Benford’s law users, beware! An assessment of the suitability of Benford’s law in Value-Added Tax fraud detection in Indonesia

2020 ◽  
pp. 133-137
Author(s):  
Kristian Agung Prasetyo
Keyword(s):  
Fraud Detection ◽  
Value Added ◽  
Benford’S Law ◽  
Value Added Tax ◽  
Benford's Law ◽  
Tax Fraud

scholarly journals PENGGUNAAN BENFORD'S LAW UNTUK MENENTUKAN PRIORITAS AUDIT PAJAK PERTAMBAHAN NILAI

Scientax ◽  
2020 ◽  
Vol 1 (2) ◽  
pp. 167-183
Author(s):  
Kristian Agung Prasetyo ◽  
Muhammad Djufri
Keyword(s):  
Value Added ◽  
Statistical Technique ◽  
Tax Credits ◽  
Benford’S Law ◽  
Tax Revenue ◽  
Value Added Tax ◽  
Statistical Procedures ◽  
Use Of Technology ◽  
Benford's Law

Value Added Tax has contributed significantly in Indonesia’s tax revenue and continually to progress in the term of its role in increasing the tax revenue. Unfortunately, the phenomenon of VAT fraud, intended to minimize VAT payment, would give consequences in violating the tax revenue. In order to minimize this phenomenon, DGT has been maximizing the use of technology in VAT administration.  Since the 1st of July 2016, the use of e-Faktur has been enforced to all registered Taxable Entrepreneurs.  The enforcement of the e-Faktur has been effectively reducing the number of counterfeit tax invoices. Nonetheless, the e-Faktur is still not be able to capture the accuracy of transactions in Tax Invoices. As a result, DGT relies heavily on the approach of conventional audit for auditing taxpayers’ VAT compliance. This approach is considered to be less effective and become a problem since DGT does not have sufficient tax auditors. The number of tax invoices that needs to be audited could be piled up whilst the amount of tax credits to be audited are also high. This paper aims to discuss this problem by using a statistical technique namely Benford's law. It is recognized in the forensic audit literature that Benford's law can be a tool to help an early fraud examination of many transactions. By using particular statistical procedures, this paper will argue that Benford's Law can be used to analyze the accuracy of VAT value on tax invoices that is reported on the monthly VAT Return.

Value-added tax fraud detection with scalable anomaly detection techniques

2020 ◽  
Vol 86 ◽  
pp. 105895 ◽  
Author(s):  
Jellis Vanhoeyveld ◽  
David Martens ◽  
Bruno Peeters
Keyword(s):  
Anomaly Detection ◽  
Fraud Detection ◽  
Value Added ◽  
Value Added Tax ◽  
Detection Techniques ◽  
Tax Fraud

scholarly journals Benford’s Law as an Instrument for Fraud Detection in Surveys Using the Data of the Socio-Economic Panel (SOEP)

2011 ◽  
Vol 231 (5-6) ◽  
Author(s):  
Jörg-Peter Schräpler
Keyword(s):  
Probability Function ◽  
Fraud Detection ◽  
Numerical Data ◽  
Benford’S Law ◽  
Continuous Data ◽  
Data Set ◽  
Benford's Law ◽  
User Data

SummaryThis paper focuses on fraud detection in surveys using Socio-Economic Panel (SOEP) data as an example for testing newly methods proposed here. A statistical theorem referred to as Benford’s Law states that in many sets of numerical data, the significant digits are not uniformly distributed, as one might expect, but adhere to a certain logarithmic probability function. In order to detect fraud, we derive several requirements that should, according to this law, be fulfilled in the case of survey data.We show that in several SOEP subsamples, Benford’s Law holds for the available continuous data. For this analysis, we developed a measure that reflects the plausibility of the digit distribution in interviewer clusters. We are thus able to demonstrate that several interviews that were known to have been fabricated and therefore deleted in the original user data set can now be detected using this method. Furthermore, in one subsample, we use this method to identify a case of an interviewer falsifying ten interviews not previously detected by the fieldwork organization.

scholarly journals Benford’s Law and Fraud Detection: Facts and Legends

2010 ◽  
Vol 11 (3) ◽  
pp. 397-401 ◽  
Author(s):  
Andreas Diekmann ◽  
Ben Jann
Keyword(s):  
Fraud Detection ◽  
Scientific Data ◽  
False Positives ◽  
Benford’S Law ◽  
Test Results ◽  
False Negatives ◽  
Benford's Law ◽  
Valid Test

Abstract Is Benford’s law a good instrument to detect fraud in reports of statistical and scientific data? For a valid test, the probability of ‘false positives’ and ‘false negatives’ has to be low. However, it is very doubtful whether the Benford distribution is an appropriate tool to discriminate between manipulated and non-manipulated estimates. Further research should focus more on the validity of the test and test results should be interpreted more carefully.

scholarly journals The Application of Benford’s Law in Fraud Detection: A Systematic Methodology

2019 ◽  
Vol 12 (10) ◽  
pp. 1
Author(s):  
Nirosh Kuruppu
Keyword(s):  
Fraud Detection ◽  
Benford’S Law ◽  
Financial Fraud ◽  
Spreadsheet Program ◽  
Naturally Occurring ◽  
Systematic Methodology ◽  
Benford's Law ◽  
The Cost ◽  
Financial Transactions

Benford’s Law relies on a recently proven mathematical distribution about the frequencies of naturally occurring numbers that can be efficiently applied to the detection of financial fraud. Despite the value of Benford’s Law for detecting fraud, most financial professionals are often unaware of its existence and how to best utilise the method for fraud detection. The purpose of this paper is therefore to present a systematic methodology for incorporating Benford’s Law for detecting and flagging potentially fraudulent financial transactions, that can be further investigated. This paper describes the development of Benford’s Law and demonstrates how it can be implemented systematically through a spreadsheet program to detect potential fraud. Given that the cost of financial fraud is significant with firms losing up to a tenth of their revenues, the methodology presented in this paper for implementing Benford’s Law can be a valuable tool for auditors and other financial professionals for detecting fraud.

scholarly journals VAT Gap Estimation and Influence of Selected Methods of Financial Administration on its Reduction

2021 ◽  
Vol 12 (1) ◽  
pp. 45-60
Author(s):  
Lukáš Moravec ◽  
Jana Hinke ◽  
Monika Borsiczká
Keyword(s):  
Czech Republic ◽  
Gross Domestic Product ◽  
Value Added ◽  
Domestic Product ◽  
National Accounts ◽  
Value Added Tax ◽  
The Czech Republic ◽  
Tax Gap ◽  
Tax Fraud ◽  
Financial Administration

Abstract The aim of this contribution is to quantify the influence of selected methods on elimination of value added tax gap in the Czech Republic within the researched period 2015–2016. To find a possible share of influence of the VAT control statement on tax fraud following priority methods were set: VAT control statement invitation, initiatives from pairing check reports, tax checking and procedures for doubt removal. By quantifying these methods, the values of theoretical benefits are measured and further compared with value added tax gap within the researched period. To set the VAT gap estimation a method was used that calculates via cleaning gross domestic product based on the database of national accounts. By using this approach it was found out that with the influence of selected methods of financial administration there was a tax gap decrease in 2015 by 5.54% and for 2016 by 4.00%.

scholarly journals On the authenticity of COVID-19 case figures

PLoS ONE ◽  
2020 ◽  
Vol 15 (12) ◽  
pp. e0243123
Author(s):  
Adrian Patrick Kennedy ◽  
Sheung Chi Phillip Yam
Keyword(s):  
Empirical Evidence ◽  
Fraud Detection ◽  
Zipf’S Law ◽  
World Health ◽  
Benford’S Law ◽  
Surveillance Systems ◽  
Zipf's Law ◽  
Benford's Law ◽  
Formal Statistical Analysis ◽  
Health Organization

In this article, we study the applicability of Benford’s law and Zipf’s law to national COVID-19 case figures with the aim of establishing guidelines upon which methods of fraud detection in epidemiology, based on formal statistical analysis, can be developed. Moreover, these approaches may also be used in evaluating the performance of public health surveillance systems. We provide theoretical arguments for why the empirical laws should hold in the early stages of an epidemic, along with preliminary empirical evidence in support of these claims. Based on data published by the World Health Organization and various national governments, we find empirical evidence that suggests that both Benford’s law and Zipf’s law largely hold across countries, and deviations can be readily explained. To the best of our knowledge, this paper is among the first to present a practical application of Zipf’s law to fraud detection.

Value Added Tax Fraud

2018 ◽  
Author(s):  
Marius-Cristian Frunza
Keyword(s):  
Value Added ◽  
Value Added Tax ◽  
Tax Fraud
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