Tax Audit and Audit Authority

Entrance

One of the most important issues in tax law is the monitoring of whether taxpayers fulfill their tax obligations correctly and on time. For the state to secure its tax revenue and prevent tax evasion and fraud, an effective audit mechanismis necessary. The Tax Procedure Law (VUK) tax audits and the authorities authorized to conduct them.

Tax audits are not merely an arbitrary action by the administration; they are a legally regulated process with defined purposes and limits.

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1. Conceptual Framework of Tax Audits

a) Definition

According to Article 134 of the Tax Procedure Law, a tax audit is "an examination conducted to investigate, determine, and ensure the accuracy of taxes due.".

b) Legal Basis

• Tax Procedure Law (Articles 134-141),
• The relevant regulations,
• Article 73 of the Constitution (tax obligation).

c) The Purpose of the Tax Audit

• To verify the accuracy of the statements,
• To prevent tax evasion and fraud,
• To ensure that taxpayers fulfill their obligations regularly,
• To ensure tax fairness.

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2. Types of Tax Audits

a) Full Review

• It covers all tax periods and all transactions of the taxpayer.
• It has a broad scope and can take a long time.

b) Limited (Partial) Review

• This is done in relation to a specific topic, period, or type of tax.
• For example, an examination solely regarding VAT refunds.

c) Counter-Examination

• This is an audit conducted on other individuals or entities with whom the primary taxpayer has conducted transactions, in order to verify the accuracy of the taxpayer's records.

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3. Procedure in Tax Audits

a) Request for and Commencement of Review

Tax audits are generally initiated by tax offices or tax inspectors. The taxpayer of the audit in writing .

b) Location where the examination was conducted

• At the tax office,
• At the taxpayer's workplace,
• In electronic format.

c) Principles to be Followed During the Inspection

• Respect for taxpayer rights,
• Temperance,
• Security,
• Procedural economy.

d) Review Period

According to Article 140 of the Tax Procedure Law, a full audit can take a maximum of one year, while a limited audit can take a maximum of six months .

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4. Authority to Inspect

a) Authorized Persons

Authorities authorized to conduct tax audits according to Article 135 of the Tax Procedure Law:

• Tax inspectors,
• Tax inspector assistants,
• They are the heads and directors of tax offices.

b) Limits of Authority

• It is not permitted to operate outside the scope of duties defined by law.
• Trade secrets of taxpayers cannot be disclosed arbitrarily.
• Only tax-related documents can be examined.

c) Legal Nature of the Inspection Authority

It is an administrative authority based on public power. However, it is subject to strict judicial review to ensure it does not infringe upon taxpayer rights.

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5. Taxpayer's Rights and Obligations

a) Rights

• Requesting that the inspection be conducted at the workplace
• Requesting that the review period be adhered to
• Obtain a copy of the report
• Seek legal action.

b) Homework

• Presenting books and documents,
• Assisting the inspector,
• Provide accurate information.

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6. Tax Audit Result

a) Inspection Report

Once the audit is complete, the inspector a tax audit report . This report forms the basis of the tax assessment.

b) Tax assessment

• If underreporting is detected, an additional tax assessment will be made.
• Tax evasion penalties may be applied.

c) Application Methods for the Taxpayer

• Request for reconciliation,
• Filing a lawsuit in tax court,
• Request for a reduction in sentence.

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7. Tax Audits and Jurisdiction in Judicial Decisions

• Council of State: The taxpayer's right to defense must be protected in tax audits. Irregular audits are unlawful.
• The Constitutional Court emphasized that the power of review must be exercised in a balanced manner with the right to property and the confidentiality of trade secrets.

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8. Problems Encountered in Practice

• The lengthy review process and its negative impact on professional life,
• The fact that the reviewers offered different interpretations,
• The failure to fully utilize electronic systems effectively,
• Lack of sufficient awareness of taxpayer rights.

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9. Comparative Law

• Germany: Tax audits are conducted regularly and systematically, and taxpayer rights are strong.
• France: Digital systems are widely used.
• USA: Electronic monitoring and risk analysis methods are prominent in IRS investigations.

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10. Improvement Suggestions

• Review times should be shortened
• Bureaucracy should be reduced by developing electronic monitoring mechanisms
• Efforts to raise awareness about taxpayer rights should be increased
• Transparency and accountability in investigative powers should be strengthened.

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Conclusion

Tax audits and the authority to audit are critically important for the healthy functioning of the tax system.

• Tax auditscheck whether taxpayers are fulfilling their obligations correctly.
• The power of inspectionmust be exercised only within the limits prescribed by law.
• Taxpayer rights must be protected, and arbitrary practices by the administration must be prevented.

In conclusion, an effective yet fair audit system both safeguards government revenue and increases taxpayers' confidence in the tax system.