2009 World Congress on Computer Science and Information Engineering
Fraud Detection in Tax Declaration Using Ensemble ISGNN
Kehan Zhang1 Aiguo Li2 Baowei Song1
1
Department of Marine, Northwestern Polytenical University, Xi'an, 710072, Shaanxi, China
2
Department of Computer Science and Technology, Xi’an University of Science and Technology,
Xi’an， 710054, Shaanxi, China
Abstract
Fraud detection in tax declaration plays an
important role in tax assessment. Using ensemble
ISGNN (Iteration learning Self-Generating Neural
Network) to solve the problem of fraud detection
in tax declaration is presented in this paper. An
ensemble ISGNN is trained using financial data of
sampled enterprises, and the trained ensemble
ISGNN is then employed to detect whether tax
declared by an enterprise is legitimate or not.
Experimental results show that proposed approach
is effective: classification precision of proposed
method is 96.7742% in 31 sample data, and it is
3.22 points higher than that of SGNN. The number
of samples to train ISGNN of ensemble ISGNN is
one third that of SGNN.
Keywords: ISGNN; Ensemble ISGNN; Fraud
Detection
1. Introduction
Fraud detection in tax declaration (FDTD) plays an
important role in tax assessment. According to the
results of FDTD, administration of taxation decides
what the key enterprises for tax detection are. However,
factors that affect FDTD are complex, so FDTD is a
challenge. An approach of FDTD based on SGNN was
proposed by Wang et al [1]. They showed that their
method has higher classification precision than that of
C 5.0.
SGNN (Self-Generating Neural Network) has been
used in many fields such as classification, clustering,
978-0-7695-3507-4/08 $25.00 © 2008 IEEE
DOI 10.1109/CSIE.2009.73
prediction, and recognition for the sake of their
efficiency [2]. ISGNN (Iteration learning Self-
Generating Neural Network) is an improved method
based on SGNN, which cuts down the size of SGNT
and improves classification precision [3]. Using
ensemble ISGNN to solve the problem of FDTD is
presented in this paper. The experimental results show
that this method is more efficient than that of SGNN
on classification precision. Classification precision of
proposed method is 96.7742%, and is 3.22 points
higher than that of SGNN.
2. Related work
SGNN was first proposed by Wen in 1992[4]. Inoue
and Narihisa then did many researches based on SGNN,
and showed that SGNN was efficient in classification,
clustering, prediction, and recognition [5, 6]. SGNN
avoid these tricky conditions as follows: (1) the
quantity of the network layers, (2) the quantity of the
neurons in each layer, (3) connecting weights among
consequent layers.
The method of training SGNN is to generate a Self-
generating neural Tree (SGNT) from training sample
data. After all training samples are inserted into the
SGNT as leaf neurons; the SGNT has been finally
generated. The attributes of the training samples are the
weight of the leaf neurons while the weights of all non-
leaf neurons are the mean value of all its children.
SGNN would dynamically decide the weight among
consequent layers in SGNT and the structures of neural
networks. The learning process of SGNN has two main
steps: generating and optimizing SGNT.
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 However, the number of node neurons in SGNT is
too large to improve the classification precision and it
requests larger memory room. That is a shortage of
SGNN. Li et al proposed an improved method named
ISGNN based on classical SGNN. ISGNN is different
from SGNN in the process that ISGNN inserts a
training sample into a SGNT and optimizes and prunes
the SGNT simultaneously. In this way, ISGNN
decrease the number of SGNT and it is superior to
SGNN in classification precision.
3. Fraud Detection in Tax Declaration
Fraud detection in tax declaration (FDTD) is the tax
administration detects whether taxpaying of enterprises
is true or not, according to financial data of enterprises.
Wang et al gave formal descriptions of FDTD as
follows [1]:
Definition 1: x is a set of D enterprises which
belong to same area, same industry and in the same
level, x = ( x 1 , x 2 , … , x D ) . Here the levels of
enterprises have two classes: common taxpayer and
uncommon taxpayer.
Definition 2: E is an attribute set which concludes
the financial information of enterprises, which declared
taxpaying, E = (e 1 , e 2 , , e q ) .
Definition 3: V is a sample data set of the financial
information of enterprises, which declared taxpaying.
⎡ v1 ⎤ ⎡ v11 v1q ⎤
⎢ ⎥ ⎢ ⎥ They showed that neural network ensemble is superior
V =⎢ ⎥=⎢ ⎥ (1)
⎢⎣v D ⎥⎦ ⎢⎣v D1 v Dq ⎥⎦
Where vi is the input vector, which is composed
of xi ’s attributes; vij is an attribute value of xi ;
i = 1, 2 , D to learn ISGNN, the higher classification precision will
FDTD is to verdict whether vi is true or not
according to V.
4. Ensemble ISGNN
4.1 ISGNN
The learning process of ISGNN includes two main
steps: generating SGNT and optimizing the SGNT.
The performance of ISGNN is superior to SGNN,
because generating and optimizing SGNT are fused
when each training sample input the SGNT. In other
word, ISGNN inserts a sample data into a SGNT and
optimizes and prunes the SGNT simultaneously.
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Through HWP (Horizontally Well Placed) and VWP
(Vertically Well Placed), the SGNT basically reaches
an optimization [4]. In this way, SGNT of an ISGNN is
smaller than that of classical SGNN. Classification
precision of ISGNN is higher than classical SGNN.
Pseudo-codes are given below:
{
copy (n1,e1); // n1 is the root node.
for (i=2, j=2; i<=N; i++) {
insert (tree,ei);
vwp (tree);
hwp (tree);
merge (tree);
j++;}
}
insert (tree, ei): insert sample ei into the tree; vwp
(tree): make the current SGNT VWP; hwp (tree): make
the current SGNT HWP; merge (tree): pruning the
dead node[4].
4.2 Ensemble ISGNN
Neural network ensemble is a learning paradigm
where several networks are jointly used to solve a
problem. In the beginning of the 1990’s, Hansen and
Salamon showed that the generalization ability of a
neural network system can be signification improved
through combining some neural networks i.e. training
several neural networks and combining their results in
some way [7]. Latter, Inoue and Zhou et al have done
many reporters based on neural network ensemble.
to the individual network [8, 9].
ISGNN is employed as classifiers in neural network
ensemble to solve classification problem in this paper.
Massive data is difficult to manage for practical
application. The more training samples are employed
be won. But the time-consumed is unaccepted.
Ensemble ISGNN, proposed in this paper, has the
performance of meeting higher classification precision
and shorter times-consumed on classification problem
simultaneously.
The algorithm of ensemble ISGNN has 6 main steps
as follows:
① Finding out all different kinds of samples in
training dataset and labeling their classes. Then
classify all training samples according to their class
labels.
 ② Computing the proportion of each class of
samples in training dataset, named ratet , which is the
proportion of the t-th class samples in training dataset.
③ Deciding Q number samples to train an ISGNN.
④ Selecting the samples from each class randomly,
according to the ratet . Then combine these samples
to generate a new training dataset whose size is Q .
⑤ According to the step ④, use the new training
sample dataset to train an ISGNN. A SGNT is
generated.
⑥ Repeating the steps ④ and ⑤ . Number of
iteration is decided by CN . CN is the number of
ISGNN in ensemble ISGNN.
As soon as each ISGNN of the ensemble ISGNN
was trained independently, we can predict testing
samples’ class using the trained ensemble ISGNN.
Each testing sample was inputted to the ensemble
ISGNN and CN classification results were obtained. If
CN ISGNNs deduce the same results for one testing
sample, the final classification result is decided easily.
Otherwise, we find out winner among CN SGNTs.
The winner has the minimum distance between the
testing sample and leaf neurons among CN SGNTs.
The class of the testing sample is then decided as same
as the class of winner. Finally, we can predict class of
each sample in testing set by ensemble ISGNN and
calculate of classification precision of testing sample
set.
5. Experiments
We choose 61 sampled enterprises as experimental
objects to compare FDTD performances between
ensemble ISGNN and SGNN. These 61 enterprises are
representative in the retail business of Qingdao city in
China, whose business area ranges from dozens of
square meters to nearly 30,000 square meters, and
registered capital ranges from hundreds of thousands
RMB to over 230 million RMB, staff's number ranges
from several to several hundred people. The financial
information of each enterprise, such as registered
capital, business area, staff’s number, total project of
the appreciation amount of tax to be paid monthly, etc.,
composes an attribute set of each sample. Every
sample has 71 attributes as input vector and one
attribute as output vector. These 61 enterprises are
divided two sets: the first 30 enterprises are training
samples; the others are testing samples.
Precision of fraud detection is defined as follows:
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M − Err
Pr ecision = × 100 % (2)
M
Where Err is the number of samples that are wrong
classified; M is the number of testing samples. Here, M
is 31.
To verdict whether classification results are correct
or not as follows:
if yˆi − yi ≤ a , then the classification result is
correct. (3)
Where ŷ i is the real value of the i-th sample, which
is expressed 1or 0. Here, 1 denotes that the enterprise
is legitimate. 0 denotes that the enterprise is
illegitimate; ŷ i is the output of the i-th sample, which
is obtained from ensemble ISGNN; a is a constant,
whose scale is from 0 to 0.5. Here a is 0.4.
According to section 4.2, the result of FDTD used
ensemble ISGNN is obtained. The result of FDTD
used SGNN is obtained using the algorithm proposed
by Wang et al [1]. Table 1 lists FDTD results of
ensemble ISGNN and SGNN.
In the experiment, one third samples of training data
were employed to train each ISGNN in ensemble
ISGNN, and there are 3 ISGNNs in the ensemble
ISGNN. Experimental results show that classification
precision of ensemble ISGNN is 96.7742% in 31
testing sample data; it is 3.22 points higher than that of
SGNN, and the number of training sample data of
ensemble ISGNN is one third that of SGNN. Ensemble
ISGNN is efficient for FDTD. However, ensemble
ISGNN consumes more time than that of SGNN.
Table 1. Performence Evaluation of ensemble ISGNN and
SGNN with Tax Dataset
Number of
Precision Time-consume
Err Training sample
(%) ( sec )
data
Ensemble
96.7742 1 10 0.7110
ISGNN
SGNN 93.5484 2 30 0.1875
6. Conclusion
We propose a new method used a neural network
ensemble of ISGNN to solve the problem of FDTD
and give comparison results of ensemble ISGNN and
SGNN in this paper. We evaluate the performances
between ensemble ISGNN and SGNN according to
financial data of 61 sampled enterprises. Experimental
results show that ensemble ISGNN is effective:
classification precision is 3.22 points higher than that
of SGNN in 31 testing sample data, and the number of
training sample data is one third that of SGNN.
However, classification precision of ensemble ISGNN
is unsteady because of selecting training samples
randomly.
Acknowledgement
This work was partially supported by the Natural
Science Fund of Department of Education of Shaanxi
province，China under Grant No. 07JK314，and the
Science Research Fund of Xi’an University of Science
and Technology.
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