What Is Tax Investigation

9.9 Tax Investigation Framework

What is Tax Investigation

Tax investigation is an inspection of taxpayer's business and / or individual books, records and documents. This inspection is to ensure the right amount of reported income and paid taxes required under laws and tax provisions. The investigation will be carried out only in cases where is suspected on the basis of precise and clear evidence that the tax payer is deliberately trying to avoid paying taxes or having committed an act of willful deceit under the Act, such as real property gains Tax Act ITA and 1976, the Petroleum(Income Tax) Act 1967, Promotion of Investment Act 1986, the Stamp Act 1949 and the Labuan Offshore Business Activity Tax Act 1990. There are two categories as follows:

Civil Tax Investigation

Civil tax investigation activity involves detection of tax evasion. The primary concern being recovery of tax loss and imposition of heavy penalties.

Criminal Tax Investigation

Functions and work procedures involving criminal tax investigation are similar to that of civil investigation. However with criminal investigation, it more focus on gathering admissible evidence with a view towards prosecution and conviction of the tax evader for commission of offences pursuant to ITA, Penal Code (Act 574), Criminal Procedure Code (Act 593), Evidence Act 1950 (Act 56) and other relevant Acts.(Hasil, 2007).

How A Tax Investigation is carried out

The Visit

Tax investigations conducted by the IRBM will be a surprise visits to taxpayer’s business premises, residential houses, agents / representatives and various third parties’ premises. The survey will be conducted in a professional and courteous, fair and reasonable manner with the provisions and regulations of the ITA. During the visit, the investigating officer is required to introducing himself, show the authority card bearing his name and images. Authority card containing a statement that empower employees have full and free access to all places and all books and other documents, and search the place and may inspect, copy or take extracts from any book or the document without making any payment or rewards.

At the beginning of the tours he has to explain the purpose of the visit to the taxpayer. Inform the taxpayers the scope and duration of the investigation and required documents and records for the purpose of investigation. Inform them the name, phone number, of the investigation officer and the senior officers who would be overseeing the investigation during the visit. Outlines the rights and responsibilities of taxpayers during visit. Then, conducting research in all the places visited. To access, download and take ownership related information from all electronic storage media. Interview and take statements from contributors and relevant during the inspection visit. Give a reasonable time for contributors to the document set records and documents to help and related tax research. Seize and take possession of the books, records and documents in connection with the investigation and Provide an acknowledgment documents books of accounts and records, as confirmed by Inquirer and contributors.(Hasil, 2007).

...