Risk Based Tax Audit Practices in Ethiopia, Evidence from Western Addis Ababa Small Taxpayers Branch Office

Tesema Gemeda

doi:10.7176/ejbm/12-28-06

Abstract

This study was study was designed to assess Practices of Risk Based Tax Audit in Western Addis Ababa Small Taxpayers Branch Office in Ethiopia To achieve the stated objectives descriptive research design with mixed research approach was adopted. The result of the study revealed that there was a significant problem of supporting the audit work by Information Technology, the tax audit evidence is not obtained from y third party. No difference in risk selection criteria’s for similar for Large, Medium and Small taxpayers, focusing on revenue collection than enhancing tax compliance, extensive application of comprehensive audit than risk based sample among others The study recommends: adequate use of information Technology in selecting taxpayers based associated risks, emphasizing on spot/issue oriented audits, applying different selection criteria based on their nature, to focus on issue audit and to use third party audit evidence. Keywords: Tax, Risk based Tax Audit, taxpayer selection, Third party information d information Technology DOI: 10.7176/EJBM/12-28-06 Publication date: October 31 st 2020

Highlights

Taxation is the earliest and most common form of government intervention with the economic life of individuals and business enterprises (Clement et al, 2018)
Comprehensive audit stands first by number of files audited and number of revenue assessed (80.50%) while investigation audit follows by additional tax assessment (18.36%) even though less investigation audit files were conducted than desk audits
The risk based tax audit effectiveness starts at having adequate audit resources and good risk criteria

Summary

Introduction

Taxation is the earliest and most common form of government intervention with the economic life of individuals and business enterprises (Clement et al, 2018). Risk-based tax audit is more efficient and effective to manage scarce audit resources wisely, target high-risk taxpayers, and assess efficient tax revenue (World Bank, 2011; ERCA, 2010). It is not possible for tax offices to identify the likely taxevaders by random selection and/or manual screening methods. The gender information shows majority of the respondents were females (57.7%) indicating the high involvement of female in the study. Tax Audit Resources The first objective of the study was to assess resources available for performing effective risk based tax audit in the branch office. There are well organized structure and 1 conducive working environment for the tax 5.8 28.8 28.8 30.8 5.8 2.99 1.04 audit practice

Objectives

Methods

Findings

Conclusion