AI-Driven Tax Compliance: How Explainable AI Transforms Shadow Economy Detection

Key Points

• This research investigates how explainable AI can enhance tax compliance by improving detection of shadow economies.
• Utilized a randomized trial design to evaluate the effectiveness of AI algorithms in tax compliance.
• Compared outcomes of explainable AI approaches against traditional detection methods.
• Engaged with stakeholders in tax administration for implementation and feedback.
• Significant improvement in detection rates of shadow economies by 25% using explainable AI (p<0.01).
• Enhanced understanding of decision processes led to increased trust in AI outcomes among tax administrators.
• Reduction in tax evasion incidents among participants in AI-informed tax systems by 15% over six months.