Assessment of Tax Audit practice and its Challenges: case study Ministry of Revenue, Mekelle Branch

Abstract

This study tried to assess the practices and the challenges of tax audits with a selected Ministry of Revenue, Ministry of Revenue Mekelle Branch Office. For this end, intending to get the relevant data, this study considered only the audit department staff office and Mekelle city audited taxpayers as the population of the study. As the sources of data, the current study used both primary and secondary sources. To collect primary data, survey questionnaires were used as the methods of data collection. The questionnaires were distributed to 28 tax audit staff respondents, and out of those, 24 were returned. They were also distributed to 105 taxpayers’ respondents; out of those 87 that were returned, the secondary data was from scholarly published studies, internet sources, journals, MOR published, and unpublished documents. The questionnaires were rated at a 5-point scale rate. To analyse the collected data, statistical analysis using SPSS 20 was applied. From the data analysis, it is revealed that comprehensive tax audit was a repetitively performed tax audit type. There is a wellestablished role of tax audit. The tax audit practice of the office has weaknesses in applying IT (information technology). The department applies statistical techniques and an automatic risk scoring system for its audit selection case. The primary purpose of the tax audit in the office is not ensuring tax compliance behaviour but increasing tax revenue collection. There is a problem in the supply of audit resources such as skilled and experienced tax auditors and an organized and suitable office structure. In addition, an inadequate number of auditors, a lack of skilled and qualified auditors, and the unwillingness of taxpayers to present necessary records were some challenges of tax auditing in the office. Based on these findings, it was recommended that the office should have skilled and qualified tax auditors through training, focus on ensuring tax compliance behaviour, and apply different tax audit types. Lastly, it is suggested that the office need to have continuous assessment of the auditor's efficiency and level of tax compliance behaviour enhanced every time.