Tax structures already have sophisticated systems which control how different taxable persons fulfill their obligations for all types of taxes, make analysis of tax data and help to define the ways to change fiscal policies. Conceptualizing more complex ways for taxes, collection of obligations, large scale tax avoidance and fiscal evasion would have been impossible without the help of Information Technology (IT) systems.
The essence of an IT system is a tax administration program. The system is conceived as a unique structure which registers every relation between taxable persons and Idaho tax id number, follows and assesses tax declarations by taxpayers violating obligations, etc. The program allows extracting a series of reports which facilitate the work of the tax administration to follow the collection of obligations from taxpayers.
The IT system is programmed in the language of a special name. At the bottom of the application lies a relational database which stores all the detailed data on a taxable person as well as all the transactions the taxpayer makes with the tax administration. Created for every taxpayer at the moment of registration with the tax authorities, the personal tax number (PTN) is their unique identification. The same PTN can never be given to different taxpayers. The system is constructed in compliance with legal provisions for the administration of taxes.
Every taxpayers exercising economic activity subject to these taxes has the following relations with the tax administration: register for taxes, prepare and file the tax declaration, make payment of tax obligations in the branches of the bank and inform the tax administration about every change in his registration. The IT system follows these stages of relations with taxpayers: register the taxpayer and assigns the PTN, process the taxpayer’s declarations and payments made in the banks, calculate eventual obligation unpaid by the taxpayer, generate reports to follow taxpayers which fail to fulfill their obligations or “forget” to file their declarations, generate Reminders and Obligation Notices, applies penalties for late payments and declarations, calculate interests on unpaid obligations and pursues penalties applied by inspectors.
These forms are kept in single copies. The inspector preparing the form should be sure to complete it correctly, according to the procedures and when necessary, obtain the signatures of persons authorized to allow modifications. Only persons authorized by the system with authorized passwords can enter these forms into the database.
The following forms are used for these processes:
a. Re-assessment of Declaration and Payment Forms
This form is necessary to re-process a tax period previously processed by the system due to changes as compared to the original declaration. Additional and incorrect information observed during an audit or presented by the taxpayers themselves provides the basis for the re-assessment of this period.
b. Penalty Form
ITSystem automatically calculates the penalties and interests on payment delays or incomplete payments. These penalties are automatically added to the assessment of the tax period. In addition to these penalties, there are cases when auditors manually apply penalties to taxpayers. These penalties apply to cases when the taxpayers are not registered, have not issued any invoice, have issued an invoice and is not registered for VAT or makes fake declarations. The inspectors enter into the database all these penalties reflected in respective forms and completed on the basis of the violation on the part of the taxpayer. They represent a second penalty, independent from the penalty in the IT System. In such cases, due attention should be attached to the way the data are completed and entered into ITSystem, since this action can penalize the taxpayers twice for the same violation.
Another function of this from is for pardoning penalties. The system reviews the penalties and interests and automatically applies interests on unpaid taxes or late payments. Penalties on late payments and late filing are automatically calculated by the system if the taxpayers fail to make the filing and payment on the established deadline. In special cases, penalties can be pardoned. Such pardon should be done with much care and only by authorized persons. When applying such pardon, the balance of the company’s accounts is modified to reflect the pardoned amount. When this pardon is equal to the taxpayers’ penalties and interests for the period in question, the system can no longer automatically track the taxpayers for settling the debts.
c. Updating the Status of Taxable Person
When a taxpayer is selected for audit, this fact should be presented to the database with details on type of tax audited for the taxpayer and the tax period that has been audited. After the taxpayer has been audited, his status should be updated to reflect the respective results of the audit.
Use of taxpayers’ IT system
When the taxpayer’s accounting system is computerized, the auditor asks the company manager to provide a written confirmation of the reliability of programming procedures. The auditor can take into consideration the level of availability for every accounting document as required by the law. If the auditor has to audit a considerable volume of data, if there is no IT control module or if a high security level is required, involving all the items in an analytical analysis, it would be effective to use audit techniques with the support of IT programs.