Determination and accounting of factors leading tax disputes

Tax disputes are disagreements that arise in the context of tax liabilities between the parties. Detections made during tax audits and declaration errors are the main reasons for the occurrence of tax disputes and there are alternative ways of resolving the disputes which can be listed under two headings: administrative and judicial remedies for the parties. Appeal for amendment, compromising, reduction in tax penalties and correction of tax errors are methods used in the administrative phase in the resolution of tax disputes and litigation in tax courts is the basis of judicial remedies. Determination of the probable factors leading tax disputes usually found through tax audits and resolved by administrative or judicial remedies, is rather important for efficient collection of tax considered to be the most important public revenues. However, review of literature indicate that little empirical research were undertaken to determine factors leading tax disputes. In order to make contribution to fill this gap, this study by analysing the tax audit reports attended to determine the factors leading to tax disputes and the accounting process to be followed in resolving such disputes. In the study, it is stated that probable factors leading tax disputes are "faulty or misleading books and documents" and "incorrect billing or non-billing" and that the tax base and tax differences determined for these and similar reasons are up to declared amounts and that the tax penalties reached about three times the tax differences determined. In addition, the assessment of tax penalties as non-deductible expenses in tax legislation resulted in differences in the accounting records made in accordance with tax accounting and generally accepted accounting principles, and that according to tax accounting, businesses should account for these penalties as receivable from shareholders. Keywords: Tax Disputes, Tax Audit, Accounting