Abstract
Billions of dollars across the Tax administrations around the world are lost every year due to noncompliance, evasions, frauds or non-collection including both direct and indirect taxes. With access to vast quantities of data from a range of sources (e.g. financial institutions, utilities, bank transactions, social media data, etc.) both in terms of structured as well as unstructured (text, video, pdfs, etc.), tax authorities can increasingly use business rules, quantitative statistical models and advance analytics techniques to conduct audits and uncover trends and discrepancies, using new techniques such as rulebased monitoring, predictive modelling and outlier detection. This paper will showcase how the tax authorities should be moving into the predictive mode rather than post audit reactive mode for zeroing on the probable risky dealers in the indirect tax domain for highest impact of revenue recovery and collection through a statistical, scientific and information driven model for decision making.
Highlights
H0: A statistical model used to predict the probability of riskiness of a dealer is as good as a baseline model and provides no benefit compared to random choice
H1: A statistical model used to predict the probability of riskiness of a dealer is better than the baseline model and provides significant benefit compared to random choice
The classification table showcases that 68.3% of the times the model have been able to rightly predict a probable risky dealer as a risky dealer and a probable non-risky dealer as a non- risky dealer. This is significantly more than the base line model (Classification=50%). This propels us to reject the null hypothesis of hypothesis 1 and accept the alternate hypothesis that the statistical model used to predict the probability of riskiness of a dealer is better than the baseline model and provides significant benefit compared to random choice
Summary
F The Objective of this analysis it to develop a predictive risk model to predict dealers’ likelihood of risk. Their study has given focus on the collection of personal income tax and corporation tax at pre-assessment and post assessment stage. According to him people would have to waste a lot of time in understanding the new provisions of income tax law and CBDT would have to issue numerous circulars and frame several rules all over again. He mentioned that proposed Code would neither improve efficiency nor tax collection due to deep rooted corruption
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