Tax Audits and Tax Compliance in Rivers State Internal Revenue Service, Nigeria

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