Gathering information for an assessment
The first step in the assessment process
is the gathering by the Internal Revenue Commission (IRC) of
information upon which to base an assessment.
Our tax laws empower the Commissioner General or an officer authorised
by him to gain access to and obtain information from a particular
taxpayer.
Access to timely and accurate information is therefore a crucial
weapon in the IRC’s efforts to assess and recover tax.
It is hardly surprising, therefore, that taxpayers make determined
efforts to prevent the IRC from obtaining the information. The IRC
obtains information from a number of sources.
An important source of information has already been and still is from
the returns lodged by the taxpayers.
These indicate or give a position on a particular taxpayers’ tax
affairs for a particular year or years of income.
However, for obvious reasons, such information may not always be
totally accurate, loan on occasions the IRC will need to supplement or
check the accuracy of the information provided by the taxpayers.
The IRC has many
other sources of information available to it including the usual
discovery of documents process once court proceedings have commenced.
Prior to commencement of any legal proceedings, the IRC also receives
information through anonymous “tip-offs”, internal IRC cross-checks,
referrals from other IRC divisions or sections such as Customs
Operations or Goods and Services Division and other Government
departments.
Any person who is carrying on business in Papua New Guinea is required
to keep sufficient records (in the English language) of his income and
expenditure to enable his assessable income and allowable deductions
to be easily determined. These would have to be kept for at least
seven (7) years.
It is also possible for records of a person or a company’s tax affairs
to be kept outside of Papua New Guinea if approval to do that is
granted by the Commissioner General.
The Commissioner General will usually impose conditions and these
conditions would have to be complied with.
The only exceptions to the requirement to keep sufficient records is
where the Commissioner General has informed the taxpayer that he is
not required to keep any records or in the case of a company which has
gone into liquidation, it cannot keep any records.
The records required by the IRC must be kept in writing in the English
language or in a way that is readily converted into English.
Thus records may be kept either in normal written form, or an
electronic medium such as computer storage provided such records in a
computer can be readily accessed and converted into a written English
version (eg by printing out a hard copy).
The records must be kept so as to easily determine a person’s income
tax liability.
As a taxpayer, any records you keep must be sufficiently full and
internally clear and coherent to enable a person of reasonable
competence to determine your tax liability promptly, easily and
quickly.
Accordingly, you cannot keep records in code or in some language that
cannot not easily be translated to English.
You are obliged to provide information relating to your tax affairs
when requested to do so by the Internal Revenue Commission.
However, there are exceptions including a claim for privilege on
documents.
These and the Commissioner General’s access powers will be considered
in subsequent articles.
by MARK OPUR
