“Assess First, Audit Later” is an IT-based assessment model that combines automatic assessment and risk assessment to make good use of the system’s operational mode:
- Data collection: The IRD collects and stores data from tax returns, including information on an individual’s or business’s income, expenses, assets, and liabilities.
- First Assessment: The Inland Revenue Department (IRD) uses an information technology system to conduct automatic assessment of the information on tax returns. Based on the preset tax laws and tax rules, the system calculates the amount of tax payable or refund.
- Risk assessment: The IT system conducts risk assessment according to a set of procedures to assess the risk level of a case. This may be based on the taxpayer’s trend in tax compliance, past audit results, risk factors in the relevant industry, etc.
- Random Cases: Based on the risk assessment results, the IT system selects the higher risk cases for review. This can be done using random sampling or based on specific risk factors.
- Review process: Selected cases will be reviewed further. This may include audits (document review by assessors), on-site audits (on-site inspections by auditors) or in-depth investigations (more detailed investigations by investigators), among others.
- Result processing: Based on the results of the audit, the IRD may determine whether further tax adjustments, checks or other appropriate actions are required. This may include tax penalties for taxpayers, refunds, amended tax returns, and more.
The purpose of the “assess first, audit later” system is to enhance the efficiency and objectivity of the IRD’s tax assessment, as well as to conduct more targeted vetting of higher-risk cases. The use of information technology applications to make the assessment process more automated and systematic can help save time and resources, while improving the fairness and compliance of the tax system.
Assessment and collection of profits tax https://www.aud.gov.hk/pdf_c/c39ch01.pdf
