Communication to Eliminate Tax Risk –
The Communication Questions
THE QUESTIONS PUT to the operations divisions in the business that will require regular review, as part of the Tax Risk Management strategy, will include the following:
• Do you know which perks or fringe benefits are subject to VAT?
• Have you accounted for VAT on any perks or fringe benefits?
• Have you exported any goods or services?
• Have you imported any software over the Internet and accounted for the VAT?
• Are your export documents 100% compliant with the tax regulations? Have you actually checked? Where are the documents kept?
• How accurate are your invoices for claiming VAT input tax credits? Have you double-checked that the supplier vendor VAT numbers are correct?
• Have you paid any reimbursements to employees over the last period?
• Have you created, transferred balances, or created any accounting provisions? What are they?
• Have you accounted for any doubtful or bad debt write-offs?
• Do you meet regularly with your BO/CFO or tax manager to discuss any potential tax risks?
• Have you created, exercised, or disposed of any options?
• Do you have any low-cost assets that could be written off for tax purposes in the current year of assessment?
• Have you acquired or disposed of any assets, or do you intend to do so in the next quarter?
• Will any of the above disposals or acquisitions require any permission or registration with a federal or government department?
• Have you conducted an internal audit, including a review of tax risk areas, in the last twelve months?
• Do you have any outstanding IRS inquiries?
• Have you done an Innermetrix© profile in the last six months?
These questions should also be put to the transactions and financial accounting sectors of the business from time to time, to answer and review the answers given by the operations managers. In this manner, consistency in the business toward tax triggers in the business can be constantly monitored.
Results should also be analyzed by the tax team and reported to the audit committee from time to time.
This type of detail will not be necessary for small businesses that have entered the tax-radar program.
The execution of this process for a large corporation is best undertaken through an adaptation or extension to the IT intranet set up for the business to facilitate any IT-driven interaction between employees in the business. Any such intranet system, facilitating the transfer and exchange of tax information or related information, should be made with the appropriate security structure in place to ensure secrecy and confidentiality at all times, with overall access only limited to the CEO, BO/CFO, and tax manager. Such a system can also record the ongoing tax issues in the business. The design of such a system is set out in appendix 5.