The Risks & Management Of Tax Planning

In this paper, the author has made a pilot study of the risks and their management of tax planning, made a description of the concept of the risks of tax planning and how they behave, analyzed the aspects that resulted in the risks, brought forward a model named as Continual Risk Management Model (CRMM) and several methods to manage the risks of tax planning on the basis of five steps of tax planning decision.The risks of tax planning are the uncertainty of the consequence of tax planning. There are two types of these risks, the risks that taxpayers pay more tax and the risks that they pay less tax. These risks can be described in three aspects: (1) Taxpayers can't get benefits of tax allowance because they don't meet all the requirements of tax allowance; (2) Tax payments are in contradiction with the Taxation Laws; (3) The benefits of tax planning disappear when the conditions they depend on have changed. Taxpayers should pay attention to some key points to control and prevent the risks of tax planning. These key points include the collection of information, tax planning experts' skills, how to deal with the risks that every tax planning scheme embodies, how to control the implementation of tax planning and how to evaluate the performance of tax planning. The principal idea of this paper is that those mature research methods on financial risks can also be used in the research of the risks of tax planning. Tax planning not only aims at lightening tax burden, but is an important financial decision. In this paper, the author attempt to apply some financial principles, such as the trade-off of risk and return, the concepts of the time value of money and opportunity cost to the research of tax planning.