Tax planning coordinates the fiscal policy of the company and minimizes the tax burden and compliance with the relevant laws. It establishes procedures for the company to meet its tax obligations and pose a favorable image to the tax authorities.
The problem of solvency in years of economic crisis is caused by the following: the devaluation of the national currency, the general rise in operating costs and decreasing labor shortages. The business sector, being immersed in an uncertain economic environment, requires planning that must be applied in all areas such as finance, human resources, marketing and production.
Speaking of an uncertain economic environment, we also refer to a possible currency devaluation that results in a high inflation rate, that has a strong impact on the finances of the company. Based on this, the importance of tax planning is discussed here, which will outline minimization of the tax burden as its primary objective. The issue related to the financial solvency of the company and some of the most important measures to preserve is also addressed.
Importance of tax planning and measures to preserve the financial solvency, planning of the different areas that make up a company helps to have a plan of action that will help to deal with various internal and external problems that are in way affect the finances of the company.
Conceptualization of financial planning
The planning is identified as a symbolic foreshadowing of the events and phenomena that are to be controlled. The treasury is increasingly becoming the majority shareholder of the company, as well as the possible correction of the defects and deficiencies incurred by taxpayers.Tax collection is not only to cover the public spending, but also to redistribute wealth by indirect means of public service.
Tax planning today is an indispensable need for the taxpayer, as the importance of carrying out lies in the economic optimization of resources. Its objectives are to save the state administrative, legal security and civil rights. To exercise tax planning it requires four very important elements: the capable subject, the specific object, a proper tool and an effective method.
The subject capable, refers to the professional who practices public accounting career, which dominates the management of legal facts and knowledge regarding reasonableness, consistency and logic to the characteristics of the subject. It must meet the following four requirements:
A. Knowledge of laws provisions – Notions of general principles of law, the hierarchy of laws, structure and basic concepts of tax provisions.
B. Knowledge of the business or individual to operate – Practical notion of the nature and characteristic of socioeconomic activities, including information technology, process optimization, human factors, marketing, business strategies, logistics and quality.
C. Imagination and memory to implement and combine the strategies under tax to employ economies – To truly become a good advisor and develop a great prosecutor to follow the plan, they must exploit all technical and professional attributes, exceed the daily activities and generate a broader view of their profession and the business world as a whole. The advisory that customers appreciate is who can identify issues of real concern to the client, which is proactive and always provide relevant information to the business, not just a list of observations, but with ideas and suggestions that can be applied in practice and a tangible benefit.
D. Order, time and circumstances in which the strategies to be applied – All planning should follow a hierarchical account of the priorities, opportunity and environment in which it will be applied.
Methods of tax planning:
The specific purpose of tax planning is to reduce the tax burden that may impact on any heritage, ie the reduction.
The method of tax planning is summarized in five basic steps:
1. The analysis of the case – This is an assessment of the present and future of the conditions, characteristics and amount of assets subject to planning.
2. The selection of possible strategies – The strategies should be consistent with the results obtained in the analysis of case.
3. The assessment or evaluation of outcomes – Determining the cash savings from the selected strategies and their intended dosing is envisaged.
4. The implementation of planned strategies – Implementation of each of the phases, formalities, procedures, documents, etc. With the effect of ensuring consistency of schedule with its practical implementation.
5. Maintenance plan – It is very necessary to keep up the execution of the plan, adjusting and readjusting in response to circumstances.
Critical points for financial planning
- Deeply understand the strategy, especially the growth plans if any and competitive context (likely actions of competitors and the competitive position of the company) in which you operate.
- Deeply understand the probable future economic environment. This is reflected in the key assumptions of economic growth, inflation, exchange rates, interest rates, and all those that are needed to ensure the financial projection.
- Financial Projection needs a foundation from which to depart. This database is the history of the company and specifically, for the numerical results of financial projection, you need the Statement of Financial Position or Balance Sheet for the immediate preceding year.
- Financial Planning is not an extrapolation of history. It gives us the information that is passed on to the future, for example the amount of existing debt and payment programs. This is taken into account necessarily.
One way of assessing the financial strength of a company is to compare the short-term volume of its debt to the amount of current assets. The problem of solvency in years of economic crisis is caused by the following:
1. devaluation of the national currency.
2. The general rise in cost of operation.
3. The working capital and its decreasing scarcity.
Some of the measures to preserve solvency in times of economic crises include a critical analysis of the traditional techniques of financial planning, flexible budgets and resource flows, methods for the study and prediction of profit, breakeven, cost of capital and financial structure.
The financial health of the company is directly related to:
a) Instruments of credit information.
b) Monetary outcomes and their impact on solvency.
c) Measures to improve solvency in times of inflation.
The tax planning has become a necessity for a state and its taxpayers. It is necessary for the state because it lets you combat technique and simple rational tax evasion and excessive tax fraud of which a taxpayer is poorly informed. The taxpayer in turn required for the economic optimization of resources.
The corporation must consider in detail any contingency to worry about, in order to understand all their financial implications, well in advance, and thus more quickly identify and give specific answer. To know the state of solvency of a company, it is necessary to analyze them through financial reasons that, when combined with the experience of the executive, decisions are taken corrective and preventive.