TAX AUDIT PRACTICE IN ETHIOPIA; CASE OF FEDERAL GOVERNMENT

Abstract

This study examines tax audit practice in Ethiopia (the case of federal government), and investigates key problems in tax audit operation regarding the appropriateness of audit type used, suitability of audit case selection methods and audit examination techniques used, The study adopts mixed method approach in order to achieve the research objectives and to answer research questions. Specifically, the techniques used in the study include questioner with tax auditors and investigators, in-depth interviews with tax officials and documentary analysis. With these research methods, the results of the study reveal that tax audit program remains undeveloped with slight range of tax audit activities performed targeting aptly specific risks. The tax audit program is a toddler tool in improving voluntary compliance and increasing future revenue performance through educating and helping taxpayers to understand their tax obligations. The study also shows low audit coverage, the absence of compliance risk-based audit case selection strategy, scarcity of audit resources, tax auditors in particular, and the absence of good interaction between tax auditors and tax payers. In the end, the study forwards the possible measures to be taken by the Ethiopian Revenue and Customs Authority to alleviate problems in tax audit operation.