When taking actions according to provisions for Criminal Prosecution, the auditor should know the Code of Criminal Procedures and the Criminal Prosecution Law. Based on that, the Head of Tax Audit should periodically issue audit directives for tax offices. All cases included in the category of cases forwarded to the Head of Tax Audit should come in the required format and contain all the required data if the case is forwarded for further actions.
The investigator can also investigate other areas. Questions are formulated in different forms and the following steps can be adopted: Observations in the investigated taxpayer’s economic activity premises without taxpayer’s knowledge of this; active search for information in sources external to tax administration and the company’s business registers; meetings with the taxpayer which is informed that the purpose of the meeting is to determine whether he is guilty and liable for potential criminal prosecution for discovered tax fraud.
According to the Code of Criminal Procedure, if the criminal action has caused material damage, the accused taxpayer should be sent for civil prosecution and the civil plaintiff should claim the return of property or reward for the damage. The civil plaintiff becomes legitimate before the court review starts. The request should contain general information of the damaged plaintiff and the accused. It should also contain the reasons for the request, signature of damaged plaintiff or his representative, name and surname of representative and authorization. In a criminal process it is the legitimate manager of the audited taxpayer in cooperation with the auditors who can initiate civil accusations.
The following summary of rules of evidence is presented here as a guide for auditors as well as intelligence and investigation inspectors:
Types of evidence:
1. Material evidence, data obtained from material objects
2. Written evidence, which can be:
2.1. Primary (original documents considered as most reliable), or
2.2. Secondary (copies or witnesses using notes taken from the original or its summary).
Secondary documentation of evidence is usually applied only when:
2.2.1. The document is owned by another party and the auditor cannot finally administer it;
2.2.2. The original is lost or destroyed;
2.2.3. It is impossible to physically produce the original (e.g. a script on a wall);
2.2.4. It is prohibited to remove the original (e.g. some public documents);
3. Confirmation of data intends to confirm the truthfulness of previously collected evidence. Confirmation of data is essential in the following circumstances:
3.1. When admission or confession is made by an accused person
3.2. Evidence is collected by kids
3.3. Evidence is collected by accomplice
The following are sources from which the investigator can collect evidence to prove tax fraud:
- Material evidence: existing materials which provide the basis for the evidence, representational selections of materials, original documents or data;
- Searches in the theater of the event;
- Information from the public, informers, department officials;
- data inspection;
- supervision;
- interviews with employees;
- Interviews with suspects (if possible)
1. The criterion of validity or acceptability of written evidence remains with:
- the party that created (signed) it;
- someone who witnessed it being created or signed;
- someone who recognizes the writing and is able to identify it;
- Expert (legal).
2. Evidence is considered such in a case if it tends to prove the existence of facts being discussed. Not every information can be evidence.
3. Evidence is acceptable if it does not breach one of the following rules:
- it is based on gossip;
- it is based on similar acts or facts;
- it is based on opinions or suppositions;
- it is incompatible with the suspect’s character (this is subjective but worthy of consideration);
- it is given by a person but accuses the suspect.
The investigator is in search of any evidence to confirm violations and guilt in the taxpayer’s activity which could send the taxpayer for criminal prosecution. The amount of revenue in investigation cases is likely to be considerable and this is why the investigation time is longer. Meetings with the taxpayer in question have another perspective, as the investigator’s questions intend to extract information not only about the taxpayer’s problems but also the persons involved in fraud.
