ASSESSMENT OF TAX AUDIT PRACTICE AND ITS EFFECTIVENESS IN ENHANCING TAX REVENUE THE CASE OF LARGE TAX PAYERS BRANCH OFFICE OF ETHIOPIAN REVENUE AND CUSTOMS ATHORITY

Abstract

The purpose of this study is to assess the tax audit practice and its effectiveness in enhancing tax revenue of large tax payers’ office. The study examines tax audit practice and its effectiveness with dimensions of experience and capable audit staff, tax payer’s record keeping, tax payer’s office information system, audit case selection and examination method, the type of audit used and frequency of tax audit influence audit effectiveness in LTO. In light of this objective the study adopted mixed research method of research approaches. Specifically, the study used survey of questionnaire analysis offices’ on tax auditors and team leader, and interview analysis on team leaders and process owners. Then tax auditors and team leaders were selected based on Census method, because, the target population studied is small. In large tax payer’s office there were 80 tax auditors supervised and lead by 10 team leaders managed by two process owners. Then the researcher distributed those questionnaires to the 90 tax auditors and team leaders, only 80 of them were returned. Consequently, Data was then analyzed on quantitative basis using inferential statistics (Anova and linear regression analysis) and descriptive statistics (frequency, percent, mean and standard deviation). Qualitatively interview was presented to process owners. The results of the study enable us to conclude that tax audit type, experience and capability of audit staff and audit case selection and examination method as a linear combination significantly influence tax audit effectiveness in the organization studied. However, tax payers record keeping, tax payers information system and frequency of tax audit were not significantly to undermine tax audit effectiveness. In the end, the study forwards the possible measures to be taken by the Ethiopian Revenue and Customs Authority to mitigate problems in tax audit operation. The authority should conduct further study to alleviate the problems which are related to tax audit.