The economic activity of any company is associated with various types of financial risks, so the ability to effectively manage them in the modern world has become a necessary and important condition for the development of the company. In addition to price, currency and other risks, the main role is given to tax risks, because the conduct of any business activity involves the occurrence of tax liabilities, the size of which has a direct impact on net profit.
The concept of tax risks and their causes
The term “Tax risks” does not exist in the Russian legislation and there is no clear scientific definition of it, while the semantic meaning is known to almost every taxpayer. As a result of making incorrect decisions in taxation, there is a possibility of unfavorable conditions, as a result of which the organization may lose property or suffer financial losses and not receive the expected benefits.
In many ways, such situations are related to the fact that the management system of most firms and companies has many shortcomings.
Factors that have a direct impact on the occurrence of negative consequences:
- Lack of control over operational processes in the company.
- Not rational plans.
- Low-quality accounting of funds.
- Lack of qualified employees.
Tax risks can be divided into two main groups. The first includes the risks in which the actions of the taxpayer in identifying the facts of violations may entail financial losses. The second group includes risks that are not directly related to the loss of funds, but their occurrence also has a bad effect on the work of the company and can lead to the loss of expected benefits or the emergence of additional costs.
The first group of tax risks includes:
- Additional accrual of taxes, insurance payments and fees.
- Fines and penalties in case of violation in tax accounting.
- Refusal to refund VAT.
- Forced collection of unpaid amounts to the budget.
In the process of off-site or on-site inspections, when violations are detected, the inspectors carry out additional taxes, fines and penalties, which the taxpayer is obliged to pay in a certain period of time. If the taxpayer didn’t pay the amount of accruals at the established time, then he is expected to be forced to collect debts, by making an appropriate decision of the state body.
The second group of tax risks includes the following risks:
- Blocking of bank accounts.
- Arrest of property.
- Call to the commission to the inspection.
- On-site inspection.
Blocking bank accounts leads to a complete “freeze” and suspension of settlements with customers, which may result in a decrease in planned income or the emergence of additional costs in terms of disruptions in payments to suppliers.
Seizure of the property on the balance sheet is used as a way to enforce orders on the collection of taxes, fines and penalties, and can be either full or partial restriction of property rights.
In case of arising suspicions of legalizing transactions or for other important reasons, management can be called to the inspection, where, accordingly, you will need to provide answers to questions.
In cases of late submission or complete absence of information, there is a risk of on-site inspection of the tax inspection, in this case, there is a high probability of identifying other errors in accounting directly at the location of the taxpayer, which, in the end, can lead to unnecessary expenses.
Reasons for arising of tax risks
In the process of doing business, often arise situations which can lead to an unfavorable position for the company in the market. It is possible to attract the attention of inspectors both when an offense is committed, and without it.
In the first case, the reason may be an untimely filed declaration or report, unpaid tax, and even a response to incoming documents or requirements that was not sent in due time. In this case, there is a threat of a fine and the accrual of penalties, the operations on the account can blocked also.
There are cases when the company has not committed any offenses, but the tax service has a suspicion of their presence arise after analyzing the activities. Perhaps among the counterparties there were unscrupulous firms. Or, during off-site inspection of VAT declarations or income tax returns, the tax authorities will have questions about the numbers they have received.
Tax planning and risk management
The main objectives of tax planning risk management are as follows:
- Examine of risk points.
- Analysis of the causes of risks.
- Development of methods and recommendations for eliminating the consequences.
Tax planning risk management will allow to calculate the expected burden of payments to the budget and prevent sanctions.
To avoid the occurrence of adverse situations, you must perform the following actions:
- Exclude suspicious “one-day” companies and unreliable partners from the list of partners and be sure to check new counterparties.
- Submit all required declarations and reports within the deadlines.
- Respond timely to all requirements and questions from the tax inspection. With timely responses and well-reasoned explanations, the probability of visiting a place of business is significantly reduced.
Tax planning will help to minimize or eliminate completely unfavorable financial risks and will allow you to rationally develop your business.