This study sought to ascertain the role of Tax Audit in Mobilizing Tax Revenue domestically. The research examined tax compliance and revenue mobilisation and possible challenges confronting Tax Auditors. Data was gathered from the Large Taxpayers Office on Tax Audit Assessment and Tax Revenue. Also questionnaire was designed where 30 Tax Auditors were sampled to ascertain the challenges that confront tax audit. Probit regression, Descriptive statistics and Correlation coefficient were employed in this study.
The study found a positive significant relationship between compliance level and external auditor type. This can be explain that, there is a high probability of firms to comply with tax regulations if their external auditors are among the biggest four audit firms in Ghana. Big firms are capable of compelling tax payers to comply probably because of goodwill.
Also, the study found that Tax Audit in itself enhances compliance as well as revenues mobilization. Various challenges the tax auditors encounter includes; the unwillingness of tax payers to corporate with auditor, taxpayer being economical with respect to information and tax payers deliberating delaying the process.
CHAPTER ONE – INTRODUCTION
Background of the Study
Every nation has two means of generating revenue: that is internally or externally (borrowing). Borrowing comes with debt payment while generating income internally through taxation causes displeasure for the citizenry (Obawana, 1996 as cited in Egyin, K B (2011). In developing nations like Ghana, taxation serve as the most relevant source of mobilizing revenue internally for development project. According to Paepe and Dickinson, (2014) tax revenue and economics growth in developing countries go hand-in-hand. In Ghana just like other developing nations, revenues mobilization to finance development has been and continue to be a major challenge. These has resulted in a consistent budget deficit operation in all developing economies over the years. The most common and largely relied means to secure funds internally for infrastructural developing and other long run investment by government is taxation. Harelimana, J. B. (2018) noted that, United Nations required developing countries to be able to at least mobilized 20 percent of their gross domestic product (GDP) in taxed in order to realize the Millennium Development Goal (MDGs). He further noted that, several countries in Sub-Saharan Africa still raise less than 17 percent of their GDP in tax therefore making finance of development projects challenging. Very low tax to GDP ratio in developing economies has been the bane of infrastructural deficits in these countries.
Tax is a compulsory levy imposed on the citizens by the government. Tax is seen as compulsory since the person liable to pay it cannot decide whether to pay or not. Tax is‘(sum of) money to be paid by people or businesses to a government for public purposes’. (Oxford Advanced learners’ dictionary). “Taxes are what we pay for civilized society” (Oliver Wendell Holmes, Jr., U.S. Supreme Court Justice). Taxation has been view in pre-modern days as a direct exchange between the tax payers and the tax authorities in which both parties expected to get
equal benefit from the transaction. At the time, taxes were seen a wages to the government which it uses to fund developmental projects, this theory is known as the ‘bargain theory’ (Danquah, 2007 as cited in Bortey, E. N. 2011). There is a lot of debate in recent time about tax revenue mobilization. Governments of African economies have prioritize issues taxation and tax reforms over the last decade.