Abstract:
The overall objective of the study was to assess the challenges and practice of tax audit in
Addis Ababa NO 1 Medium Tax Payers Branch Office. The study engaged mixed research
Approach where survey design and in-depth interviews were employed. The Survey was
conducted with team leaders and tax auditors working at the branch. The Actual sample size
was achieved (96.5%) for the tax auditor’s survey. In addition, in-depth interviews were
conducted with the team coordinator of the tax audit department of the branch. The results of
this study revealed that, Tax Auditors do not make sufficient efforts to interpret complex tax
rules and regulations for Taxpayers and detect the noncompliance behavior of individual
taxpayers. They usually focus on gathering and collecting information on the health of the Tax
system, the office does not proportionally focus on all types of Tax Audit techniques; most of
the time Tax Audit activities were not done within the time planned. Moreover, there are no
well-established strategies that make Tax Auditors competent and efficient in understanding
and knowledge of Tax related rules and regulations. In general, the results of the study
revealed that the overall tax audit practice of the branch is found at a low level. Concerning
challenges that influence the practices of Tax Audit of the branch office; factors related to
traditions of corruption, requests for informal payments to get things done in the course of tax
assessment and tax audit, inconsistency and frequent changes of regulations and laws related
to tax audit practices, limited capacity of management and leadership on the part of the
branch office on tax audit administration and absences of coordinated efforts among sector
offices of the branch engaged on tax audit related responsibilities, are the sever challenges
which strongly affected the practice of tax audit of the branch office. The branch should
improve the overall tax audit practices to collect a reasonable amount of tax revenue and
promote the satisfaction level of tax payers. Moreover, Strategies and policies should be
formulated to minimize most of the challenges found in the study which faced the branch and
the government in general
