FINANCE

TAX PLANNING TECHNIQUES IN TAX REPORTING

by obitaxan

Tax planning means legally arranging a person or corporate finance, business and tax affair in order to reduce tax burden.

Note that ‘aggressive’ tax planning to the detriment of the government can be termed illegal.
However the tax payer as a rational person will always try to minimize his/ her tax liability.

 

Tax avoidance is legal while tax evasion is illegal.

 

 REQUIREMENT FOR TAX PLANNERS

 

·         Knowledge of tax laws (statutes, enactment, past and current case laws.)

 

·         Financial management.

 

·         Ability to apply  tax skills to client peculiar circumstance.

·         Understanding of client operating environment.

  TECHNIQUES OF TAX REPORTING

1.     Financial management-

      

      Good understanding of IFRS in relationship with local tax laws will help a tax planner take advantage of the tax laws and provision to reduce its tax liability.

      For example: where the tax  payer understand the finances and the projected financials,

      he can use more borrowed fund than issued capital to finance his business where necessary.

              (I) ‘Deferred tax management’- can impact on the success of tax planning.

              (II) ‘Tax cash outflow management and timing’-can impact on the success of tax planning.

2.       Application of tax skill to client peculiar circumstance-

    Some tax ‘general rule’ may or may not apply to your client circumstances. It is necessary that the tax planner understand the client finances and circumstance so that he can make informed decision. 

3. ‘Tax sheltering’-‘use of trust ,investment in real estate, agriculture and others”

4.       Understanding of client operating environment can mean success for business.

Operating environment include countries where a multinational operates.

Some countries want to attract investors- labour cost, legal cost and tax cost may be low in such places.

Arranging client business to benefit from such country that will reduce the overall financial

And tax cost can be beneficial.

 

 
 

Below are some tax guides

1.Conversion of projected transactions from high tax rate brackets to low tax rate bracket-Legal restriction exist.

2.conversion of immediate tax cash outflow to future cash outflow.

3.Method of financing -Equity or debt financing. Although there are legal restriction.

4.Accounting policy-Legal restriction exist.

5.Transfer pricing methods.

6.Costing methods.

7.Engaging in tax exempt business.

8.Researching  specific tax laws to see available tax incentives.

9.Financial budget simulation to see reflection of different tax indices.

10.Compare ‘delay tax payment penalty with potential benefits other adverse consequences’.

11.Consider the impact of differing payment during inflationary period if legal.

12.Consider the impact of pricing of intangibles such as patent, invention & others.

13.’Cost contributory planning’.

 
 
 

 

Disclaimer: Obi Azubuike is not by this publication(or post) acting as a professional advisers and therefore not liable for any damage whatsoever for your acting or refraining to act based on  this publication(post). Consult your professional for advice. 

Copyright(c)2018-Obi Azubuike