KURGAN and Real-Time Audit; a Paradigm Shift in Tax Audits

With the Ministry of Treasury and Finance’s Strategy to Combat False Documents and KURGAN (the Institution-Supervised Analysis System), tax audits are changing fundamentally. Instead of focusing on past periods, your transactions are now scanned in real time and a risk score is calculated within seconds.

KURGAN cross-checks not only VAT returns but the widest layered data set, including capacity reports, customs declarations, registry and shareholding information. The system’s most striking capability is proactive intervention; when it scores a transaction as high risk, an audit team can arrive at your premises within five to seven days and ask whether the goods are in the warehouse. This means the instant triggering of administrative security measures such as security deposits and deregistration under Article 160/A of the Tax Procedure Law.

Admirable as KURGAN’s operational speed is, it creates a serious tension in legal certainty; the algorithm collides with the element of intent. KURGAN can objectively establish the reality of a commercial transaction; it cannot, however, directly prove the “knowingly and willingly” element required for the evasion offence under Article 359. A high risk score may undermine the presumption of innocence and push the taxpayer into a defensive position in which even logistical errors or temporary record mismatches may be perceived as deliberate acts. This carries the risk of indirectly shifting the burden of proof onto the taxpayer.

Three proposals. The basic operating logic and risk thresholds of the algorithm should be shared while protecting intellectual property; legal foreseeability requires it. High scores should not be treated as prima facie evidence of intent in prosecutions under Article 359; the distinction between administrative risk and criminal intent should be preserved. A recovery period should be defined so that legitimate correction mechanisms are reflected in the system and taxpayers acting in good faith are not subjected to unjust intervention.

Tax audit is no longer merely accounting but a discipline of data management. Companies must continuously manage their own risk scores and raise supplier due diligence to the highest level.