Abstract
This study examined the relationship between tax audits with the empirical referents of desk audit, field audit and tax compliance with its measures of taxpayers registration, filing of tax return and penalties in Rivers State Internal Revenue Service. Tax audits as emerging concepts has suffered from scarcity of empirical evidence in Rivers State. Research hypotheses were formulated to test the relationship between tax audits and tax compliance. Copies of Questionnaire were distributed. The data that was obtained via survey instruments were analyzed using the descriptive statistical method to test for the mean, Rho analysis. Reliability test was conducted using Cronbach Alpha reliability with the scores of the variables of 0.7. The hypotheses were tested using Pearson’s Product Moment Correlation (PPMC) and regression analysis. From the analysis, the result shows that there is a significant relationship between empirical referent of tax audits and the measures of tax compliance. The study also found that there is a significant association between desk audits and filing of tax returns. Also desk audit is significantly correlated to penalties. Other results show that there is significant association between field audits and filing of tax returns, field audit and penalties also have a significant association. It was also found that adequate manpower does have mediating influence in the association between tax audits and tax compliance. Consequently, the study concludes thus, organizations prefers desk audits to field audits because field audits reveals more detailed work and encourages the provision of more documents by the taxpayer. The desk audit is more convenient for both the revenue authority and the taxpayer because field audit entails elaborate job to be performed by the Revenue authority. The study recommends that tax audits should be carried out on regular intervals, by this compliance rate will increase if tax audit is administered and the revenue realized is judiciously used. Tax audits should include desk audit and field audit. Adequate personnel should be engaged to carry out tax audits. Desk audit for the sake of convenience should be preferred to field audit and finally, companies that fall within the tax net should comply to avoid penalties. Keywords: Tax, Tax audits, Tax Compliance, Internal revenue Service DOI: 10.7176/RJFA/11-16-13 Publication date: August 31 st 2020
Highlights
Tax audit is an examination into the financial records of taxpayers by the revenue authorities with the sole aim of identifying that the exact or correct amount of tax has been paid by the taxpayers to the government in a particular year of assessment in relation to the activities of the taxpayers
There are outlined criteria for companies to be selected for tax audit which may include the following: nil tax returns, refund cases, persistent losses, low tax yield, non-submission of returns, fraud or evasion, suspicion for tax avoidance, transfer mispricing, thin capitalization and sometimes when taxpayers request for tax clearance certificate (TCC) among others (Bitrus, Okonkwo & Oyedokun 2014)
The study shows the relationship between tax audits and tax compliance, it is evidence that there is strong compliance rate when tax audits is been carried out
Summary
Tax audit is an examination into the financial records of taxpayers by the revenue authorities with the sole aim of identifying that the exact or correct amount of tax has been paid by the taxpayers to the government in a particular year of assessment in relation to the activities of the taxpayers. The relevant tax authorities responsible for tax audit are the Federal Inland Revenue Service (FIRS) for limited liability companies and State Board of Internal Revenue (SBIR) for enterprises. Tax audit is carried out to ensure a true and fair view of the business records for tax purposes, the officials of the tax audit is responsible to ensure that the amount reported is correct and the amount of tax liability is being paid in accordance with the rules, regulations and tax laws
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