China prepares to unleash artificial intelligence to catch tax cheats
25 Dec 2019

Chinese scientists have been working on a system to use artificial intelligence that would make it almost impossible to cheat on taxes, according to researchers involved in the project.

Over the last three years, about 300,000 government tax inspectors have been helping to train an AI system that draws on big data to detect behaviour that may be hard for human inspectors to spot.

Now the machine can flag more than 95 per cent of offences, including some new ploys unfamiliar to most human tax collectors, researchers involved in the project said.

However, given the number of companies that rely on informal deals with local tax authorities to lessen their burden, the system’s introduction may be delayed until the economic climate is more favourable.

The AI engine has been embedded in the heart of the Golden Tax System, the software used by the State Taxation Administration, China’s top tax office.

The system was developed by Aisino Corporation, a major contractor for Golden Tax based in Beijing, in collaboration with scientists from the Harbin Institute of Technology (HIT) and Beijing University of Posts and Telecommunications.

An administrative staff member at HIT confirmed the institution’s involvement but said they could not provide further details.

Aisino and the Beijing University of Posts and Telecommunications did not respond to requests for comment.

The government has not yet approved a full-scale launch of the system but its performance has been tested in pilot programmes in several areas, mostly in the country’s economic powerhouses in the east, and achieved “very positive” results, according to the researchers.

Existing methods for detecting tax evasion are slow and inefficient, the researchers say, and limited manpower means that human inspectors have to rely on random checks, which makes it easy for tax cheats to slip through the cracks.

One scientist, who asked not to be named due to the sensitivity of his work, said the traditional tax system was also too fragmented to work effectively.

“Business databases are segmented, provinces disconnected, data management inefficient and unreliable,” the scientist said.

The AI system can help solve this problem because it is connected to all government databases, including property, commodities, international trade and business registration.

This allows the technology to automatically detect if companies and individuals have reported false data when filing their taxes and to spot evasion methods not previously known to authorities.

Tax inspectors have also been training the AI system by labelling data that flags misconduct and correcting it whenever it makes a mistake to improve the algorithms.

At the same time, the AI upgrades the algorithms automatically to keep it up to date on the latest tax regulations.

By Stephen Chen, South China Morning Post, 24 December 2019

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