FRAMEWORK OF TAX AUDIT AND INVESTIGATIONS
OVERVIEW OF TAX AUDIT
Tax audit and investigations has gained much traction in recent years due to the increasing number of tax defaulters and evaders as well as the quest of government to drive economic growth mainly through taxation revenue. In this vein, tax audits are conducted to examine the tax returns and supporting documentations of an entity or individual to ensure the accuracy and completeness of whatever is filed. Tax audits are conducted in line with the tax laws of the country.
OBJECTIVES OF TAX AUDIT
The primary objectives of tax audits are;
• To administer and enforce the tax programme in an equitable manner
• To determine proper reporting of Tax payers audited
• Tax education of tax laws and regulations
• Promote voluntary compliance
• Revenue maximization
CONCEPT OF TAX INVESTIGATION
What is tax Investigation?
✓ Is the gathering of admissible evidence
✓ To recover tax undercharged
✓ Where there is suspicion of tax avoidance, non-compliance and evasion
✓ To enforce criminal aspect of revenue laws.
Some Criminal Activities that trigger a Tax Investigation
✓ Deliberately under-reporting or omitting income
✓ Overstating the amount of deductions
✓ Keeping two sets of books
✓ Making false entries in the books and records
✓ Claiming false deductions
✓ Operating with fake documents
✓ Hiding or transferring assets or income
DIFFERENCES BETWEEN A TAX AUDIT AND A TAX INVESTIGATION
A tax Audit
- Audit is mandatory under law
- Is planned and prior information is sent to the tax payer
- It is not carried out on previously audited financial statements unless in a few exceptional cases. It starts from where the last audit ended.
- Examination of taxpayer’s records, accounts and financial affairs to ascertain the tax payer’s compliance.
A tax Investigation
- There is no legal obligation involved
- Does not require prior information on what is going to be investigated
- Can override audit to accomplish certain objectives
- Collect evidence which may satisfy some conditions affirmed here under; a criminal violation, loss of Government revenue and intent to deny Government Revenue.
