Andersen

Direct and indirect taxes are becoming as diverse as their governing laws and regulations. Therefore, taxpayers might face some issues while trying to manage compliance and due dates within the scope and ramifications of the tax sector. What is the solution and how can one ensure paying taxes timely and accurately? The concept of tax compliance is the solution.

Tax compliance refers to taxpayers’ decision to comply with obligations stipulated by tax laws and regulations, such as registration for tax, filing tax returns and paying taxes on due dates, information and record submission, maintenance of Books of Accounts and collaboration with tax authority.

It is worth noting that tax compliance can be through taking action, e.g., when someone files tax returns, or through abstaining from taking action just like avoiding claiming input VAT related to private expenses which are not related to economic activity.

Why tax compliance matters

Ensuring proper fulfilment of tax compliance obligations is critical to taxpayers who desire to avoid audits and penalties. Playing around these fines and tax non-compliance behavior, whether fully or partially, makes taxpayers subject to penalties.

Furthermore, tax authorities always strive to achieve the highest levels of compliance and seek full employment of its objectives by enhancing tax awareness, assisting taxpayers, issuing guidance documents, etc. At the same time, the authorities follow up and actively examine taxpayers’ records in the light of compliance risk management. Tax authorities classify taxpayers by the degree of compliance and based on specific criteria reflecting taxpayers’ behavior and extent of commitment, as well as the imposition of penalties and fines, tax avoidance and tax evasion schemes, as criminalized acts.

Examining the causes and forms of tax non-compliance

As per the theory of tax compliance, if a taxpayer fails to pay his/her tax obligations, he/she might face non-compliance consequences. This does not always mean that this act is voluntary as it might result from unintentional errors. Tax non-compliance might take place due to taxpayer’s lack of awareness, misunderstanding tax laws, lack of strategies and structures resulting from low administrative efficiency and failure to communicate with tax experts and hence to reach correct tax advice and guidance, and not following up the continuous amendments and updates to tax legislation, among other reasons.

Tax non-compliance includes

• Failure to register with tax authority.
• Failure to submit tax returns within legal deadlines.
• Submitting an incorrect tax return by failing to disclose income sources or all revenues sources in the tax period.
• Failure to pay taxes due by the dates specified in the rules and regulations.
• Failure to provide information and/or records, failure to keep or bad record management, in addition to failure to cooperate with tax authority.

Factors encouraging tax compliance

Tax awareness

taxpayer’s knowledge about tax function and the philosophy of tax compliance is highly important. It helps the taxpayer to comply with the tax and realize the principal objectives of taxation: economic or social goals and services provided in exchange. Among other tax incentives, courses and workshops providing insights and spreading awareness to transform tax culture, increase voluntary compliance, and assure a better understanding of penalties and risks associated with non-compliance.

The effect of tax advisors

Since complying with tax regulations is a challenge, tax advisory has great effect on taxpayers’ compliance: Navigating across the tax landscape, competent and seasoned tax experts help clients to better comply with regulations and avoid possible fines. Experts provide taxpayers with the correct and professional choices enhancing their compliance with laws and ensuring their protection from penalties. Their presence compensates for taxpayer’s lack of knowledge about tax laws or unintentional errors due to ignorance about tax procedures that must be followed to fulfill tax obligations.

Tax compliance and business continuity

Tax compliance assures your business continuity, growth and expansion of economic activity. It allows to keep track of corporate tax status and to fulfill tax obligations in accordance with tax legislations.

Keeping pace with tax updates

frequent policies changes affect laws and regulations, and tax systems are no exception. Tax compliance finally allows following up the latest amendments and updates to ensure reaching full commitment and to keep pace with the constantly evolving tax landscape.