Assessing the Practices and the Challenges of Tax Audit in the Somali Regional State Revenue Authority

Abstract

The tax collection system of the Somali regional state revenue authority is plagued by continues challenges ranging from misuse of the tax for vested interests to dissatisfied businesses often amused by the lack of the public infrastructure return on their routine tax payments.  Using in depth interviews and survey design with selected tax auditors, this study assesses the practices and the challenges of the tax auditing system employed by the Somali regional state revenue authority. Results of the study reveal that the practices to achieve ultimate Goals of Tax Audit was found at moderate level; Tax Auditors of the Office do not make sufficient efforts to create Taxpayers’ awareness; instead focus on gathering and collecting information on health of the Tax system including compliance behavior of the Taxpayers. In addition, this study reveals that the Office did not proportionally focus on all types of Tax Audit techniques; most of the time Tax Audit activities were done without schedules and carried out arbitrarily. Overall, the practice of Tax audit at Head Office level of the Region is sub-standard. The finding further indicated that, majority of the Tax Auditors have not previously attended training programs related to their current job during the past two years of their services at the Office. Yet, the results of this study revealed that, there is no well-established strategies that make Tax Auditors competent and efficient on their job through training on continuous bases. As a result, proficiency and competency level of Tax Auditors was found at moderate levels. The challenges that often curtail the effectiveness of the tax system included long standing traditions of corruption, inflated estimation of tax amount; not responding the compliance of taxpayers on time; taxpayers’ consideration of illegal business practices as best way of doing business; and absences of coordinated efforts among sector offices of the region engaged on Tax audit related responsibilities. Key recommendations of the study include offering training; assigning competent Tax Auditors, integrating sector offices’ efforts, developing and using annual schedule of auditing for Taxpayers business firm, and arranging annual forum.