Abstract:
Underground Economy (UE) is refers to the unpaid tax from an individual or an
organisation. There are numerous methods that have been used to measure the size of
UE such as tax auditing, MIMIC (Multiple Indicators and Multiple Causes) model,
monetary approach and Type-1 Fuzzy Logic System (T1 FLS). This research
discussed and proposed a new model to measure the size of UE using Interval Type-
2 Fuzzy Logic System (IT2 FLS) as an alternative approach to solve the uncertainty
data problem. ITF FLS is a three dimensional approach where the membership
function involves the z-axis. The third dimension gives extra degrees of freedom to
IT2 FLS in solving the uncertainty problem. In this study, the properties of T1 FS,
IT2 FS and Type-2 Fuzzy Set (T2 FS) are discussed and then applied T1 FLS and
IT2 FLS model in measuring the size of UE in Malaysia over the period of 2001 to
2010. The efficiency of IT2 FLS model, flow and trend of UE in Malaysia are also
discussed.
