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Q：
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What is the difference between field audit and investigation?
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A：
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The work of field auditors entails site visits to business premises and examination of accounting records of taxpayer to provide them more thorough understanding of business operations. Meanwhile, investigation officers are responsible for conducting in-depth investigations where tax evasion is suspected.
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Q：
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How will IRD select cases for initiation of field audit or investigation?
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A：
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IRD mainly target at areas where non-compliance is apparent or compliance problems are prevalent in an industry. Cases may also be selected on a random basis and rigid case selection criteria are not generally applied.
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Normally, what are the reasons to be selected for field audit or investigation?
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A：
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Field audit or investigation is normally initiated where characteristics or indications of non-compliance are present, such as the following:
The auditors’ report in respect of the accounts of an incorporated business is heavily qualified;
A business has an unreasonably low turnover or profit (having regard to factors such as the nature of the business, its location and type of customers);
Persistent failure to lodge or submit tax return on time in past years;
Failure to maintain proper business records;
Failure to provide material information as requested by IRD.
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Q：
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How will IRD calculate the back duty assessments because of the inadequate or complete absence of reliable records?
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A：
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In such cases, back duty assessments generally have to be based on indirect methods. In this regard, more commonly used methods are the “Assets Betterment Statement Method”, the “Bank Deposits Method”, the “Business Economics (Percentage Computation) Method” and the “Projection Method”. The method to be used depends on the circumstances of the case.
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Q：
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Is there any distinction between field audit and investigation in relation to the imposition of penalties?
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A：
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No, it would be the same. In assessing penalties, IRD will take into consideration factors such as the gravity of the case, the loss suffered by IRD, the co-operation given by the taxpayer, the sophistication of the taxpayer’s business and the degree of irregularity or whether scheme was deliberate or designed to evade tax.
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FAQ
