Towards the design of digital twins for Tax Law

Using smart contracts and legal ontologies for automated Decision-Making

Citation: Florian Schnitzhofer, Towards the design of digital twins for Tax Law, in: Jusletter IT 26 March 2025

This paper presents proposed research on the design of a framework for automating decision-making in tax software systems through the development of digital twins of tax laws, using the Austrian Income Tax Act as an example. These digital counterparts of the legal texts formulated in natural language are structured into four layers, inspired by the structured approach of smart contracts used in automated legal contract systems: (1) the legal text, (2) a domain-specific tax ontology, (3) a model layer for data configurations, and (4) a logic layer where the tax law logic is implemented in a formal language. By formalizing these layers, we intend to create a comprehensive, machine-interpretable representation of (parts of) existing tax laws. Future work will further investigate which parts of law texts can be formalized in digital twins, which decisions can be automated, and where human inputs will continue to be required.

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