12 Mar

FAILED TAX AUDIT AS A BASIS FOR BEST OF JUDGEMENT (FACT YOU NEED TO KNOW)

In the past, the chunk of the annual budget of Nigeria was financed by the revenue generated from the proceeds from the sale of crude oil. In recent times, the eye of government officials opened to the fact that there is a need for the economy to be diversified. Consequently, the focus of the government has shifted to the non-oil sector of the economy for the financing of the annual budget at the federal and state level. This new development has increased the appetite of the tax authorities for tax audit and investigation.Best of judgement assessment is usually adopted by the tax authorities to assess an individual or a corporate body to tax where tax officials have established that the relevant information or documents being made available to them are incomplete or inaccurate for the purpose of establishing the actual tax payable from the earnings of a taxpayer.

Tax audit involves the review of the financial records of taxpayers by the tax officials to establish the level of compliance with the tax laws and regulations. Tax officials usually adopt best of judgement where they have a reason to believe a taxpayer has not provided key information for the purpose of ascertaining their tax liabilities. Of course, when a taxpayer receives the notice of assessment that is based on best of judgement, an objection is prompted if such tax notice is perceived to be excessive.