The current system for detecting tax avoidance is inefficient and relies on frequent inspections of workplaces.
Chinese scientists have been working on a system that with the use of AI it would make it virtually impossible to evade taxes, according to the researchers involved in the project.
In the past three years, approximately 300.000 Chinese government tax inspectors have helped train a artificial intelligence system which relies on big data to detect behavior that would otherwise be difficult for a human to detect.
Now the machine is capable of reporting over 95% of crimes, including more complex strategies for evading taxes.
The problem? The AI is too good
Despite the development and success of the tests, artificial intelligence against tax evaders will be introduced with caution. The reason lies in the large number of Chinese companies that have disputes with the tax authorities and are demanding greater state flexibility on taxes. To be brutal, such a relentless mechanism in targeting tax evasion can provoke a real revolt.
However, the AI engine was incorporated into the heart of the Golden Tax System, the software used by the state administration. It will be "mitigated" by human eyes, which will apply (in what way? With what arbitrariness? With what political value) an "indulgence" on a case-by-case basis.
The system was developed by Aisino Corporation, a major Golden Tax contractor based in Beijing, in collaboration with scientists from the Harbin Institute of Technology (HIT) and Beijing University of Posts and Telecommunications.
A member of HIT's administrative staff confirmed the institution's involvement but said he could not provide further details.
The government has not yet approved a full-scale rollout of the system, but its performance has been tested in pilot programs in several areas, mainly in China's major economic centers, and achieved "very positive" results, according to the researchers.
Existing methods for detecting tax evasion are slow and inefficient, researchers say, and limited manpower means human inspectors rely on random checks, making it easy for tax evaders to slip through the cracks. justice.
The “magic” eye that makes it impossible to evade taxes
The artificial intelligence system can help solve this problem because it is linked to all government databases, including property registers, commodities, international trade and business registration.
This will allow the technology to automatically detect false statements by identifying evasion methods previously unknown to the authorities.
Tax inspectors also trained the AI system. AI now stores all the signals of “bad behavior” and refines them gradually to improve algorithms, or to adapt to changing tax rules.
An example of use
Researchers are unwilling to offer too many details about the system for fear of being compromised, but they made an example of use. A construction company exaggerated the price of tax-deductible items like cement when it filed its tax return.
The artificial intelligence system was able to compare the price reported by the company with the average market price at the time.
The combination of big data and AI “It will greatly improve the operational efficiency of the tax system and stimulate institutional reforms”, said the scientist.
Not just for companies
The system not only works for companies but also for every individual. AI makes it impossible to evade taxes, thanks to a connection with government databases such as the social credit system and even the national surveillance network.
Authorities will be able to quickly find a suspect as soon as the amount enters the range of criminal offenses.
Tax evasion is a common practice among China's richest people. In one of the most sensational cases, actress Fan Bingbing was fined almost 900 million yuan (120 million euros) for tax crimes.
More humanity is needed
Chinese taxes can be a heavy burden on many companies. Small businesses that often rely on informal agreements with local tax offices that allow them to pay less than the legal requirements.
Such agreements have played an important role in liberating the economy and stimulating growth. Dr. says so Chen Sanpan, a researcher in public finance and fiscal policy at Zhongnan University of Economics and Law in Wuhan.
“AI is a machine, it doesn't have such flexibility”, he said. “The government usually takes into account the current state of companies and makes changes gradually.”
There is also concern that the AI system may have an impact on economic growth. China's economy has slowed in recent years and recently posted its worst growth in nearly three decades. Numerous factors, ranging from the US trade war to a weak real estate sector, have also put many companies in difficulty.
