The Impact of Artificial Intelligence Investment on Tax Revenues: A Bayesian Estimation for the G7 Countries

Abstract

Purpose: Given the growing importance of the knowledge economy in the 21st century and the growing potential of artificial intelligence (AI), this study explores the impact of AI investment on government tax revenue mobilisation across countries.
Design/methodology/approach: Using a sample of seven G7 countries over the period 2012–2020 and Bayesian regression for panel data, this paper hypothesises that differences in the level of AI investment explain differences in tax collection. Therefore, AI investment is expected to have an impact on tax revenue.
Findings: The key finding of the paper is that higher levels of AI investment are associated with higher tax mobilisation. This finding persists after several robustness analyses.
Originality/value: Difficulty in tax collection is considered a barrier to economic development. Financing development requires mobilising large financial resources. While significant progress has been made in understanding the role of tax revenue and the potential factors that influence it, the role of AI investment in tax revenue remains a largely unexplored topic. These results suggest that G7 governments should encourage further investment in AI to enhance tax performance.