Facing Tax Inspections and Audits in the right way (1)
Since 2020, with the economic downturn, many countries have taken a series of specific measures to strengthen tax collection and administration.
In March 2021, the General Office of the Central Committee of the Communist Party of the CPC Central Committee and the General Office of the State Council issued Opinions on Further Deepening the Reform of Tax Collection Administration, emphasizing the promotion of all-around changes in the concepts, ways, and means of tax law enforcement, service, and supervision, and proposing a series of pioneering reform initiatives.
Under the new tax administration pattern of “tax administration by numbers, tax management by numbers” (in Chinese “以数治税、以数管税”) in China, some high-net-worth individuals tend to be skeptical – the concerns are mainly focused on the tax management by big data.
So, what kind of attitude should we take to face the new tax administration pattern? Here we will sort out the issues from the perspective of tax inspection and tax audit and analyze the response ideas and attitudes in different situations.
- Main difference between tax inspections and audits
The main difference between tax inspections and tax audits is that they have different attributes, with tax inspections focusing on daily management and having certain tax service attributes and tax audits focusing on cracking down on tax violations, demonstrating the rigidity of law enforcement and not having service attributes.
Tax Inspection
Most of the daily tax inspection tasks come from the risk notice sent via the tax system. The system automatically sends risks when an enterprise has an abnormality in a certain indicator, and inspections are generally initiated by the competent tax office that interacts most frequently with taxpayers on a daily basis.
Tax Audits
Tax audits are initiated by the Inspectorate, which is a functional department in charge of tax audits, and basically has no service attributes.
The main common reasons for initiating a tax audit are:
- The upstream enterprise has been characterized as falsely issuing VAT invoices, and the enterprise has been subject to tax audit or co-inspection for accepting falsely issued VAT invoices.
- The upstream or downstream enterprise has been audited for tax evasion, and the enterprise has been requested to cooperate in the investigation because it is an important link in the business of the upstream or downstream enterprise.
- Tax audits triggered by reports.
- Random audits of key enterprises or key industries.
- Special audit on false invoicing or fraudulent export tax refund by joint enforcement of tax and police.
Whether it is tax inspection or tax audit, both have to verify based on tax law, they have strong commonality, but in terms of the rigidity of law enforcement, tax inspection emphasizes service while tax audit emphasizes law enforcement. Therefore, we should have different emphases when dealing with them.
Speaking of dealing with them, how to do and do in right way? Please keep following our next article.
Please feel free to contact us if you have any questions.
