Characterization and detection of taxpayers with false invoices using data mining techniques

Abstract

In this paper we give evidence that it is possible to characterize and detect those potential users of false invoices in a given year, depending on the information in their tax payment, their historical performance and characteristics, using different types of data mining techniques. First, clustering algorithms like SOM and neural gas are used to identify groups of similar behaviour in the universe of taxpayers. Then decision trees, neural networks and Bayesian networks are used to identify those variables that are related to conduct of fraud and/or no fraud, detect patterns of associated behaviour and establishing to what extent cases of fraud and/or no fraud can be detected with the available information. This will help identify patterns of fraud and generate knowledge that can be used in the audit work performed by the Tax Administration of Chile (in Spanish Servicio de Impuestos Internos (SII)) to detect this type of tax crime.