In an era of rapid technological development, artificial intelligence is becoming an integral part of many areas of life, including business consultancy. Legal and tax advisers are getting their hands on new tools to increase efficiency and enhance the quality of services provided to clients. On the other hand, they have to face new challenges brought by the integration of AI in their daily work. It is worth taking a look at these issues, especially within the legal and tax aspects.
The use of AI versus legal compliance: seeking a balance
With such rapid advances in AI technology and the opportunities it brings, today’s advisers, particularly legal and tax advisers, face a particularly complex problem – finding a balance between adopting technological innovations and fundamental obligations to clients, issues of trust and professional ethics and ensuring AI tools are used in accordance with the law.
AI as a powerful ally for modern legal advisers
AI offers unprecedented capabilities that can improve the delivery of legal services. Sophisticated systems can analyse thousands of documents in a very short time, significantly improving the efficiency of the investigation and providing comprehensive analysis of large volumes of data. Document drafting has been significantly improved with AI tools that can propose specific solutions (such as contractual clauses or arguments in disputes) based on huge databases of model solutions.
For large business clients with complex legal needs, AI provides significant value through improved data management and analytics. Legal departments can use AI to identify cost reduction opportunities, develop business strategies, minimise contractual risks and improve service delivery.
Critical legal risks and remedial strategies
Despite these benefits, responsible integration of AI into legal practice requires an awareness of several important risks.
- Inaccuracies and ‘hallucinations’
AI systems, particularly those based on large language models (LLMs), can generate inaccurate information in a way that creates the appearance of plausibility. These ‘hallucinations’ pose serious risks in a legal context where accuracy is crucial. The implementation of rigorous verification protocols is essential – all AI results must be independently verified and critically evaluated by experienced professionals, based on relevant sources before they are applied to client cases. In this context, the role of experienced counsel is crucial – without the involvement of such individuals in the advice process, the risk of errors and serious adverse consequences increases significantly. - Data security and confidentiality
A key challenge is maintaining the confidentiality of client data, especially in the context of professional secrecy. Introducing sensitive client information into AI tools may constitute a breach of professional secrecy or other confidentiality obligations and create serious risks for clients. In this context, familiarity with the technology, strict control of the tools used and a high level of technological expertise on the part of the advisers themselves (and their organisations) is key.
Particularly important from the perspective of client data security and confidentiality is the advisers’ own technical infrastructure, within which tools are deployed to support service delivery. Adviser firms investing in dedicated, secure AI systems running in their own controlled IT environment can significantly reduce confidentiality and professional secrecy risks. Such a solution increases the security that client data remains within the adviser’s organisation and is protected by existing data governance frameworks and security protocols. Unlike public models, where data handling practices can be unclear, advisory firms with their own infrastructure retain far greater control over data storage, processing and disposal. This therefore forms part of building a competitive advantage through increased security, confidentiality and a basis for building trust. - Intellectual property issues
The use ofAI systems raises a number of complex legal issues in the area of intellectual property, both in relation to the content used to train the models and the generated elements delivered as part of the service delivery. Legal advisers need to put processes in place to review AI outputs for potential IP infringements and conduct thorough due diligence on AI tools to control the sources of training data. - Ethical and professional obligations of advisers
Notwithstanding the rapid development of technology, the ethical obligations of legal or tax advisers remain unchanged in the AI era. They must build their competencies and implement their service delivery methods in such a way that fundamental professional ethics are not compromised. Critical scrutiny of the results delivered to clients, the ability to safely apply and select AI tools, or the overriding principle of independence and the primacy of professional secrecy, are issues that legal or tax advisers should focus on in particular in the face of the rapid development of AI technology.
The way forward: responsible integration
The modern legal or tax adviser can and should implement AI tools while remaining compliant with legal and ethical standards. This requires the implementation of a comprehensive governance framework that includes:
- clear policies on appropriate AI use cases
- rigorous verification procedures for all AI-generated content
- the application of the highest quality procedures and measures to ensure data security and confidentiality
- ongoing training and professional development to ensure staff understand both the opportunities and limitations of AI.
By approaching the implementation and use of AI in a thoughtful manner, legal and tax advisers can take advantage of the opportunities offered by technological solutions, while maintaining the core values of trust, professional secrecy and high quality advice. At the same time, this process cannot take place without having the right infrastructure in place to use the new solutions safely.
AI in the world of taxation
In the context of tax advice, AI can significantly improve tax analysis and tax planning processes. Advanced algorithms can identify effective tax strategies, analyse the risks associated with different tax scenarios and anticipate the effects of changes in tax legislation. With AI, tax advisors can identify the tax consequences of individual decisions and actions more quickly and accurately.
However, as with legal advice, there are some risks associated with the use of AI in tax advice. First of all, AI systems need to be regularly updated to take into account the latest changes in tax legislation and the positions of tax authorities. In addition, tax advisers must be careful not to rely solely on the results generated by AI, but also to carry out their own analysis and verification.
- Complicated tax transactions
One area where AI can get ‘lost’, for example, is in complex company merger transactions. Such transactions often involve many complex tax aspects that can be difficult for AI systems to understand and correctly interpret. For example, different jurisdictions may have different rules regarding the taxation of merger transactions, which can lead to erroneous conclusions and incorrect tax recommendations. In such cases, verification is needed to analyse the situation accurately and ensure compliance with applicable regulations. - International transactions
This is an area where AI can face particular difficulties. Different countries have different tax laws and international transactions can involve many complex aspects, such as double taxation, transfer pricing rules or differences in tax rates. AI may find it difficult to take all these factors into account correctly, which may lead to erroneous tax recommendations.
Risks but also prospects for AI in tax advice
One of the risks associated with AI in tax advice is the possibility of incorrect input data. AI systems rely on data that is fed into their algorithms. If this data is incorrect or incomplete, the results generated by AI may be erroneous.
AI may also have difficulty taking into account context, which is very important in tax advice. For example, AI may not take into account the specific circumstances of a transaction that may affect its tax treatment.
At the same time, AI offers great opportunities to improve the efficiency and quality of advisory services. However, the use of this technology requires a responsible approach and awareness of the risks associated with its use. Juxtaposing the benefits and opportunities of AI tools with the areas of risk that their use generates – it is clear that artificial intelligence cannot, at this stage, replace the work of a human being, especially one with significant professional experience. Moreover, in untrained hands, the use of AI tools can cause more harm than benefit.
In contrast, the use of AI technology by experienced advisers, who are also skilled in the correct use of AI tools, offers significant synergies. In this arrangement, the new technology significantly increases the efficiency and quality of the services provided, while allowing key risks to be controlled and excluded. It is this approach, the combination of human and technology, that produces the best results.
About the authors:
Dagmara Leonik – legal counsel, tax advisor, manager in the People Advisory Services Tax Team, EY Polska
Marcin Ręgorowicz – legal counsel, manager in the Intellectual Property, Technology and Personal Data Team at EY Law firm
