Impact of Tax Audit on Taxpayers'Complaince in Rwanda

Abstract

A tax is a compulsory levy by government through its agencies on the income, consumption and capital of its subjects. These levies are made on personal income such as salaries, business profit, interest, dividend, discount or royalties to obtain revenue, it is the reason this study assesses the effect of Tax audit on tax compliance in Rwanda a case of Rwanda Revenue Authority (RRA). The main objective of this research is to assess the impact of tax audit on tax payers‘ compliance.Towards the fulfillment of general objectives of the research, the following will be specific objectives.To assess the extent to which tax audit helps the tax officials to identify the tax evasion and other tax malpractices, To find out if tax audit helps in submission of accurate tax returns, To find out whether taxpayers cooperate during tax audit exercise, To examine whether outcome of tax audit help improve taxpayers‘ compliance. For this study, the researcher applied descriptive analysis using the fact that a descriptive research design is used to describe the data and characteristic about what is being studied. The population under this research consisted of tax auditors totalling 113. This study incorporated both quantitative and qualitative research approaches. The stratified sampling technique was used to select 88 respondents to be included in the sample. The main finding of the study include among other; revealed that tax audit towards achieving target revenue, that tax audit reduce the problems of tax evasion, that tax payers do not usually cooperated with tax audit personnel during the exercise. The Pearson correlation coefficient above reveals that there is a positive moderate relationship between tax audit and tax compliance. Therefore I accept the hypothesis at it is shown by the Pearson correlation of 0.673** tested at 0.01 level of significance. Also the correlation shows a gap of 0.327 that needs to be closed by the auditors of Rwanda revenue Authority. In conclusion, the results not only have the potential to contribute theoretically to public finance but also to the area of institutional performance. The Author also recommends that; Rwanda Revenue Authority‘s auditors should make all possible ways that Taxpayers feel comfortable and cooperate during tax auditing exercise and to continue intensify taxpayer education and sensitization programs across the country, it needs to keep strengthening the use of new technologies to ease the work of it partners in business.