| Abstract: | This study tried to assess the practices and the challenges of tax audit in case of selected Revenue and Customs Authority, The Adama Revenue and Customs Office. For this end, with the intention of getting the relevant information, this study considered only audit department staff of office as population of the study. Since the number of population is small, this study considered the whole staff members of the audit departments. As the sources of data, the current study used both primary and secondary sources. And, to collect the necessary data survey questionnaires were used as the methods of data collection. The questionnaires were rated at Five Points Likert Scale Rate. To analyze the collected data descriptive statistics such as mean, standard deviation and percentages were applied. From the data analysis, it was revealed that comprehensive tax audit was repetitively performed tax audit type. There was well established role of tax audit. The tax audit practice of the office has weakness in selecting those taxpayers with high tax potential and in business wise. The department also not applied statistical techniques and automatic risk scoring system for its audit selection case. The primary purpose of the tax audit in the office was not ensuring the tax compliance behavior but increasing tax revenue collection. There was problem in supply of audit resources such as skilled and experienced tax auditors and organized and suitable office structure. There was no taxpayer segmentation of taxpayers for tax audit and risk based tax audit strategy. In addition, inadequate number of auditors, lack of skilled and qualified auditors and unwillingness of taxpayers to present necessary records were some challenges of tax audit in the office. Based on these findings, it was recommended that the office should have skilled and qualified tax auditors through training and retaining the experienced auditors, focus on ensuring tax compliance behavior, shall practice statistical techniques for case selection, to follow risk based tax audit strategy, to segment taxpayers and apply different tax audit types. Lastly, it is suggested that the office must have continuous assessment of auditor’s efficiency and level of tax compliance behavior enhanced every time. |
