An algorithmic approach to handle circular trading in commercial taxation system

摘要

Tax manipulation comes in a variety of forms with different motivations and of varying complexities. This paper deals with a specific technique used by tax-evaders known as circular trading. In particular, algorithms are defined for the detection and analysis of circular trade. To achieve this, the whole system is modelled as a directed graph with the actors being vertices and the transactions among them as directed edges. The proposed algorithm is run on the commercial tax dataset of the government of Telangana, India, which contains the transaction details of a set of participants involved in a known circular trade.