Choosing a tax consultant

Category: Taxes

Autor: Rustam Tairov

Source: Publisher Business Life # 8 (74) August, 2013   

Choosing a tax consultant

When you choose a tax consultant you should take into account a nature of issues to be considered. For example, protection of interests of a taxpayer in court bodies can effectively be performed by a legal consultant, since the correct interpretation of tax laws and knowledge of proceeding rules is necessary. At that, a lawyer can involve experts if the issue is of a special nature. Services associated with the accuracy of assessment and payment of taxes which is currently in demand require involvement of companies with the staff of specialist, having wide experience in the field of law, and in business and economics as well. 

Sometimes we can observe a simplified approach to the tax audit from the side of some consulting companies. For example, the tax audit cannot be presented only by the desk audit of figures included into the tax return (reconciliation of accounting data with tax records, check up of invoices for availability of details as required by tax laws and etc.) Of course this testing is necessary, but it is focused on revealing obvious error. At that, the significant risks can result from erroneous interpretation of legislative regulation, including necessity to monitor amendments to the laws, or methodology of tax assessment and etc.  

Worrying factors when choosing a tax consultant may also include situations where:

• Offered price for the competition on procurement of services several times lower than the planned budget. The economic effect of the tax audit will be directly proportional to the level of qualification of the tax consultant. Considering deficiency of qualified specialists in the field of taxation the level of their payment, as a rule, is a major component in the cost of consulting services.
• Tax Consultant agrees to take full responsibility for the consequences of additional taxes and other obligatory payments to the budget for the tax audit.

Kazakhstan tax legislation is under development and has inconsistency of rules and differences in the interpretation even between the tax authorities of various levels of subordination and territoriality.

In these circumstances, no tax consultant can provide the customer with the absolute assurance on the tax implications on the basis of a tax audit.

Advantages of involving an external tax consultant

Specialists of consulting companies tend to have a much more extensive practice and knowledge than in-house specialists in taxation of non-specialized companies. And even regular participation in various training does not compensate for this information gap in full. In many companies responsibilities for the calculation and payment of taxes is vested in the chief accountants who have neither the time nor sufficient store of knowledge to manage tax risks.

In practice, companies’ management, who are not experts in the field of taxation, is not always able to adequately assess the professionalism of its employees who are entrusted with accounting of tax records. Insight may come too late, for example, when the company incurs looses in the form of additional charges of tax and penalties as a result of a tax audit. Companies providing services in the field of taxation, by definition, must have a more rigid system of selection and training of personnel, and quality control over their work.

Qualification of specialists in the field of taxation

As an example of current demand of services on tax audit, requirements to the qualification of leading experts on taxation of the consulting (audit) company can be considered based on three main aspects.

First, it is knowledge, analytical skills and business thinking. Provision of services starts with understanding a client’s business and its industry characteristics, but not with the validation of filing in tax returns or original documents. In practice, a tax aspect exists in activities of each officer and in each fact of financial and economic activity of the company. But how many of the officers are aware of this and will calculate the tax consequences of their decisions? Conversely, targets of structural subdivisions may be contrary to the tax strategy of the company.

Secondly, law knowledge, not only in the field of ​​tax law, including international taxation, but also in the field of civil, financial, labor and other areas of law, including the nature of the bearing industry. The law knowledge is both knowledge and the sources of the rules of law and ability to interpret and apply.

Thirdly, economic literacy, starting from techniques of accounting and tax accounting to financial management is necessary. Knowledge in the field of international financial reporting standards (IFRS) at the conceptual and methodological level is of particular importance. IFRS which tax legislation references to is quite general and compromise document, implying the latitude of judgment. Accordingly, IFRS, on the one hand, can be an effective tool for tax planning, on the other hand, because of the possibility of different interpretations by the tax authorities, it can be a high-risk area.

We believe that, all of the above has no direct connection with the qualified requirements which are sometimes specified by companies to participate in tenders for purchase of tax consulting services. Sometimes these requirements are clearly unrelated to the nature of the services and largely directed at trappings. For example, when a company purchasing a service of tax consulting states the certain number of ACCA, ACA, CPA certificates as qualification requirements. We have repeatedly sent requests to these companies, trying to figure out how the presence of 17 (as well as 16,15,14 ...) specialists certified by American or British standards of accounting can contribute to the quality of their services on taxation in the Republic of Kazakhstan. Moreover, as a rule, we are not talking about the involvement of all of these specialists in the services purchased. How to calculate these “magic” numbers which often predetermine a winner of a tender? We have not received any clear answer.