The Revenue's approach to
carry out a tax investigation depends on the following circumstances:
Whether the taxpayer keeps
sufficient business records.
To what extent the business
records are reliable.
How much is the tax
Nature of the business /
Co-operation of the
The extent and approach of a
tax investigation is a judgment of the investigator. Generally speaking, the
bigger the tax omitted, the greater the depth of investigation. The more
evidence adduced to prove a taxpayer's willful evasion of tax, the greater the
chance for a criminal prosecution. And the better cooperation of a taxpayer with IRD, the quicker the completion of an investigation with lesser penalty.
There are three
popular methods of tax investigation. As aforesaid, the choice of method depends
investigator's judgment as well as the circumstances of each case. In general,
all the three methods are to be done, and then one of them to be adopted for the
main basis of income estimation, and then the undercharged income to be adjusted
by the findings revealed by other two methods. The three major methods are: