A former senior Treasury adviser to Gordon Brown has warned that HMRC is on the cusp of using artificial intelligence to track people’s and businesses income and expenditure without them knowing.
Dr Chris Wales, who was a member of Mr Brown’s Council of Economic Advisers for more than six years, has sounded the alarm while launching a chilling book on the conduct of the Spanish tax authority, Agencia Tributaria.
He is set to join former Labour Treasury minister Baroness Dawn Primarolo at an event next week flagging up how the Spanish model of dealing with tax evasion is about to arrive in the UK suggesting that the door is opening for a “surveillance state.”
In a preview of the future, Dr Wales has claimed that confidentiality in personal life – not just finances – “will simply go out of the window” and asks whether there are adequate safeguards in the UK to prevent HMRC from emulating its Spanish counterpart.
He said: “From 1 January, every single invoice will go through the tax agency in Spain. The Inspector can already obtain all your utility bills and will soon find out which clinic and pharmacy you use and what you buy there, which restaurants you eat at, where you purchase wine and groceries, what kind of car you have, how far you drive and where you park, what flights you take and which hotels you use. Information security? A thing of the past.”
He went on: “I am far from being a libertarian, but I see great danger in the direction in which tax authority powers are going, particularly because the process doesn’t seem to involve our active consent. There is little parliamentary debate about it. In Spain it is simply out of control. In the UK, let’s see.”
Highlighting the CONNECT AI program already used by HMRC in the UK, Dr Wales claimed that the UK is now close to following Spain’s lead.
He said: “HMRC has been using sophisticated information technology for years including an AI system called CONNECT which, as early as 2023, was said to contain more than 55 billion taxpayer-related data items.
“It will be much bigger today with these billions of pieces of information about taxpayers capable of being sorted quickly by AI.”
Dr Wales, who is now senior research adviser at International Centre for Tax and Development, added that HMRC also declines to say what algorithms it uses, under the pretext that if you publish them people will “game the system”, a claim that he suggests does not stand up to scrutiny.
“The system is understood to be used to target evasion. For tax authorities, everyone is a potential tax evader. This means that they believe they have a legitimate reason to collect data about all of us,” he said.
Dr Wales and Baroness Primarolo will be urging parliamentarians in the UK to make more of a stand and apply greater scrutiny than has happened in Spain.
He noted that the Spanish government is trying to introduce a new law, making it an official secret, how the data is used, what algorithms are employed in the selection of taxpayers for investigation and whether there is any review by an official, in apparent defiance of the EU AI Act, GDPR and its own Constitution. “This is obviously a matter of deep concern. When the reasons why decisions are made are unknowable, legal challenge becomes almost impossible.”
In Spain the system is already being used against British expats and others by the authorities.
An HMRC spokesperson said: “Our data and collection powers are set by Parliament and subject to strict legal safeguards, oversight and data protection laws. They exist so we can collect the right tax to fund vital public services, and target error and fraud in a way which minimises intrusion on the honest majority.
“Artificial intelligence supports some of our processes but never replaces human decision-making and oversight. We remain committed to the safe use of these technologies, underpinned by strict data protection, security and ethical standards.”
