Businesses evolve, especially given the technological advances we see unfolding every day. Accordingly, as the operating environment changes, so do the fiscal laws and regulations. It is therefore essential for business operators to adapt and conform to such changes, as it is key for business growth and impacts their tax compliance status. In this case, it is imperative that businesses regularly review their tax position to safeguard against any tax exposures that might be detrimental to operations. A Tax Health Check (THC) is one of the most useful tools that can help business operators to manage, plan and minimise tax exposures. Consequently, ignoring or neglecting a tax health check may be catastrophic. In this article, words importing the masculine shall be deemed to include the feminine.
Enter tax health check
Basically, a THC is a detailed examination of one’s tax affairs, including a review of past, present and contemplated future transactions with an aim to determine and mitigate any arising tax exposures. Put differently, it is basically a review of an entity or person’s financial and tax records to ascertain the level of compliance with the tax laws.
As alluded to above, tax laws are constantly changing and at times becoming complex. Therefore, such changes may actually pose a business risk to the transacting business community, as some business operators fail to keep up with the ever-changing tax laws. Consequently, such business operators may inadvertently fail to comply with the prevailing tax laws, which may result in over- or underpaying tax and may result in penalties and interest. In this regard, it is prudent for business operators to constantly engage tax experts to conduct a tax health check of their business to avoid falling into tax potholes.
Why a THC?
As a rule of thumb, any valued transaction conducted by any business has a potential tax implication. The question of whether the implication is favourable or adverse is basically the gist of concern. Businesses conduct numerous transactions, including mergers, acquisitions, new deals, etc. More often than not, some of these transactions appear to be risk-free at face value, whilst they are actually embedded with tax exposures that may require an expert’s assistance. Due to that fact alone, some people or businesses inadvertently end up swamped in a tax debt arising from past transactions. In such cases, a tax health check helps to manage risk as such exposures are brought to light before a BURS audit.
In this regard, a Tax Health Check becomes a key tool in ensuring that a business’s tax affairs are compliant with the tax laws. As an addition, tax authorities are generally lenient to taxpayers who come forward and voluntarily declare unpaid taxes or incorrect application of tax provisions as opposed to instances where they deploy resources to unearth the same. Therefore, a Tax Health Check is key in minimising tax penalties, as a company may voluntarily comply and liaise with the tax authorities.
Looking at it from another perspective, it is common knowledge that every business relies on its internal processes to ensure that internal information, including tax records, is free from errors and material misstatements. Therefore, investing in a tax health check may be a perfect way to validate all fiscal records. Accordingly, where gaps are found, the business has the opportunity to address them as early as possible.
Conclusion
Essentially, a THC is an integral business tool that helps businesses to manage and mitigate tax risk. A THC not only adds value to a business but also provides a platform for a business to strategically arrange its tax affairs.
Tax hint & cheers!
If you have never had a tax audit conducted on your business by a tax firm, we highly recommend that you consider such so as to proactively reduce tax gaps. As we say goodbye, remember to pay Caesar what belongs to him. If you want to consult, join our free Tax WhatsApp group or to know about our 9 Tax e-books, send a text to +267 7181 5836 or email us at jhore@aupracontax.co.bw. You can read more tax articles on our website, www.aupracontax.co.bw under the ‘Tax articles’ tab.
