(A)

(i) Promote voluntary compliance: The primary role of the audit programmer is to promote voluntary compliance by taxpayers with the tax laws. It seeks to achieve this by reminding taxpayers of the risks of non-compliance and by engendering confidence in the broader community that serious abuses of the tax law will be detected and appropriately penalized.

(ii) Detect non-compliance and brings additional tax revenue: By concentrating on major areas of risk (e.g. unreported cash income) and those individual taxpayers most likely to be evading their responsibilities, audits may bring to light significant understatements of tax liabilities, and additional tax revenue collections.

(iii) Gather information on the “health” of the tax system (including patterns of taxpayers’ compliance behavior): The results of normal audit activity may provide information on the general well-being of the tax system. Audits conducted on a random basis can assist overall revenue administration by gathering critical information required to form judgments on overall levels of tax compliance—that over time can be used to identify trends in overall organizational effectiveness—and to gather more precise information that can be used to inform decision-making on future compliance improvement strategies, to refine automated risk-based case selection processes, and even support changes to tax legislation.

(iv) Gather intelligence information: Audits may bring to light information on evasion and avoidance schemes involving large numbers of taxpayers that can be used to mount major counter-abuse projects.

(v) Educate taxpayers: Audits can assist clarify the application of the law for individual taxpayers and to identify improvements required to record-keeping and thus may contribute to improved compliance by taxpayers in the future.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             (B)

a) Taxpayers’ record-keeping obligations: Taxpayers are obliged to keep books and records. The books and records must be sufficiently comprehensive for taxable income to be determined or that the accuracy of VAT due or claimed to be verifiable. The books and records should be recorded in the language of the country where the taxpayer has his head office or in the language of the country where the subsidiary or permanent establishment resides. Where the books and records are in a different language, the auditor can ask for a certified translation and the taxpayer must cover the costs of the translation.

b) Giving tax officials access to third party information sources: Legal provisions should give an auditor access to all tax-relevant information during an audit. Tax-relevant information is any piece of information (such as books and records, bank statements, trade letters, contracts etc.), which is essential to determine the correct amounts of tax due. Domestic information is information kept in the home country. It must be available to the auditor during an audit at his request within an acceptable time, whether in paper form or electronically.

c) Obtaining information from other countries’ revenue bodies: The nature of audit activities is changing from working exclusively in the domestic arena to doing audits on international issues. One means of verifying information involving other countries is through simultaneous bilateral or multilateral audits. For many revenue bodies the exchange of information is organised through liaison units. These units process the requests of foreign tax authorities; supervise the restrictions on the kinds of information that may be exchanged, and in some cases, the fact that exchange can only take place in important cases.

d) Powers of revenue bodies to amend returns: The power to audit must be supported by a power to amend the original tax return. The report made by the auditor at the conclusion of the audit will form the basis for any reassessment.

e) Sanctions for non-compliance: The Revenue Administration Act 2016, Act 915 allows tax auditors to impose penalties for refusal or failure to furnish an answer or to provide documents or relevant papers to an auditor and without such legal sanction it would be very difficult to conduct any effective audit activity. These sanctions affect the taxpayer and/or any third party approached for information. The levels of sanction range from monetary penalties related to the documents required to imprisonment.