Turkey joins the movement to deploy AI machine learning to take on VAT and tax fraud
Turkey is set to leverage artificial intelligence (AI) in its efforts to combat tax evasion, following in the footsteps of countries like Greece and the Austria. The Treasury and Finance Ministry has announced this initiative, emphasising that AI will play a key role in auditing companies and identifying cases of tax avoidance and fraud. Currently, many Turkish companies report minimal or no profits, with more than half announcing outright losses or “symbolic” gains.
The Ministry is looking at several areas where AI can assist it, including:
- Predictive Analytics – using established AI and machine learning models for pre-processing data
- Advanced Analytics – other analysis based on other tax reporting requirements
- Tax Analytics – looks a consolidating wider tax data, including salary data.
- Customs Analytics – risk profiling; customs-related support; and international fraud cases.
Many other examples of tax authorities adopting AI VAT fraud measures have been published.
Turkey lags behind other OECD countries in terms of tax collection relative to its economic output, and the tax authorities believe that cutting-edge technology can help close this gap. They have in the past highlighted the importance of increasing compliance, noting that AI-powered audits could help authorities spot wrongdoing more effectively.
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Traditional audit fail in construction and other fraud-prone sectors
For instance, in recent years, large-scale tax fraud schemes in Turkey have involved companies underreporting revenues, inflating expenses, or creating fake invoices to reduce their taxable income. A notable case was the 2019 investigation into several construction firms accused of evading millions in taxes through false bookkeeping. Detecting such fraudulent practices can be challenging for traditional audits, which often rely on human oversight and random checks.
AI could revolutionize the detection of these schemes by analyzing vast amounts of data from tax filings, financial records, and even social media. Advanced algorithms could flag suspicious patterns, such as inconsistencies between a company’s reported earnings and its market activities, or unusually high expenses relative to industry standards. By automating these processes, AI could help authorities conduct more comprehensive and accurate audits, reducing the chance for tax evaders to slip through the cracks.
