The current tax avoidance detection system is inefficient and relies on frequent workplace inspections.
Chinese scientists worked 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? AI is too good
Despite the fine-tuning and the 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 flexibility of the state 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, who will apply (in what way? With what will? With what political value) an "indulgence" on a case-by-case basis.
The system was developed by Aisino Corporation, a major Beijing-based Golden Tax contractor, in collaboration with scientists from the Harbin Institute of Technology (HIT) and Beijing University of Posts and Telecommunications.
A member of the HIT administrative staff confirmed the institution's involvement but said they 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 has achieved "very positive" results, according to the researchers.
Existing methods for detecting tax evasion are slow and inefficient, the researchers say, and the limited workforce makes human inspectors rely on random checks, making it easy for tax evasioners to slip through the meshes of tax evasion. justice.
The "magic" eye that makes tax evasion impossible
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 artificial intelligence system. AI now memorizes all signals of "misconduct" and gradually refines them 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 works not only for companies but also for every individual. AI makes tax evasion impossible, thanks to a link to 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 criminal offense range.
Tax evasion is a common practice among China's wealthiest people. In one of the most striking cases, actress Fan Bingbing was fined nearly 900 million yuan (120 million euros) for tax offenses.
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 freeing the economy and stimulating growth. Dr. Chen Sanpan, researcher in public finance and fiscal policy at Zhongnan University of Economics and Law in Wuhan.
"Artificial intelligence is a machine, it doesn't have such flexibility", he said. "The government usually takes into account the current state of the 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 experienced the 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 trouble.
