Use of Information Sources for Tax Audit Purposes

By Eduart Gjokutaj

Sources of information from other tax regimes

More or less, all taxes tend to interact with each one another. An auditor when is auditing a particular company self declaration for VAT will understand the impact of excise or customs duties on VAT circulation as well as the profit made by income tax payments. The cost of tax payments is usually a deductible cost when calculating the tax obligation for business incomes. However, when reducing tax payments, the deduction should be equal to the current payment of the tax, for example, reduction for a given tax regime should be equal to the payment of another. A common example of the mismatch in a tax declaration is when the declared turnover for profit tax purposes is not equal to the declared turnover for VAT.

Sources of information from Local tax Offices

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Local Tax Offices send requests for verification of other routine transactions based on the condition that a person’ sales should be another person’s purchases. In addition to this, an audit conducted in a business in another Local Tax Office often casts certain suspicions on the clients or suppliers of this particular business, certain references for which need to be checked and confirmed.

Information from bank statements and their matching with information from cash registry

Incomes from sales in the business process or from sales of fixed assets should either be deposited in a bank or be kept cash in the cash registry by taxpayers. The auditor can determine:

1. Fixed assets at the beginning of the taxpayer’s economic activity (including undeclared amounts in money)
2. Fixed assets at the end of the activity (including amount in the cash registry)
3. Costs for developing economic activity (including cash withdrawals by the owner)

By calculating, 3 + 2 – 1 = incomes from business.

Purchases and costs incurred by large businesses usually go through bank accounts. Matching these costs with the bank account may discover purchases which are hard to explain and lead to other income-generating activity areas. Mismatch between purchase costs and deductible costs may require further clarifications in terms of higher declared costs or lower purchase costs (for the purpose of hiding purchases).

Information from financial statements

All companies operate in sectors with some specific characteristics, which usually provide the basis for analyses of their main reports or trends, for commercial or government obligations. The analysis of trends in key sectors and their comparison with the audited taxpayer can discover unexpected differences which need further clarification and verification.

The auditor should make specific analyses of reports by audited businesses in order to look for irregularities during the preliminary audit inspection and during the programmed audit. Economic sectors liable for VAT on sales are classified in groups according to the Classification Code for Standards in Industry. Each classification has certain characteristics of taxpayers’ activity which can help form a clearer picture in terms of average

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