Ensuring Equitable Policies using AI

It is a well know maxim that if all tax payers remitted the

tax owed, a municipality would be able to lower the tax

burden for everyone. Unfortunately, some businesses use

subtle schemes to avoid paying what they owe. Identifying

these situations is not trivial. More importantly, falsely

identifying a business of fraud does not instill confidence

in the municipalities revenue collection practice.

SmartCloud utilizes AI to uncover, with confidence, the

activities that are truly fraudulent. SmartCloud’s Tax

Intelligence System (TIS) reasons over massive amounts

of data, in any format, to determine the existence of

fraudulent (or non-fraudulent) patterns or situations.

AI sustains performance

SmartCloud’s AI-driven TIS solution maximizes and

sustains the achievement of Key Performance Indicators

(KPI) by giving tax officials the situational awareness and

added intelligence they need to better detect and respond

to tax compliance issues in real time.

Our solutions model, simulate, forecast, optimize and

supervise the entire process. Solutions are built on

SmartCloud’s patented Cognitive Reasoning Engine

(CRex™), which merges the reasoning power of

artificial intelligence (AI), real-time monitoring

capabilities learned from industrial automation, Big

Data scalability and cloud computing.

Examples of the hundreds of situations that our TIS

solution monitors include:

Repeat Offenders: presence in a data pattern of

vendors, and/or their accountants and legal advisors,

who previously were audited or present in judicial

records of various types.

SITUATION AWARENESS

FOR COMPLIANCE

SmartCloud’s artificial intelligence

(AI) driven solutions enhance the

performance of commercial fraud

detection systems in real time.

SmartCloud solutions blend proven

AI reasoning techniques with

industrial automation methods to

deliver results with exceptional

performance and breadth of

coverage.

AI techniques include semantic

knowledge bases, goal-directed

agents, rules, machine learning,

Bayesian networks, and more.

ENDSLEY MODEL FOR SA

SmartCloud’s AI applications utilize

the Endsley Model for representing

what a domain expert needs for

situational awareness (SA).

SmartCloud has extended this model

to enable representation of how the

expert ‘thinks’ about situations and

determines actions needed to reach

goals. Our Intelligent Decision

Support product automates the

entire reasoning process, constantly

evaluating situations relevant to

achieving goals, and determining

impacts to key performance

indicators as well as attendant risks

and rewards.

Deploy within a secure cloud as a

SaaS solution to speed up delivery

and lower life-cycle costs.

Deployments can also be on-

premise or hybrid cloud.

Recovering 50% of VAT losses

Located in northeast Brazil on the Atlantic coast, Ceará

is the eighth largest Brazilian state by population with

over 8 million residents. Its fiscal authority, SEFAZ, is

deploying a SmartCloud TIS solution to detect retail

VAT fraud and non-

compliance. The solution will

monitor over two million point-

of-sale transactions per day

from approximately 60,000

vendors. When fully

deployed, the goal is to

prevent at least 50% of their

losses, totaling tens of

millions of US dollars in

recovered tax revenues. Additional benefits are to

include: fairer business competition, cutting cash flows to

those behind fraud, simplifying ability of retailers to

correctly pay VAT, and improving productivity of tax

analysts.

SmartCloud’s Tax Intelligence System reasons over any tax-

relevant business data to determine the likeliness of whether or not

businesses are engaging in fraudulent activities.

The TIS gives users the ability to pinpoint likely fraudulent

events among millions of transactions.

Magnitude of sales: data patterns with large volumes of transactions

and large sales amount within short periods of time.

Disallowed products: presence in the patterns of products that

cannot legally or weren’t historically sold, such as a laundry business

that suddenly starts to sell cell phones or computer chips.

Utility usage records: correlating business volumes with heat,

light, electricity, gas, water and other data to infer that a business’s

activity is greater than actual reported sales.

Geographic locality business comparison: mismatch of activity

in several locations where business should be uniformly active, for

example because of a holiday or sporting event, or other real-time

anomalies, one restaurant out to five in the same geo-location is not

showing 30% more business on a certain night.

Microsoft AppSource Trial Application

SmartCloud offers a free trial of the TIS on Microsoft AppSource. The

trial comes with a week’s worth of receipts produced via the TIS Vendor

Data Generator. Within this set of receipts are a number of fraudulent

events that involve one or more vendors. The trial includes the

following capabilities:

Replay the receipt collection: Users can control the replay of

data collection from any or all of the vendors and observe the real

time evaluation of the situational rules.

Fraud Detection : Situations are one of a number of non-

compliance events, evaluated by rules which determine when an

event has occurred. Changing parameters in the rules affects the

results.

Machine Learning: Cluster analysis is performed on the included

data set to detect new patterns of non-compliance. Based on the

learned pattners new situational rules can then be added to the TIS.

Rule Configuration: Users can adjust rule parameters in the

situational analysis to determine the impact on the quality of the

reasoning results relative to the goal of establishing a fair business

environment for vendors.

Revenue Impact and Forecast: An executive Tax Dashboard is

included to provide updated status on the revenue impact of

improved compliance monitoring on projected tax revenue.

Goal Directed Task Analysis Methodology

The trial TIS situational reasoning is developed through a goal-directed

task analysis (GDTA) methodology that establishes the most important

tax compliance situations to be monitored.

1

Promote the establishment a fair business environment for

all businesses

1

Discourage the practice of not paying required taxes by

catching the most egregious violators.

1 Reduce the amount of taxes lost to Sales Suppression.

1 Identify all vendors who clearly exhibit SS Fraud.

2

Look for a SS pattern of behavior from the receipts

collected.

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Goal Directed Task Analysis (GDTA) ensures that the tax

compliance monitoring goals of the TIS are the focal point of

processing. Information that does not influence achievement of a

goal is not required by the TIS

www.smartcloudinc.com || info@smartcloudinc.com 339-970-2775

The TIS trial app includes a Tax Dashboard where the revenue impact

from situational reasoning can be monitored as transactions are evaluated.

The TIS trial app includes the capability to perform

cluster analysis on data to detect new patterns of non-

compliance.