Digital transformation and the use of artificial intelligence to enhance financial transparency and ensure tax and insurance compliance: reducing the double whammy

Abstract

The phenomenon of failing to transfer amounts deducted from employees’ salaries for taxes and social insurance, along with the non-payment of the employer’s share, represents a dual loophole that affects both the public treasury and workers’ rights in Egypt. This practice results in substantial financial losses estimated at between EGP 80 and 100 billion annually, weakening the state’s ability to finance public services and undermining the sustainability of social insurance funds. This study relies on the analysis of financial and tax data to estimate the losses resulting from tax and social insurance non-compliance, while examining its impact on employment and the macroeconomy. Through a review of previous studies, the research highlights the role of digital systems and artificial intelligence in combating this phenomenon and enhancing legal compliance. The study proposes innovative technological solutions, including: * Electronically linking payroll systems with financial institutions to ensure the automatic transfer of tax and social insurance contributions. * Activating smart digital oversight through artificial intelligence and data analytics to proactively detect violations. * Imposing immediate fines and stricter legal penalties on non-compliant companies, thereby helping to reduce the financial gap and improve transparency. The study aims to propose reform policies based on financial technology to enhance tax and social insurance compliance, which would positively contribute to the stability of the Egyptian economy and the protection of workers’ rights.