Risk-based audits in a behavioural model.

The tools of predictive analytics are widely used in the analysis of large data sets to predict future patterns in the system. In particular, predictive analytics is used to estimate risk of engaging in certain behavior. Risk-based audits are used by revenue services to target potentially noncompliant taxpayers, but the results of predictive analytics serve predominantly only as a guide rather than a rule. “Auditor judgment” retains an important role in selecting audit targets. This article assesses the effectiveness of using predictive analytics in a model of the compliance decision that incorporates several components from behavioral economics: subjective beliefs about audit probabilities, a social custom reward from honest tax payment, and a degree of risk aversion that increases with age. Simulation analysis shows that predictive analytics are successful in raising compliance and that the resulting pattern of audits is very close to being a cutoff rule

Predictive Analytics For Controlling Tax Evasion

Tax evasion is an illegal practice where a person or a business entity intentionally avoids paying his/her true tax liability. Any business entity is required by the law to file their tax return statements following a periodical schedule. Avoiding to file the tax return statement is one among the most rudimentary forms of tax evasion. The dealers committing tax evasion in such a way are called return defaulters. We constructed a logistic regression model that predicts with high accuracy whether a business entity is a potential return defaulter for the upcoming tax-filing period. For the same, we analyzed the effect of the amount of sales/purchases transactions among the business entities (dealers) and the mean absolute deviation (MAD) value of the �rst digit Benford's analysis on sales transactions by a business entity. We developed and deployed this model for the commercial taxes department, government of Telangana, India. Another technique, which is a much more sophisticated one, used for tax evasion, is known as Circular trading. Circular trading is a fraudulent trading scheme used by notorious tax evaders with the motivation to trick the tax enforcement authorities from identifying their suspicious transactions. Dealers make use of this technique to collude with each other and hence do heavy illegitimate trade among themselves to hide suspicious sales transactions. We developed an algorithm to detect the group of colluding dealers who do heavy illegitimate trading among themselves. For the same, we formulated the problem as finding clusters in a weighted directed graph. Novelty of our approach is that we used Benford's analysis to define weights and defined a measure similar to F1 score to find similarity between two clusters. The proposed algorithm is run on the commercial tax data set, and the results obtained contains a group of several colluding dealers

Global Systems Science and Policy

The vision of Global Systems Science (GSS) is to provide scientific evidence and means to engage into a reflective dialogue to support policy-making and public action and to enable civil society to collectively engage in societal action in response to global challenges like climate change, urbanisation, or social inclusion. GSS has four elements: policy and its implementation, the science of complex systems, policy informatics, and citizen engagement. It aims to give policy makers and citizens a better understanding of the possible behaviours of complex social systems. Policy informatics helps generate and evaluate policy options with computer-based tools and the abundance of data available today. The results they generate are made accessible to everybody—policymakers, citizens—through intuitive user interfaces, animations, visual analytics, gaming, social media, and so on. Examples of Global Systems include epidemics, finance, cities, the Internet, trade systems and more. GSS addresses the question of policies having desirable outcomes, not necessarily optimal outcomes. The underpinning idea of GSS is not to precisely predict but to establish possible and desirable futures and their likelihood. Solving policy problems is a process, often needing the requirements, constraints, and lines of action to be revisited and modified, until the problem is ‘satisficed’, i.e. an acceptable compromise is found between competing objectives and constraints. Thus policy problems and their solutions coevolve much as in a design process. Policy and societal action is as much about attempts to understand objective facts as it is about the narratives that guide our actions. GSS tries to reconcile these apparently contradictory modes of operations. GSS thus provides policy makers and society guidance on their course of action rather than proposing (illusionary) optimal solutions

Tax Avoidance Practice in Textile Company in Bangladesh and Impact of Social Media to Avoid This Problems

In Bangladesh's textile sector, tax evasion is a major problem, with businesses using a range of tactics to reduce their tax obligations. The purpose of this study is to look into tax evasion tactics used by Bangladeshi textile industries and to see if social media might help solve this issue. This study looks at the tactics used by textile companies to evade taxes, such as profit shifting, transfer pricing, and offshore tax havens, through a thorough examination of the literature and empirical evidence. The results indicate that tax evasion is a multifaceted matter that is impacted by various elements such as legal frameworks, corporate governance arrangements, and cultural standards. In order to take advantage of tax system weaknesses and reduce their tax liabilities, textile companies in Bangladesh frequently employ aggressive tax planning techniques. In addition to undermining government revenue, these actions also exacerbate social injustice and wealth inequality. The study also investigates how social networking sites like Facebook, LinkedIn, and Twitter might help reduce tax avoidance by encouraging accountability, transparency, and corporate responsibility. The results imply that social media can be an effective instrument for increasing awareness, revealing unethical behavior, and making businesses responsible for their tax duties. The efficient use of social media for tax transparency is hampered by issues like false information, privacy concerns, and regulatory loopholes. By illuminating the mechanics of tax avoidance in Bangladesh's textile industry and suggesting tactics for utilizing social media to combat this problem.&nbsp

Toward Business Integrity Modeling and Analysis Framework for Risk Measurement and Analysis

Financialization has contributed to economic growth but has caused scandals, misselling, rogue trading, tax evasion, and market speculation. To a certain extent, it has also created problems in social and economic instability. It is an important aspect of Enterprise Security, Privacy, and Risk (ESPR), particularly in risk research and analysis. In order to minimize the damaging impacts caused by the lack of regulatory compliance, governance, ethical responsibilities, and trust, we propose a Business Integrity Modeling and Analysis (BIMA) framework to unify business integrity with performance using big data predictive analytics and business intelligence. Comprehensive services include modeling risk and asset prices, and consequently, aligning them with business strategies, making our services, according to market trend analysis, both transparent and fair. The BIMA framework uses Monte Carlo simulation, the Black–Scholes–Merton model, and the Heston model for performing financial, operational, and liquidity risk analysis and present outputs in the form of analytics and visualization. Our results and analysis demonstrate supplier bankruptcy modeling, risk pricing, high-frequency pricing simulations, London Interbank Offered Rate (LIBOR) rate simulation, and speculation detection results to provide a variety of critical risk analysis. Our approaches to tackle problems caused by financial services and the operational risk clearly demonstrate that the BIMA framework, as the outputs of our data analytics research, can effectively combine integrity and risk analysis together with overall business performance and can contribute to operational risk research

Risk-Based Audits in a Behavioural Model

The tools of predictive analytics are widely used in the analysis of large data sets to predict future patterns in the system. In particular, predictive analytics is used to estimate risk of engaging in certain behavior. Risk-based audits are used by revenue services to target potentially noncompliant taxpayers, but the results of predictive analytics serve predominantly only as a guide rather than a rule. “Auditor judgment” retains an important role in selecting audit targets. This article assesses the effectiveness of using predictive analytics in a model of the compliance decision that incorporates several components from behavioral economics: subjective beliefs about audit probabilities, a social custom reward from honest tax payment, and a degree of risk aversion that increases with age. Simulation analysis shows that predictive analytics are successful in raising compliance and that the resulting pattern of audits is very close to being a cutoff rule

A proposal of a suspicion of tax fraud indicator based on Google trends to foresee Spanish tax revenues.

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The use of predictive analytics in finance

Statistical and computational methods are being increasingly integrated into Decision Support Systems to aid management and help with strategic decisions. Researchers need to fully understand the use of such techniques in order to make predictions when using financial data. This paper therefore presents a method based literature review focused on the predictive analytics domain. The study comprehensively covers classification, regression, clustering, association and time series models. It expands existing explanatory statistical modelling into the realm of computational modelling. The methods explored enable the prediction of the future through the analysis of financial time series and cross-sectional data that is collected, stored and processed in Information Systems. The output of such models allow financial managers and risk oversight professionals to achieve better outcomes. This review brings the various predictive analytic methods in finance together under one domain

A big data analytics method for assessing creditworthiness of SMEs:Fuzzy equifinality relationships analysis

Nowadays, many financial institutions are beginning to use Big Data Analytics (BDA) to help them make better credit underwriting decisions, especially for small and medium-sized enterprises (SMEs) with limited financial histories and other information. The various complexities and the equifinality problem of Big Data make it difficult to apply traditionalstatistical techniques to creditworthiness evaluation, or credit scoring. In this study, we extend the existing research in the field of creditworthiness assessment and propose a novel approach based on neighborhood rough sets (NRSs), to evaluate and investigate the complexities and fuzzy equifinality relationships in the presence of Big Data. We utilize a real SME loan dataset from a Chinese commercial bank to generate interval number rules that provide insight into the fuzzy equifinality relationships between borrowers’ demographic information, company financial ratios, loan characteristics, other non-financial information, local macroeconomic indicators and rated creditworthiness level. In addition, the interval number rules are used to predict creditworthiness levels based on test data and the accuracy of the prediction is found to be 75.44%. One of the major advantages of using the proposed BDA approach is that it helps us to reduce complexity and identify equivalence relationships when using Big Data to assess the creditworthiness of SMEs. This study also provides important implications for practices in financial institutions and SMEs

Blockchain, business and the fourth industrial revolution:Whence, whither, wherefore and how?

Blockchain is one the most remarkable technological innovations of the 21st century. The most notable application of blockchain is in the development and operation of cryptocurrencies (e.g. bitcoin, ethereum, among others). Besides the financial services industry, blockchain is also considered in other sectors such as international trade, taxation, supply chain management, business operations and governance. However, blockchain has not been examined comprehensively in all areas of relevant literature. This article conducts a survey of the literature to gain an understanding of the opportunities and issues presented by blockchain in various business functions. The article begins by providing a discussion regarding how the blockchain technology operates. The paper takes a broad focus in its analysis of the prospects of blockchain for various business functions, including banking and the capital markets, corporate governance, international trade, and taxation. The paper demonstrates how organisations and regulators can leverage blockchain to upscale business operations, enhance efficiency and reduce operational costs. The key drawbacks of blockchain that stakeholders need to bear in mind before adopting the technology are also highlighted. The article also reflects on how organisations can tap into blockchain to reap the full potential of the fourth industrial revolution