Dr Chris Wales, a former member of the former prime minister’s Council of Economic Advisers, issued the warning ahead of the launch of his book Hacienda and the Dual State, co-authored with international lawyer Robert Amsterdam, which examines the Spanish tax authority Agencia Tributaria and its approach to enforcement.
He argued that the UK could move closer to Spain’s model, where tax authorities are increasingly able to access and analyse vast amounts of personal financial data. Dr Wales said Spain is heading towards a system where “every single invoice will go through the tax agency,” with authorities able to view detailed records of everyday spending, from utilities and healthcare to travel and shopping habits.
He warned that such developments could lead to a “surveillance state,” arguing that personal confidentiality may “go out of the window” if similar systems are adopted more widely without sufficient safeguards or public debate.
Dr Wales also highlighted HMRC’s existing use of artificial intelligence, including its CONNECT system, which analyses large volumes of taxpayer data to identify potential errors or fraud. He said the system already processes billions of data points and continues to expand in scale and capability.
He raised concerns about transparency, noting that HMRC does not publicly disclose details of its algorithms, and questioned whether sufficient accountability exists when AI is used to assess taxpayer behaviour.
According to HMRC, its systems are designed to ensure tax compliance while minimising intrusion on the majority of honest taxpayers. The department also states that artificial intelligence is used to support processes, not replace human decision-making, and is subject to strict legal and data protection safeguards.
Dr Wales and former Labour Treasury minister Baroness Dawn Primarolo are expected to urge UK policymakers to strengthen parliamentary scrutiny of tax data systems, pointing to Spain as a cautionary example of how rapidly such tools can expand.
He also warned that proposals in Spain could restrict transparency around how taxpayer data is used, potentially making it harder to challenge decisions and raising concerns under EU data protection and AI governance rules.
HMRC told The Independent: “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.”