Application of Interpretable Artificial Intelligence for Sustainable Tax Management in the Manufacturing Industry

Ning Han, Wen Xu, Qian Song, Kai Zhao and Yao Xu ()
Additional contact information
Ning Han: Business School, Qingdao University of Technology, Qingdao 266520, China
Wen Xu: School of Engineering, Cardiff University, Cardiff CF24 3AA, UK
Qian Song: Business School, Loughborough University, Leicestershire LE11 3TU, UK
Kai Zhao: School of Engineering and Architecture, University College Cork, T12 HW58 Cork, Ireland
Yao Xu: Business School, Qingdao University of Technology, Qingdao 266520, China

Sustainability, 2025, vol. 17, issue 3, 1-17

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.

Keywords: digital innovation; sustainable tax management; artificial intelligence; Shapley additive explanation; strategic management (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2025
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.mdpi.com/2071-1050/17/3/1121/pdf (application/pdf)
https://www.mdpi.com/2071-1050/17/3/1121/ (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:gam:jsusta:v:17:y:2025:i:3:p:1121-:d:1580254

Access Statistics for this article

Sustainability is currently edited by Ms. Alexandra Wu

More articles in Sustainability from MDPI
Bibliographic data for series maintained by MDPI Indexing Manager ().