Artificial Intelligence and Law

, Volume 24, Issue 2, pp 149–182

Detecting tax evasion: a co-evolutionary approach

  • Erik Hemberg
  • Jacob Rosen
  • Geoff Warner
  • Sanith Wijesinghe
  • Una-May O’Reilly
Article

DOI: 10.1007/s10506-016-9181-6

Cite this article as:
Hemberg, E., Rosen, J., Warner, G. et al. Artif Intell Law (2016) 24: 149. doi:10.1007/s10506-016-9181-6

Abstract

We present an algorithm that can anticipate tax evasion by modeling the co-evolution of tax schemes with auditing policies. Malicious tax non-compliance, or evasion, accounts for billions of lost revenue each year. Unfortunately when tax administrators change the tax laws or auditing procedures to eliminate known fraudulent schemes another potentially more profitable scheme takes it place. Modeling both the tax schemes and auditing policies within a single framework can therefore provide major advantages. In particular we can explore the likely forms of tax schemes in response to changes in audit policies. This can serve as an early warning system to help focus enforcement efforts. In addition, the audit policies can be fine tuned to help improve tax scheme detection. We demonstrate our approach using the iBOB tax scheme and show it can capture the co-evolution between tax evasion and audit policy. Our experiments shows the expected oscillatory behavior of a biological co-evolving system.

Keywords

Tax evasion Co-evolution Grammatical evolution Genetic algorithms Auditing policy Partnership tax 

Copyright information

© Springer Science+Business Media Dordrecht 2016

Authors and Affiliations

  • Erik Hemberg
    • 1
  • Jacob Rosen
    • 2
  • Geoff Warner
    • 2
  • Sanith Wijesinghe
    • 2
  • Una-May O’Reilly
    • 1
  1. 1.Massachusetts Institute of Technology, Computer Science and AI LabCambridgeUSA
  2. 2.The MITRE CorporationMcLeanUSA

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