Why to use services of a tax consultant?

The work of tax consultant is often trivialized in a sense of a work consisting only of a tax deferral, a tax return filing and the use of various discounts. Such an idea is totally wrong, although it is surely true that the majority of tax consultants occupy only with this work. Tax consulting consists not only in this though. After all to every tax return there are relatively voluminous and elaborated instructions with their help is the majority of taxpayers able to fill a tax return themselves.

A good tax consultant is more than just a machine for filing prescribed forms. They are basically experts on tax law, who compared to the overwhelming majority of people with only legal education can apply individual provisions into the real world of economic numbers. Since no law acts separately but always in association with other regulations a tax consultant cannot restrict only to the tax law.

Tax libility arises long time before filing your Tax return

To get an idea on how this works it is possible to give a purchase contract of immovable property as a short example, where from the legal point of view is everything right, but not from the point of view of a tax consultant for the price is not divided into depreciable and not depreciable property. Another typical field refers to wrong arranged employment contracts which have not only tax impacts (e.g. a wrong formulation of the variable remuneration), but also an influence on social and health insurance payments even in European context (e.g. a wrong determination of the place of work). In cross-border business it is necessary to think in advance the buyer-supplier relationship through, so that no needless registration duty to various taxes in different states emerges, and to examine if the usage of international delivery conditions INCOTERM etc. has any concrete impacts, in which case these problems do not concern only vast international companies, but also smaller and minute entrepreneurs. It can be stated that similar pitfalls and complications are an inseparable part of every business regardless its object. The tax amount is often decided already in the moment of contract conclusion. The infinite number of similar examples can be still mentioned.

Trust and the ability to predict

Talking about good tax consulting it is essential to gain the mutual trust between the tax consultant and the client. This relationship can be compared to the one between patients and their doctors. Only openness can lead to finding of optimal solution, in which case even a little negligence can change conclusions of a tax analysis and tax impacts entirely. Furthermore, a top manager stays always alone. He needs to consult many problems, but not with his subordinates. A tax consultant figures at his level as the person to whom he can confide. Since required by law, a tax consultant is bound by the extensive secrecy and always stays on the client’s side.

In practise as a common problem appears that client is does not realize and cannot distinguish which information is important and may have to tax impacts. The task of a tax consultant is actually the ability to empathize with the client’s position and to predict potential problems in client’s business operation. Thanks to his experience he is able to formulate essential questions which not only lead to the problems solution but also opens client’s eyes.

Furthermore, a tax consultant works for a vast count of subjects and solves huge and various amount of difficult tax problems, which appear by any individual subject only sporadically. His experiences and knowledge spare the time and expenses of a client.

Tax consultants pay for their mistakes

Another significant reason why to use external services of tax consulting is the risk diversification because tax consultants are responsible for their mistakes and cover any potential fine and penalty assessed to their clients. The cooperation with a tax consultant should be a part of the company risk management together with the protection against other risks (currency, credit etc.). It is necessary to mention that in The Czech Republic, speaking about larger companies especially, it is quite common to employ people responsible for tax problematics within dependent business. These subjects deprive themselves of the possibility to distribute risks resulting from mistakes and potential fines from supplementary taxes because employees bear material responsibility up to the amount of three monthly salaries. Even in the case that this responsibility is in the employment contract solved in detail, in praxis reparations are not claimed, expanses are then born by the subject itself.

The fact is that state and its financial management should be interested in representing of tax subjects by tax consultants as much as possible because to claim the damage recovery, i.e. tax accruals, from tax consultants is considerably easier than from tax subjects. The reason is the obligatory insurance of tax consultants which is anchored in law. Financial management does not need then to search and contact fictive companies; those whose executive directors are homeless etc.

The current penalties for wrong tax have in comparison with common interest rates usurious extent, which has no parallel in advanced countries – penalty 20 % from supplementary tax and the interest for delay at least 14 % p.a. This does not have to be necessarily problem for the financial management, if the supplementary tax itself is not payed, because in such a situation tax accruals often considerably approximate the supplementary tax amount itself.

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