Towards Explainable Automation of Decision-Making in Tax Consulting: Integrating LLMs with Logical Reasoning for Selection of Transfer Pricing Method

Tax consulting involves interpreting natural-language case descriptions to make logic based decisions, such as selecting a transfer pricing method for multinational enterprises.
While large language models (LLMs) are effective at processing natural language, they
lack true logical reasoning capabilities. In contrast, logic programming, e.g., using Prolog, offers explainable and correct reasoning when given a structured fact base. This short
paper proposes a hybrid AI approach that combines the strengths of LLMs and Prolog:
The LLM extracts structured facts from textual case descriptions using a guided, question based process, and a Prolog program applies logical rules to perform reasoning. A human
remains in the loop to address ambiguities. We present a proof-of-concept implementation and an evaluation of the approach using real-world transfer pricing cases from a tax
consulting firm.