:y:2025:i:3:p:48-75
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    References listed on IDEAS

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    1. Joel Slemrod, 2019. "Tax Compliance and Enforcement," Journal of Economic Literature, American Economic Association, vol. 57(4), pages 904-954, December.
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    JEL classification:

    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance
    • H30 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - General
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • M15 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - IT Management
    • C55 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Large Data Sets: Modeling and Analysis

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