Interval type-2 fuzzy logic system model in measuring the size of underground economy in Malaysia

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.