Vietnam Taps Big Data and AI to Combat Sophisticated E-Invoice Fraud

The proliferation of invoice trading and tax fraud in the digital sphere presents significant challenges to Vietnam's tax administration and revenue collection efforts. In response, tax authorities are increasingly adopting big data technologies to analyze the vast information generated by the e-invoicing system, enabling more effective risk management and early detection of violations.

According to statistics from the tax authority, 100 percent of eligible businesses, organisations, and individual business operators have transitioned to e-invoices. The system has received and processed approximately 23.3 billion e-invoices since its implementation. Notably, 463,855 business establishments have registered to use e-invoices generated from cash registers, a 474 percent increase compared to the same period last year.

Nguyễn Thế Bình, chief accountant at Quang Ngai Sugar Joint Stock Company, noted that the e-invoice rollout is one of the tax administration's most significant digital transformation achievements. He said that beyond altering tax declaration methods, e-invoices help businesses optimise accounting, data management, and system administration, while allowing tax authorities to enhance management efficiency.

However, the substantial volume of data also creates major challenges in fraud control. While violations previously involved paper invoices, the electronic environment permits invoices to be issued and circulated almost instantaneously. This allows fraudsters to conduct thousands of transactions in a short period, overwhelming traditional inspection methods. In recent years, law enforcement and tax authorities have uncovered several large value-added tax invoice trading networks.

The General Department of Taxation (GDT) acknowledges that while e-invoices have created a vast data source for modern tax administration, the high number of daily transactions and increasingly sophisticated fraud schemes require an accelerated adoption of digital technologies, AI, and big data analytics to identify risks early.

"The Fourth Industrial Revolution drove a strong shift from traditional tax administration to data-driven governance," said Nguyễn Thu Trà, head of the GDT's Compliance Management and Taxpayer Service Division. She explained that instead of relying on scheduled audits, the tax authority is gradually transitioning to a risk management model based on data analysis.

Technology experts state that big data’s primary advantage is its capacity to collect, store, and process immense volumes of information from multiple sources. Beyond invoice data, the system can integrate information from business registration databases, banking systems, customs authorities, social insurance records, and tax compliance histories to build comprehensive business profiles and identify unusual patterns.

A highly effective application is business network analysis. Rather than examining companies individually, big data can map relationships among thousands of businesses through invoice transactions and financial flows. This allows authorities to detect clusters of companies that frequently trade invoices, share addresses or legal representatives, or exhibit other unusual financial connections. Experts view this as a powerful tool for dismantling organised invoice trading networks, which are often concealed by complex transaction layers.

The use of big data is also facilitating a shift from a post-audit approach to a proactive monitoring and pre-audit model. Previously, many fraud cases were discovered months or even years after they occurred. Now, suspicious transactions can be identified almost immediately after an invoice is issued. This significantly reduces the risk of budget revenue loss and improves the efficiency of government resources by allowing authorities to focus on high-risk entities instead of conducting broad inspections, thereby reducing the burden on legitimate businesses.

Despite these advancements, applying big data in tax administration faces numerous challenges. Data remains fragmented across various ministries and agencies and has not been fully standardised. Data integration and sharing mechanisms require further improvement. Furthermore, substantial investment is needed in technological infrastructure, data security, and the development of a highly skilled workforce.

GDT Director General Mai Xuân Thành said the tax sector has made important progress in digitising its administration through e-invoices and other electronic platforms. However, he cautioned that the sector risks falling behind the rapid evolution of global tax governance if it rests on its current achievements. "It is necessary to confront existing realities, accurately assess current gaps, and recognise that digital transformation is not merely a technological task, but a comprehensive restructuring of tax administration methods," he added.