TAX AUDITS & INVESTIGATIONS - MITIGATING RISKS & AVOIDING DISPUTES
Under the self-assessment system, the Inland Revenue Board (IRB) carries out its enforcement activities through tax audits and tax investigations. During a tax audit, the IRB will seek to ensure that the reporting of income and/or claiming of expenses in the tax returns filed are consistent with tax laws and regulations and they are supported by documents. The IRB officers will go beyond the documents, that is, they will interview employees of taxpayers to look for irregularities. Any understatement of the tax liability discovered during a tax audit will be subject to penalties.
As tax audits are unavoidable, it is important that taxpayers are prepared for it. Selection of cases for tax audits will be done based on prescribed criteria and focused on selected sectors including multinational companies, healthcare providers, online businesses, lawyers and other professionals. Tax officers will undertake an in-depth investigation of the affairs of taxpayers where tax evasion is suspected.
In the last 5 months alone, the media has highlighted that the IRB will be active in carrying out investigations on companies and prominent individuals. Such activities have brought about additional revenue to the Government. It was reported that the IRB collected RM114.015 billion in taxes in 2016 and the IRB is targeting to collect RM127 billion in taxes in 2017 despite a challenging economy. Hence, we can expect a substantial increase in the number of audit and investigation cases being taken by the IRB in the coming months.
The CEO of the IRB, Datuk Sabin Samitah, has announced in media statements that, effective January 1 next year, a penalty of 100% will be imposed on the tax liability of individuals and companies dodging payment or filing of incorrect tax returns. For example, if the taxpayer under reports taxable income on which the tax liability is RM1 million, the taxpayer would pay a RM1 million penalty, that is 100% of the value of the tax, as compared to the 45% currently imposed. This penalty regime will apply for
- repeated offences of undeclared or incorrectly declared income stated in the return form
- cases where there was refusal to give full cooperation, information or documents requested by the IRB during an audit or investigation process or
- cases where there have been a carrying out of an organised tax evasion scheme.
This is a step towards elevating the level of voluntary compliance among taxpayers who are hardcore tax defaulters. In this connection, the IRB has set up an Aggressive Tax Planning Division under the Special Task Department to focus on aggressive tax planning as part of its efforts to curb tax leakages and evasion.
It should be noted that the IRB can collect outstanding taxes from the Company’s Directors who occupy an executive position and hold not less than 20% of the shares of the Company. If these taxes are not paid, these Directors can be stopped at the immigration checkpoint from leaving the country until these taxes are paid or arrangements are made to settle them.
With the increased focus by the IRB on collecting taxes through tax audits and investigations, it is crucial for companies to be prepared in managing the challenges of the new tax environment. Generally, the IRB will look more favourably on a company that has taken steps to address and resolve the issues as compared to a company that has not done so. Ultimately, if taxpayers have received good advice and are well prepared, there is no need to fear a tax audit. It is best to regard a tax audit as another consideration in carrying out a business and to look for the best way to manage it. Similarly, a tax investigation needs to be approached systematically and professionally. If not, it can lead to the imposition of substantial taxes and penalties that will have an adverse effect on cash flows. If unresolved for a number of years, it can result in significant legal and professional costs as well as unproductive management time.
At Axcelasia Taxand, we have a dedicated team of tax professionals with extensive experience in handling tax audit and investigation cases efficiently. The objective is to bring these cases to a close amicably with the end result that they are closed within a reasonable time period at a sum acceptable to both the taxpayer and the IRB.
We live in a time where choices are abundant and sometimes with these choices come a lack of loyalty. According to a survey done by Deloitte, 66% of the millennial generation would leave their current jobs by the year 2020 if given the choice. So it is imperative to ask yourself how much is your organisation doing to keep your employees engaged while retaining the best talent you have.
With trailblazers like Google, Facebook and LinkedIn prioritising their employees above the business, other organisations are now being held to the same high standards by younger generations. But the huge silver lining here is that engaged employees are emotionally attached to their organisations and are highly involved in their jobs with great enthusiasm for the success of their employers, often willing to go the extra mile.
How do you even get to this point? Let us start a conversation with Axcelasia’s Human Resource Consulting Team.
With our in-depth expertise, we will craft an engagement survey that will gauge your current position and where your employees fit within the dynamics of engagement and enablement. An assessment of the current situation will give you the best overall picture of how you fare with your employees. The questions critically address a range of important factors like ‘respect & recognition’, ‘confidence in leadership’ and ‘enablement’ to name a few.
Taking this first step in listening and understanding your employees will pave the way for financial performance, customer loyalty, innovation and an enhanced corporate reputation. Don’t delay when it comes to the success of your business. Get in touch with us today!
SUCCESSION PLANNING: LOOKING FORWARD REQUIRES LOOKING WITHIN
Planning is bringing the future into the present so that you can do something about it now. Organisations invest a large amount of time, effort and money on employee engagement, and a large part of this is to ensure the fluidity and success of the business. In a time where markets are so volatile and people have the luxury of options before them, what can an organisation do to continuously ensure the stability and profitable continuity of their business? Axcelasia HR Consulting strongly recommends the strategic development of succession planning.
But do not be eluded into thinking that a hierarchy or an organisation chart is a means to an organisation’s succession plan. It is in fact quite the contrary. A structure that exists today may not necessarily be relevant in the next five years.
There are two main situations when the need for a successor is critical -- When an organisation manages a change or transfer of leadership or when key employees leave an organisation. Both situations sometimes arise without much notice, and an attempt to mindlessly fill a spot too quickly can result in disaster for a business that runs like a well-oiled machine.
The first step that HR departments can take is to look within the organisation to capitalise on the talents it already has. Open dialogues between employee and supervisor are great starting points in assessing skills, knowledge, qualities, experience and the passion or desire to be groomed for higher management.
This is why an exercise that will clearly identify the traits and competencies required for individuals in an organisation who will take over critical roles, and develop their career tracks prior to succession into these key managerial and leadership roles is critical.
An employee will be assessed on many different key topics some of which include result orientation, operational excellence, problem solving & decision making and leading & inspiring others to name a few. These key topics allow the organisation to gauge if an employee is ready for more responsibility and a bigger role. This assessment also aids in providing the right training if she or he faces developmental gaps.
The key takeaway from succession planning is the overall benefits it brings for both employees and the organisation. Organisations can capitalise on the current pool of talent in the event major changes are taking place while employees see a clearer path in their individual careers.
Succession planning also tackles the current hot topic of sustainability. From procurement to manufacturing and now to human resources, organisations are keen to be held to a high global standard of practices that are ethical, empowering and fair. Organisations that encourage sustainable practices are also seen as potential employers of choice.
Getting started on succession planning in your organisation may seem like a daunting task, especially for an organisation with many employees.
Allow Axcelasia HR Consulting to create a strategic plan that best suits your organisation’s unique needs. We provide the strategic counsel in ensuring your business stays sustainable today and more importantly, in the future.
Start the conversation with us today by contacting our Executive Director in charge of HR Consulting, Sylvia Anita Rockey at +6012-9167824 or email firstname.lastname@example.org
STRATEGIC EXECUTION ADVISORY
What risks are really bringing down organisations?
According to some global research findings, when an organisation suffers losses, 86% of this is due to strategic risks not being well managed. It is not the type of operational risks such as ‘equipment breakdown’, ‘missing customer delivery deadlines’, or ‘poor vendor performance’ that will bring down an organisation. Rather, it is the strategic risks that will change the business landscape significantly, and even to the extent of causing business closure. Examples of strategic risks are such as ‘investment failure’; ‘technology obsolescence’; ‘reliance on single market/ customer/ vendor’; ‘changes in regulatory requirements’, etc.
Why is it a huge challenge to manage strategic risks?
There are a few aspects on why strategic risks are not addressed adequately in most organisations. The nature of strategic risks versus operational risks are not fully understood. Operational risks arise directly from the day-to-day activities which are aimed at pursuing organisational goals, hence operational risks must be avoided or prevented via cost-effective measures. On the other hand, strategic risks are events that are usually beyond the imagination of the majority in a normal operating environment. The correct mindset to deal with strategic risks is not so much of avoidance, but how to embrace them. This means having an acceptable level of risk understanding and to take on the risks accordingly. Business managers who could not differentiate these two concepts often ended up making decisions that are not relevant and timely.
Eastman Kodak, once the world’s largest photo film and photographic company, was forced to cease business (filed for bankruptcy due to liquidity challenges which affected its continuous operation) largely due to its slow response to the digitalisation of photo taking.
Secondly, to effectively manage a strategic risk, extensive research and analysis is required. This often does not happen in most organisations as resources and capability constraints are big challenges. Employees are simply not empowered or encouraged to think beyond their day-to-day work activities, while senior management are often found busy addressing operational variations or become complacent (business idling; lack of innovation; poor visibility on business conditions changes, etc).
Another point to consider is, even though if there is sufficient analysis of the strategic risks, to bring such a document to the Board of Directors for deliberation requires courage, comprehensive knowledge as well as ‘rock solid’ confidence on the part of the Risk Manager.
How could Axcelasia assist?
Our business consulting team at Axcelasia Columbus deploys a scenario planning approach to assist an organisation in visualising and mapping out the specific factors that drive the strategic risks. We will brainstorm and constructively challenge the thinking of business managers in identifying the unique solutions that work -- this is done together with input from our research and knowledge on specific strategic risks that affect the organisation.
Our approach also seeks to explore the opportunities behind every strategic risk. We help organisations to open up the mindset of their business managers and leaders in seeing opportunities that are associated with the risks.
“Managing strategic risks is as easy as ‘ABC’ if we have the right mindset, discipline and approach”