To verify compliance, the revenue authority is granted far-reaching statutory powers to inspect businesses and demand financial data.
Difference Between an Audit and an Investigation
- Tax Audit: A routine, preventive compliance review of a taxpayer’s records to confirm that taxes were correctly calculated and paid according to the law.
- Tax Investigation: A targeted, criminal-focused inquiry initiated when there is credible intelligence of tax evasion, fraud, or deliberate concealment of income.
Powers of Entry and Access to Information
Under the TPA, authorised tax officers holding proper identification badges have expansive powers to secure revenue. They can:
- Enter any business premises or land during normal working hours without a prior judicial warrant to inspect inventory, computers, and accounting records.
- Take full and free access to all logs, files, and digital data systems.
- Make copies or seize physical documents and hard drives if they suspect they may be destroyed or altered.
Production of Books and Notice to Third Parties
The Commissioner can issue a formal administrative notice requiring any person—including banks, suppliers, customers, or government agencies—to provide specific information, statements of accounts, or testimonies concerning a targeted taxpayer.