Azerbaijan Tax Service Shifts To Preventive, AI-Aided Risk Management

(MENAFN- Trend News Agency) BAKU, Azerbaijan, October 22. Azerbaijan is shifting from detecting tax violations after they occur to a preventive model focused on identifying and mitigating risks in advance, Samir Khaligov, Head of the Main Department for Tax Risk Management at the State Tax Service under the Ministry of Economy, said, Trend 's correspondent reports from the event.

He made the remarks on Thursday at a conference in Baku dedicated to the digital transformation of public finance.

Khaligov added that artificial intelligence, risk assessment models and electronic monitoring mechanisms are being introduced to support this transition.

He said the main objective of tax reforms was not to detect violations after the fact, but to identify potential risks in advance and prevent them.

“One of the most important changes in tax risk management is the shift from a post-factum approach to a preventive one. Previously, measures related to risky transactions were taken mainly after transactions had been completed or risks had been identified. Today, the main goal is to identify risks in advance and enable taxpayers to avoid such transactions,” Khaligov said.

According to him, the use of artificial intelligence and advanced analytical tools is being expanded in this area. AI-based classifiers are being introduced to automatically categorize data, while risk-scoring systems assess the risk levels of taxpayers and the tax returns they submit.

Khaligov said these mechanisms enable tax authorities to direct resources toward cases with a higher likelihood of actual risk while improving the accuracy of risk identification.

The State Tax Service official also highlighted the importance of the“Know Your Counterparty” service as a key preventive tool. It allows taxpayers to obtain relevant information about potential business partners before entering into business relationships or purchasing goods and services from them.

“This helps taxpayers assess a counterparty's activities in advance, take potential risks into account and make better-informed decisions,” he said.

Khaligov added that an automated system was also in place to send notifications and warnings about transactions involving high-risk taxpayers. The system is designed to inform the parties involved about potential risks in advance.

He also discussed the introduction of an electronic field inspection system, which has already been launched and is being tested in pilot mode in one of the regions.

According to him, the system allows identified violations to be addressed without paperwork, through electronic notifications. This enables businesses to correct deficiencies voluntarily and take the necessary steps to remedy violations.

Khaligov emphasized that such digital mechanisms not only improve the efficiency of tax administration but also reduce the administrative burden on businesses, encourage voluntary tax compliance and strengthen transparency in tax relations.

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