Abstract:
This study aims to evaluate the effectiveness of tax audit practices at the North West Addis Ababa Small Taxpayers Branch Office. The research targeted a population of 141 employees, from which 104 were selected using a random sampling technique. To achieve the objectives of the study, primary data sources were utilized, with the researcher employing questionnaires to gather relevant information from the selected respondents. The data collected was then analyzed using the Statistical Package for the Social Sciences (SPSS), and inferential statistics were applied to interpret the results. The findings of the study reveal that tax audit practices at the North West Addis Ababa Small Taxpayers Branch Office have not been as effective as anticipated. Several factors were identified as contributing to this ineffectiveness, including the design and implementation of the tax audit program, methods of selecting audit cases, the complexity of the tax system, corruption, the likelihood of error detection, and the level of taxpayer awareness. Moreover, the general attitude of both the tax office and the taxpayers towards tax audits was found to be a critical factor in the limited success of the audit practice. Based on these findings, it can be concluded that the tax audit practices are not generating the expected revenue and are not providing adequate support to taxpayers, primarily due to a range of operational and behavioral challenges within the tax administration system. These issues, such as insufficient taxpayer engagement and lack of professionalism among employees, hinder the efficiency of the audit process. To address these challenges, the study recommends that the tax office engage in open discussions with both employees and taxpayers to identify and resolve the issues contributing to inefficiency. Additionally, there is a need for greater efforts to raise taxpayer awareness about their responsibilities and rights, and to enhance employee professionalism through regular training and capacity building initiatives. By improving these areas, the tax audit process can be made more effective, ultimately contributing to increased tax compliance and revenue generation
