Implementing Indirect Tax Fraud Analytics for Enhanced Revenue Collection

Combating Indirect Tax Fraud with AI-Powered Analytics

Industry:  Government Tax Administration

Headquarters: Eastern Europe

Coverage: National Client

Background

An Eastern European Tax Office, responsible for overseeing more than 12 million taxpayer entities, manages tax collection across multiple regions with 6,500 employees in 168 locations. Facing 30 years of legacy data stored in siloed systems, the office struggled with inefficiencies, manual cross-system tasks, and an inability to connect or collaborate effectively with other tax systems.

Business Challenge

The Serbian Tax Office had a significant VAT gap due to fraud, evasion, and avoidance schemes.

Key challenges included a lack of integrated fiscal information environments, difficulty ingesting and managing large, complex tax data sets, insufficient enforcement resources to combat sophisticated schemes, and limited holistic data from company registers and citizen information for forensic analysis and audits.

mLogica’s Approach

mLogica delivered the CAP*M Tax Fraud Analytics system as part of a comprehensive modernization effort, focusing on real-time data ingestion, AI-driven fraud detection, and enhanced enforcement. The implementation included:

Consolidating all data sources into a single repository for a holistic view, including VAT transactions, tax returns, history, and third-party supplier chain information.
Integrating AI-powered advanced analytics for real-time monitoring of transactions, risk analysis to identify fraud candidates, anomaly detection.
Enabling the blending of data from external sources, such as banking data, to provide comprehensive context and map connections between cartels and persons of interest.
Implementing alerts and reporting features for live tax threat notifications, automatic distribution to stakeholders (including EU authorities), and dashboards for forensics and audits, allowing drill-down to individual transactions and searches across trillions of records in seconds.
Enhancing enforcement efficiency through directed inspections, reduced false positives, and portable forensic insights for inspectors, all while processing fraud detection in real-time using advanced AI algorithms.

This approach ensured seamless integration with existing systems without interrupting operations, sifting through large volumes of data to identify patterns, relationships, and anomalies.

Strategic Outcome

The deployment yielded transformative results:

VAT collections increased by 117% year-over-year, becoming 70% of new tax revenue and continuing to grow, with forecasts reaching €452 million annually, which was up 11% and representing 52% of new tax revenues.

Record number of tax evasion cases prosecuted, including uncovering widespread non-compliance (e.g.: 65.5% of pharmacies violating fiscal invoice rules))

Improved automated enforcement, timely alerts to stakeholders, and suppression of unfair competition, gray economy, and non-recording of trade through real-time data analysis and risk flagging.

The Power Behind a Seamless Implementation

mLogica’s expertise in advanced analytics, data integration, and AI-driven solutions powered by CAP*M enabled the Eastern European Tax Office to overcome legacy challenges and achieve unprecedented efficiency in fraud detection. This collaboration not only boosted tax revenues and voluntary compliance but also provided a scalable platform for ongoing analytics, data quality governance, and evolutionary improvements, ensuring long-term objectives like equal taxpayer treatment and optimized resource allocation.