The tax auditing approach in Turkey has undergone a significant transformation process with the widespread adoption of digitalisation and data analytics technologies. Developed by the Ministry of Treasury and Finance, KURGAN (Institutional Supervised Analysis System) offers an artificial intelligence and big data-based analysis model, differing from the traditional tax audit approach, thereby making audit processes proactive. This transformation has reshaped not only the methods of the tax administration but also taxpayers’ risk management, document organisation, and commercial decision-making processes.
Limitations of Traditional Tax Audits and New Requirements
In the past, tax audits were mostly retrospective in nature and could be initiated years later. This model could create inefficiencies in terms of time and cost for both the administration and taxpayers due to elements such as document-focused examination, limited data analysis, and manual risk selection. Furthermore, detecting complex commercial relationships and fake document networks was not always possible using traditional methods alone.
The growth of the digital economy, the widespread adoption of e-invoicing and e-ledger systems, and the increase in transaction volume have created a need for a faster and more analytical audit model. The KURGAN system stands out as a new generation analytical approach that responds to this need.
What is the KURGAN System and How Does it Work?
KURGAN is a risk assessment system that integrates multiple digital data sources, such as e-invoices, e-ledgers, bank records, customs data, and declarations, to analyse transactions in real-time. The system examines the relationships between transactions to generate a risk score for each taxpayer and transaction, aiming to identify high-risk situations at an early stage. Unlike traditional audits, KURGAN creates an ‘early warning’ mechanism by monitoring current activities rather than reviewing past transactions. This approach aims to manage risk at an early stage rather than penalising tax losses retrospectively.
Key Differences Between Traditional Auditing and the KURGAN Approach
The transformation brought about by the new system can be summarised under the following headings:
- Timing: Real-time and proactive analysis instead of retrospective review
- Focus: Not just document control; transaction relationships and supply chain analysis
- Technology use: AI-powered data analytics instead of manual sampling
- Objective: Preventing risk at an early stage rather than detecting tax losses
- Taxpayer interaction: Requesting information letters and an explanation process instead of a classic audit
This change requires businesses to consider not only their accounting records but also their entire commercial processes from a data integrity perspective.
KURGAN Risk Analysis: What Criteria Does the System Focus On?
KURGAN’s analytical approach is not limited to the financial statements of a single company. The system attempts to identify potential risks by examining the connections between companies’ customers, suppliers, and transaction networks. Anomalies that may indicate the use of false or misleading documents can be detected by algorithms. Therefore, today, tax risk is affected not only by internal company processes but also by the risk profile of the companies they do business with.
The ‘Request for Information’ Process and Taxpayers’ Strategic Options
When KURGAN identifies a risk, the process usually begins with a request for information based on Article 148 of the Tax Procedure Law.
This stage is not merely a technical request for information; it is a process that measures the taxpayer’s compliance approach and capacity for explanation.
In this case, businesses are usually faced with three different strategic options:
- Explanation and submission of documents: Preparation of documents proving the commercial basis of the transaction
- Voluntary disclosure: Making corrections before the investigation begins if an error is detected
- Disclosure with reservation: Preserving the right to judicial recourse in the event of a disagreement with the administration
Choosing the right strategy can directly affect the company’s financial and legal risk profile.
Supply Chain Risk and Commercial Reputation Management
The KURGAN system analyses not only the company but also its suppliers and customers. A commercial transaction with a risky company can affect the risk scores of other companies in a chain reaction. Therefore, for businesses today, supplier selection has become a strategic decision beyond classic cost and quality criteria, also in terms of tax compliance.
The Strategic Importance of Tax Compliance in the New Era
With KURGAN, the concept of tax auditing is undergoing a fundamental change. It is no longer sufficient to simply file the correct returns; companies must ensure that all their transaction flows are consistent, traceable, and documentable. The accuracy of financial records, the reliability of digital infrastructure, and supply chain transparency have become fundamental elements of tax compliance.
This transformation removes tax auditing from being a retrospective control mechanism and turns it into a management tool that identifies financial risks for businesses at an early stage.
ÖzbekCPA with KURGAN Risk Analysis and Tax Compliance Consultancy
As ÖzbekCPA, we provide support in adapting to the new audit approach introduced by the KURGAN system, conducting risk analysis, preparing strategic responses to information requests, and structuring supply chain compliance processes. You can contact us at to assess your business’s risk profile and develop a proactive compliance strategy.
