How do Tax auditors do their audit ?
1. They will check the purchase of goods and see whether sales are reported
(most of the time cost are fully recorded but sales are omitted to reduce profits)
Fraud
Serious fraud schemes may be discovered during tax audits where taxpayer substantially reduces its income tax by suppressing the revenue and overstating its costs and purchases.
In such instances, specialized tax investigation teams will be sent in to carry out tax investigation to detect tax
evasion.
Tax Audit Framework
Consequentially, in January 2007, the IRBM issued “Tax Audit Framework” and “Tax Investigation Framework” to answer the call from tax paying public for a more transparent tax audit and investigation processes. The ‘Tax Audit Framework” among others outlined the objectives of tax audit, and describes the rights and responsibilities of the tax auditors, taxpayers and the tax agents in tax audit.
Tax penalties
Late payment penalties of 10% + 5% are imposed on the amount of taxes due to IRBM.
This penalty is much lower as compared to the penalty imposed for non payment of income
tax i.e. 3 times of the tax payable.
Hence, tax audits also aim to detect non payment of income taxes as it is commonly used by taxpayers as illegitimate tax planning.
1. They will check the purchase of goods and see whether sales are reported
(most of the time cost are fully recorded but sales are omitted to reduce profits)
Fraud
Serious fraud schemes may be discovered during tax audits where taxpayer substantially reduces its income tax by suppressing the revenue and overstating its costs and purchases.
In such instances, specialized tax investigation teams will be sent in to carry out tax investigation to detect tax
evasion.
Tax Audit Framework
Consequentially, in January 2007, the IRBM issued “Tax Audit Framework” and “Tax Investigation Framework” to answer the call from tax paying public for a more transparent tax audit and investigation processes. The ‘Tax Audit Framework” among others outlined the objectives of tax audit, and describes the rights and responsibilities of the tax auditors, taxpayers and the tax agents in tax audit.
Tax penalties
Late payment penalties of 10% + 5% are imposed on the amount of taxes due to IRBM.
This penalty is much lower as compared to the penalty imposed for non payment of income
tax i.e. 3 times of the tax payable.
Hence, tax audits also aim to detect non payment of income taxes as it is commonly used by taxpayers as illegitimate tax planning.
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