Assessment of the Challenges of Post Clearance Audit in Ethiopian Revenue and Customs Authority (a Case of Mekelle Branch office)

Abstract

The increase in volume of international trade and the need for trade facilitation has necessitated the adoption of risk management and audit-based controls. Post Clearance Audit is one of the most important means/tools used by many countries in the customs reform and modernization. Ethiopia has introduced Post Clearance Audit in 2009, in its reform to improve trade facilitation and control at the Headquarters and Branch Offices. The Mekelle Branch Office also started the PCA in the same year. The main objective of this study is to assess the challenges of the Post Clearance Audit at the Mekelle Branch Office and  tried to assess the proficiency and competency, of the PCA auditors, legal framework to implement PCA, the level of risk management, the contribution of PCA in the trade facilitation and revenue collection and tried to identify the major challenges in the implementation of PCA. To achieve these objectives, both quantitative and qualitative research approaches were used and data were collected from primary and secondary sources. The primary data were collected, using survey method, from the PCA staff, taxpayers or agents and non-PCA staff. About 128 structured questionnaires were distributed to the respondents and the response rate is 81.3%. The analysis provided that the PCA auditors have good education background but they are constrained by lack of training and development; the legal framework of ERCA (Customs Proclamation 859/2014, Article 21/ 4 has a problem concerning the long audit coverage period; risk management is not applied in the PCA to select cases for audit; the existing audit program doesn’t contribute to the desired level; and PCA does not cover all the customs regimes. The study concluded that if PCA were conducted by competent auditors, it could have resulted in effective customs administration. Finally, the researcher  recommends  that the Tax Authority /ERCA/ should improve the capabilities of the PCA auditors; risk management should be adopted in the case selection; and  the tax laws should be reviewed regularly, so that loopholes of the law can be addressed .

Key words: post clearance audit, trade facilitation, risk management

DOI: 10.7176/RJFA/11-6-14

Publication date:March 31^st 2020