A Novel Example-Dependent Cost-Sensitive Stacking Classifier to Identify Tax Return Defaulters
Keywords:goods and services tax, tax evasion, xample-dependent cost-sensitive stacking classifier, example-dependent cost-sensitive ANNs, Benford’s analysis, social network analysis, cosine similarity
Tax evasion refers to an entity indulging in illegal activities to avoid paying their actual tax liability. A tax return statement is a periodic report comprising information about income, expenditure, etc. One of the most basic tax evasion methods is failing to file tax returns or delay filing tax return statements. The taxpayers who do not file their returns, or fail to do so within the stipulated period are called tax return defaulters. As a result, the Government has to bear the financial losses due to a taxpayer defaulting, which varies for each taxpayer. Therefore, while designing any statistical model to predict potential return defaulters, we have to consider the real financial loss associated with the misclassification of each individual. This paper proposes a framework for an example-dependent cost-sensitive stacking classifier that uses cost-insensitive classifiers as base generalizers to make predictions on the input space. These predictions are used to train an example-dependent cost-sensitive meta generalizer. Based on the meta-generalizer choice, we propose four variant models used to predict potential return defaulters for the upcoming tax-filing period. These models have been developed for the Commercial Taxes Department, Government of Telangana, India. Applying our proposed variant models to GST data, we observe a significant increase in savings compared to conventional classifiers. Additionally, we develop an empirical study showing that our approach is more adept at identifying potential tax return defaulters than existing example-dependent cost-sensitive classification algorithms.
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