COMPANIES should protect their rights during government field audits, a tax specialist has warned. Field audits, which were introduced in 1991, are detailed checks by the Government of the accuracy of tax returns by taxpayers, including businesses. ''Full co-operation [with government field auditors] does not include endangering the internal privacy of the taxpayer's business,'' Coopers & Lybrand tax manager Victor Woo Hing-kwen told an Aberdare Consultants seminar yesterday. Companies could refuse to submit irrelevant information or allow field auditors to interview staff members on matters with which they were not well acquainted, he said. ''You may also find that employees who don't really know the full and correct answers to questions put to them by field auditors may give a misleading and costly impression in reply,'' said Mr Woo. ''Co-operation fully with field auditors also should not be taken to mean ignoring the taxpayer's right to a reasonable length of time to correctly answer questions put to him,'' he said. But Mr Woo stressed it was usually in the taxpayer's interest to co-operate with field auditors. That would make it unnecessary for field auditors to use their full powers of investigation or to refer the case to the Investigation Unit, which probes tax evasion. He advised taxpayers or their tax representatives to prepare a corporate financial analysis before meeting field auditors so that major weaknesses could be identified before they were challenged. Companies should consult their tax representatives on whether they had committed an error and to decide how to best avoid or reduce penalties, he said. The field audit group had looked closely at certain industries such as tourist shops, medical practitioners, the construction industry and import and export companies, he said. ''From my observation, they focus on industries with a big volume of cash receipts which can easily mean confusion,'' said Mr Woo. The need for a field audit did not reflect a businessman's honesty, he said. ''The vast majority are so busy running their business they simply don't have time to really understand the tax system in Hong Kong, although there's bound to a small minority abusing the system,'' he said. Field auditing is conducted by the Inland Revenue Department, which has increased its number of field auditors from the initial 24 to the current 54. It aims at eventually reviewing all companies periodically to ensure proper compliance. Up to March 31, the field audit group had raised $152 million in Government revenue by recovering unpaid portions of tax, and from penalties and estimates it will raise a further $160 million in the current fiscal year.
