Taxation and Tax Audit of SMEs

Small and medium enterprises (SMEs) are undoubtedly very important actors in the Albanian trade and economy, both in quantitative and qualitative terms. As regards the former aspects, SMEs represent 97.8% of all enterprises located in the Albania, and they employ more than two thirds of the overall workforce (Instat, 2008). For what concerns the qualitative aspects, it has been pointed out that the role of SMEs in the Albanian society has become increasingly important as providers of employment opportunities and key players for the wellbeing of the communities at local and regional level. At the same time it will be no longer possible to ignore their impact on economy given the fact that actually the average firms size is decreasing, and therefore the Albanian business scene will be occupied predominantly by SMEs, not only in quantitative terms.The required capabilities of auditors were generally identified by analyzing the activities required to perform particular audit tasks, and through practice and experience. They were often based on the notion that auditors are generalists, who may subsequently develop into specialists to meet organizational needs. The required capabilities of audit managers and directors were typically identified and based on the notion that they were to be both people leaders and tax technical leaders. Coaching, communication, and leadership skills are seen by many as important capabilities. Experienced personnel (who have proven and demonstrated abilities to perform audit work) generally identify the required capabilities to perform audit work. Specialist qualifications and skills were not cited as important factors in determining who is to identify the required capabilities. The majority of responses identified senior management, team leaders and experienced audit staff as the people who identified the required capabilities. This was often done jointly or in consultation with human resource stakeholders, training departments and head office.The required capabilities for audit staff in Albania using competency models are as listed below:- conduct investigations;
- determine compliance;
- tax accounting and financial analysis;
- conduct research and analysis;
- apply the law (technical expertise);
- make effective decisions;
- communicate effectively;
- apply work processes and procedures;
- manage own work;
- achieve results; and
- manage relationships.Responsibility and accountability for improving auditors, audit managers and audit directors commonly lies with the staff member in question and their direct manager and/or local management team. Responsibility and accountability is influenced by the organizational structure that change in accordance with the change of tax leadership. Human resource departments (where applicable) often have joint responsibility and/or are significant contributors to this process, together with tax auditing / training departments.The audit is responsible for managing a coordinated audit program for all taxes for which the tax administration is responsible (Income Tax, VAT, etc.). This does not necessarily mean that an auditor will be expected to do a complete audit of all taxes but rather that the Audit Department will adopt a coordinated approach in selecting and conducting audits. Whenever possible, income tax and VAT audits should be conducted simultaneously, even though different tax periods may be audited for each type of tax. For example, an income tax audit for 2007, 2008 tax years and a VAT audit only for 2008 tax periods. This will enable common issues, records and areas of concern to be dealt with comprehensively.The Regional Audit Directories, that have the competencies to audit SMEs also develop close cooperation with all other Directories of the Regional Tax Directorate and neighbor Regional Tax Directorates in particular; the Anti-Evasion Directorate in General Taxation Directorate, not only to ensure cases of suspected evasion are referred on a timely basis but also to volunteer the expert audit services of the Directorate in investigations being conducted; the Enforced Collections Directorate to receive referrals of audit stop-filers or no filers; and, the Appeals Directorate – to re-audit taxpayers who have produced new evidence during the appeal process.The substructure of the directory includes units to conduct both office audits and field audits. Additionally, auditors can be grouped by specialty, both by type of tax (VAT, Excise, Income, etc.) and type of industry (banking, manufacturing, retailers, etc.)Repeated focus on an industry will permit an auditor to become expert in the tax legislation issues and the necessary audit techniques related to specific industries. A separate unit handle risk analysis methodology based in automatic selection with data mining drill system. Until an automated case selection system based on risk analysis is developed in all country, this unit will Coordinate the regional directorates that work manually with them that really are automated. Once the automated system really is effective in place, staffing will be reduced but will still be necessary to ensure that the risk assessment system is functioning properly and to supplement it as appropriate. This is necessary to provide a small number of audits for compliance coverage even where the risk is relatively low, and to deal with newly discovered pockets of non-compliance.Finally, a separate audit review unit is necessary for post audit quality assurance and trend analysis. A strong accounting education is required for the staff assigned to perform income tax and specialty audits in the field (outside the tax administration’s office). Staff handling simple office audits (where the taxpayer visits a tax administration office) and VAT audits or controls require minimal accounting skills. Auditors assigned to complex case audits, audit classification, and audit quality review, should possess excellent skills and have significant experience in the department. All staff must be knowledgeable in tax law, audit techniques, and internal operating procedures. Along with all other public contact employees of the tax administration, they must possess good interpersonal skills and exercise good judgment in accomplishing their work assignments.

Factors To Consider in Determining to Offer Tax Relief or Not

If you feel you will likely be in need of tax relief in the near future it will be important for you to understand what factors are looked at when the government decides whether or not to offer relief.Being proactive in your attempts to seek out tax relief is a very important factor which is considered when determining whether or not to offer the relief. What this means is that if you have the knowledge that you will not be able to pay back your taxes you should reach out proactively to the government to explain to them what your circumstances are and that you would like to have some assistance or relief offered to you. This will cast you in a positive light and increase the likelihood that you will be extended assistance.Your current income is a factor which is considered very heavily when looking at the possibility of offering tax relief. This is to say that your obligation to the government may be too great for your current circumstances. One example of when this can be true is if you were running a small business which has gone bankrupt. The amount of money which was owed to the government was determined based on the amount of money which your company was producing. If you are no longer producing any money from your company and are in stead relying on your personal wages it may be that you simply do not make enough money to pay back this tax. In this case with proper auditing it is likely that it will be determined that you should be relieved of your tax debt because you are unable to pay it.

Selling A Share of Your Business to an Employee

Selling a share of your business (or the entire business) to an employee is often overlooked as a strategy, yet it can be very beneficial for both the owner and employee. There are many different ways this can be achieved and different situations where it might be beneficial. It is also possible that the owner can negotiate a better price as the employee may not have the capacity to purchase the business without the owner’s added assistance.How does it Work?One of the reasons why this strategy is attractive is that you can tailor it to meet the requirements of the business, the owner and the employee. There are no fixed rules, work out what both parties need for the deal to be beneficial and it’s a negotiation process from there.The essential part of the transaction is that the owner will be entitled to receive a payment in return for giving the employee ownership or part ownership of the business.The following variations can exist
If the employee does not have the funds or the capacity to borrow the purchase price, then
the purchase price can be paid over a number of instalments
the owner can personally guarantee the loan (in the employee’s name) and a separate agreement which entitles the owner to retain ownership of the business sold if the guarantee is activated
If the employee does not have the capacity to establish their own business premises then the employee can pay a rent and administration fee to the owner
The employee may purchase only one income stream of the business (and the owner continues to operate and own the remainder of the business)
The employee may purchase a share of the entire business (which could be Stage one of a number of stages to acquire the whole business)
What situations would it be beneficial?Some examples which would suit this strategy:1. The owner requires cash for personal reasons and financing is not an optionExamplePeter owns 3 toy stores which are trading very well. However Peter borrowed heavily to invest in an Aged Care Venture recommended by a friend. The Aged Care Venture has filed for bankruptcy and Peter is struggling to meet his debt obligations personally. The business operated an overdraft and the bank is not willing to lend any additional funds.Paul has been a store manager for 5 years, and has previously spoken with Peter about purchasing the business or part of the business, but Peter had declined as he felt he would sell the entire business when he plans to retire in 5 years.Peter and Paul negotiate for Paul to purchase 20% of the business for $50,000.2. The business is largely dependent on the owner and therefore difficult to sell to an “outside party”. However, through a staged process, the business and its value can be transferred from the owner to the employeeExampleNeville provides engineering consulting services to large mining companies. Almost all of the income is from 4 mining companies that he has consulted to for over 10 years. Daniel is a qualified engineer who has been an employee for 5 years assisting Neville on these contracts (the business also employs 1 engineering undergraduate and 1 administration staff member). Neville wishes to retire.It is unlikely that this business is saleable to anyone except Daniel. It is also likely that Daniel would not be awarded the contracts himself without Neville’s assistance.Daniel agrees to purchase the business effective immediately – the deal is

50% of the purchase price is paid now

50% of the purchase price is payable in 12 months if the mining companies agree to maintain the contracts after Neville’s departure

Neville agrees to continue in the business for 12 months and is paid a salary
3. The owner wishes to offload part of the business to allow another part of the business to grow OR an excellent employee will leave without being rewarded with ownership.ExampleAnnette owns a business that distributes cleaning products. The business has 3 distinct income streams

Wholesale of cleaning products to 3 large corporate clients. Annette has known these clients and has been distributing to them for 15 years. Profit on these products is high.

Retail of cleaning products to restaurants within a 200km radius. Carol is the manager who looks after this division, and whilst sales growth has been good, profit margins are lower as there are a number of competitors in this market.

Annette has developed an innovative cleaning product which is suitable for hospitals. This product has significant potential but Annette will have to invest a lot of time to commercialize, trial and distribute the product.
Carol works long hours and has done a great job with the retail division. Carol is enthusiastic about new products that could be sold through the retail network and has some other ideas to increase profits. Annette however does not have the time, nor the interest to invest money into this division, especially when the same time and money spent on the hospital product could produce much higher profit. Carol is frustrated at this lack of interest and is deciding whether she should approach a competitor to employ her. Carol has been repaying her university debt and does not have much money.Annette and Carol agree as follows

Carol will purchase the retail division for $200,000, payable immediately

Carol is unable to obtain finance for $200,000 by herself, so Annette agrees to personally guarantee the loan. They sign an additional agreement which states that if the personal guarantee is called upon then Annette will be entitled to retain the Retail business. The loan term is for 4 years.

Carol will pay a Rent and Administration charge to Annette of $2,000 per month for the use of the office, staff and equipment.
DISCLAIMER: Many of the comments in this publication are general in nature and anyone intending to apply the information to practical circumstances should seek professional advice to independently verify their interpretation and the information’s applicability to their circumstances. The author expressly disclaims all and any liability and responsibility to any person, whether a purchaser or reader of this publication or not, in respect of anything, and of the consequences of anything done by any such person in reliance, whether wholly or partially upon the whole or any part of the contents of this publication.

Affordable Drug Rehab – Where to Look For It

It’s hard enough to face the fact that you need drug rehab. The last thing you need is the stress dealing with how you’ll pay for it.Fact is, drug rehab is not cheap. Each month in drug rehab can cost you tens of thousands of dollars. Not many people have that kind of money saved up. Nor can everyone qualify for government aid. And too many others have no health insurance. Not only that: what one person considers affordable may not be so easy to deal with for another person.So, thinking and shopping carefully is of the utmost importance. That said, it would be a good idea to look at the whole range of affordable drug rehab choices before you make an informed decision. In other words, don’t pick the first option presented to you. There may be more affordable choices if you spend some time looking.General Non-Profit RehabsOne of your best options for affordable drug rehab is to look at non-profit facilities. Their fees will often be lower than the corresponding for-profit drug rehab facilities. The reason for this is that the non-profits are subsidized by public money (like the Federal or state government) or by non-governmental organizations (NGO).There are dozens — if not hundreds — of non-profit drug rehab facilities that were founded expressly to help lower income and uninsured individuals. These non-profits can give you significant therapy benefits in very clean and well-organized environments. Most of them will not be free of charge. However, these affordable drug rehab facilities will (almost) never turn away a patient who is truly in need of treatment — whether or not they can pay full price.What are your other options?In addition to the not-for-profit facilities, there are the for-profit facilities that have beds reserved for patients needing subsidized care. This is not the same thing as free treatment. However, the fees are based on a sliding scale according to your income, size of family and overall ability to pay. If you can get affordable drug rehab at a private facility such as this, you can expect excellent care.Faith-based organizationsSome NGOs such as the Salvation Army don’t provide the celebrity-type surroundings but can still offer effective treatment and, most importantly, a safe haven. The amenities can be quite limited, but for someone with nowhere else to go, these facilities can provide the prospect of recovery. The programs are typically long-term and free to the participant willing to engage in a faith-based program.Sober Living HousingAnother option for affordable drug rehab is the so-called sober living option. Not as intensive as true drug rehab, these facilities provide an inexpensive but supportive environment in which the participant can recover. Most of these facilities will have a work-requirement as well as the expectation that the participant attend AA meetings, or the equivalent, while living in sober housing. SummaryUnfortunately, you’ll have to do some research and expend some effort to find the complete range of affordable drug rehab options open to you in your area. However, the good news is that they are out there for you — and your loved ones.