Tax compliance and tax-risk management for small and medium-sized enterprises
Great importance is attached to tax compliance. The tax authorities are taking ever more resolute action against (allegedly) tax-evading corporations. It is even ever more common for government tax audits to involve threats of criminal tax proceedings being initiated. Likewise, fines due to an (alleged) organizational shortcomings in corporations and forfeiture orders to reap interest advantages are increasingly “in fashion”.
Tax compliance management systems (Tax CMS) can help corporations to identify in good time risks pertaining to liability, criminal tax law and fines for major violations and help to avoid and/or minimize them. This opportunity for exculpation for corporations is expressly emphasized by the tax authorities in the utilization decree for Section 153 of the German Fiscal Code (AO). The question of introducing a Tax CMS is therefore highly topical for companies. Positive side effects of a Tax CMS can also include the associated tax and commercial optimization of the enterprise itself (e.g. Through the parallel introduction of a tax controlling system).
The implementation of a functioning Tax CMS that is matched to the size of the firm is primarily useful for areas of a firm that are especially prone to errors and therefore liability. Due to the large number of (partially complex) business transactions (often associated with foreign elements), this is especially true for the “volume business” of VAT. However, other risk factors can also exist in other taxation areas, e.g., payroll tax/social insurance, income tax or in international matters.
Conclusion: The growing complexity of tax law and business processes there is a considerable susceptibility to errors. Violations can lead to liability risks, criminal tax law risks and risks of fines for companies. These risks can be counteracted (also in the opinion of the tax authorities) by the introduction of a functioning Tax CMS that is matched to the size of the firm.
Dr. Michael Rutemöller, LL.M. (Taxation) is an attorney-at-law/specialist attorney for tax law at WMS Rechtsanwälte GbR, co-operation partner of WMS Treuhand GbR (member company of the PKF network).