2. A national revenue commission performs audits on public companies to find and fine tax defaulters. To perform an audit, a tax inspector visits a company and spends a number of days scrutinizing the company’s accounts. Because it takes so long and relies on experienced, expert tax inspectors, performing an audit is an expensive exercise. The revenue commission currently selects companies for audit at random. When an audit reveals that a company is complying with all tax requirements, there is a sense that the time spent performing the audit was wasted, and more important, that another business who is not tax compliant has been spared an investigation. The revenue commissioner would like to solve this problem by targeting audits at companies who are likely to be in breach of tax regulations, rather than selecting companies for audit at random. In this way the revenue commission hopes to maximize the yield from the audits that it performs.

To help with situational fluency for this scenario here is a brief outline of how companies interact with the revenue commission. When a company is formed, it registers with the company registrations office.

Information provided at registration includes the type of industry the company is involved in, details of the directors of the company, and where the company is located. Once a company has been registered, it must provide a tax return at the end of every financial year. This includes all financial details of the company’s operations during the year and is the basis of calculating the tax liability of a company. Public companies also must file public documents every year that outline how they have been performing, details of any changes in directorship, and so on.

a. Propose two ways in which predictive data analytics could be used to help address this business problem.10 For each proposed approach, describe the predictive model that will be built, how the model will be used by the business, and how using the model will help address the original business problem.

b. For each analytics solution you have proposed for the revenue commission, outline the type of data that would be required.

c. For each analytics solution you have proposed, outline the capacity that the revenue commission would need in order to utilize the analytics-based insight that your solution would provide.