Application of interpretable artificial intelligence for sustainable tax management in the manufacturing industry

Han, Ning, Xu, Wen, Song, Qian, Zhao, Kai and Xu, Yao 2025. Application of interpretable artificial intelligence for sustainable tax management in the manufacturing industry. Sustainability 17 (3) , 1121. 10.3390/su17031121

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Abstract

The long-term development of the manufacturing industry relies on sustainable tax management, which plays a key role in optimizing production costs. While artificial intelligence models have been applied to tax-related predictions, research on their application for predicting tax management levels is quite limited, with no studies focused on the manufacturing industry in China. To enhance digital innovation in corporate management, this study applies interpretable artificial intelligence models to predict the tax management level, which helps decision-makers maintain it within a sustainable range. The ratio of total tax expense to total profits (ETR) is used to represent the tax management level, which is predicted using decision trees, random forests, linear regression, support vector regression, and artificial neural networks with eight input features. Comparisons among the developed models indicate that the random forest model exhibits the best performance in terms of prediction accuracy and generalization capability. Additionally, the Shapley additive explanations (SHAP) technique is integrated with the developed model to enhance the interpretability of its predictions. The SHAP results reveal the importance of the input features and also highlight the dominance of certain features. The results show that the ETR from the previous year holds the greatest importance, being more than twice as significant as the second most important factor, whereas the effect of board size is negligible. Moreover, benefiting from the local interpretations using SHAP values, this approach aids managers in making rational tax management decisions.

Item Type:	Article
Status:	Published
Schools:	Engineering
Additional Information:	License information from Publisher: LICENSE 1: URL: https://creativecommons.org/licenses/by/4.0/, Start Date: 2025-01-30
Publisher:	MDPI
Date of First Compliant Deposit:	13 February 2025
Date of Acceptance:	27 January 2025
Last Modified:	13 Feb 2025 16:45
URI:	https://orca.cardiff.ac.uk/id/eprint/176173

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