Aggressive tax audits are expected in the year ahead
At the end of last year, the government issued many tax measures to spur the economy. Of course, the consequential reduction in government revenue results in the need to find other sources of income to compensate. It seems that tax audits will be used as
Last month, the Revenue Department signalled that it would increase the volume of tax audits through the formal tax audit process, so taxpayers can expect to receive a summons for a tax audit instead of an invitation letter if the department has any desire for additional clarification.
For the past several years, the department tended not to issue a summons asking for a formal audit of accounting and tax records. Instead, it performed an operational review after an invitation letter. The taxpayer was asked to submit documents and answer specific questions.
By not using a summons, the tax authority expected to be able to close cases faster by asking the taxpayers to amend their tax returns voluntarily and pay additional taxes and surcharges without a penalty.
However, the review time was sometimes longer than expected, especially in cases where a conclusion could not be reached between the taxpayer and the tax authority, resulting in extensive negotiations.
Effective from the last week of December, many taxpayers with outstanding cases with the tax authorities have received summonses for formal tax audits from the department if there had been disagreement with the tax authorities over voluntarily amending their tax returns.
The department also said a special team had been established in each local tax-office area to conduct audits under tax summonses. This strategy was initiated in December.
It is also anticipated that in the year ahead, the department will be more aggressive in its tax audits, especially in cases of tax-refund requests.
If taxpayers receive a summons, they must prepare for a field audit by the tax authority, which will normally cover all types of taxes.
There may be additional costs in the form of a penalty assessment up to 100 per cent of the additional corporate income tax payable, which is not imposed if additional tax is settled by voluntarily filing of an amended tax return through the operational review under the invitation letter.
This is a key difference between an audit under a summons and a tax review under an invitation letter – the summons results in additional costs from a formal tax audit.
Last, an appeal against the notice of tax assessment can be made to the Appeal Committee. Failing a successful resolution at this level, the taxpayer may appeal to the Tax Court.
In this regard, if the taxpayer anticipates a disagreement during the tax audit, the taxpayer should prepare supporting evidence for when the case is taken to the appeal committee and the court.
Benjamas Kullakattimas is tax partner in charge , KPMG Phoomchai Tax Ltd.
