Sampling taxpayers for audits has always been a major concern for policymakers of tax administration. The purpose of this study is to propose a systematic method to select a small number of taxpayers with a high probability of tax fraud.
An efficient sampling method for taxpayers for an audit is investigated in the context of a property acquisition tax. An autoencoder, a popular unsupervised learning algorithm, is applied to 2,228 tax returns, and reconstruction errors are calculated to determine the probability of tax deficiencies for each return. The reasonableness of the estimated reconstruction errors is verified using the Apriori algorithm, a well-known marketing tool for identifying patterns in purchased item sets.
The sorted reconstruction scores are reasonably consistent with actual fraudulent/non-fraudulent cases, indicating that the reconstruction errors can be utilized to select suspected taxpayers for an audit in a cost-effective manner.
The proposed deep learning-based approach is expected to be applied in a real-world tax administration, promoting voluntary compliance of taxpayers, and reinforcing the self-assessing acquisition tax system.
