| dc.description.abstract | Tax income forms a very significant portion of government revenue. Taxation is geared
towards generating revenue for the government to cater for its expenditure. In spite of
recording remarkable revenue growth and implementing many initiatives such as
carrying out an audit of taxpayers to improve tax collection, Kenya Revenue Authority
did not achieve its revenue targets over the period under study. An ineffective tax audit
has been considered as one of the many reasons behind non-compliance to tax laws and
revenue loss. The audit of taxpayers plays an important role in the administration of tax
laws. Its primary role is detecting and preventing non-compliance. The taxpayers, both
large and small pose a risk that their reported taxable income is not correct due to under
declaration of business income or overstating the expenses against business income. All
these risks lead to a reduction or loss of tax revenue to the government. Therefore, the
present study sought to evaluate the selected factors affecting tax audit effectiveness in
Kenya. Specifically, it sought to examine the effect of audit case selection, staff capacity,
tax dispute resolution mechanism, and Interpretation of tax laws on tax audit
effectiveness in Kenya Revenue Authority-South rift valley region. The study was
premised on the Theory of Inspired Confidence, Policy Learning Theory, Optimal
Theory of Taxation, and Hoffman‟s Tax Planning Theory. The study used a descriptive
research design targeting a population of 80 respondents, consisting of tax officers in
South Rift Valley Region; therefore, it adopted a census method. Questionnaires were
used to collect data after being subjected to the tests for validity by pre-testing the
instruments, engaging independent experts to evaluate it, and doing a pilot test which
assists in the restructuring of the questionnaire to suit the information required from
respondents. The reliability of the research instrument was checked by doing a Testretest
of the same. Data were analyzed using descriptive statistics and inferential
statistics. The study has added new knowledge to the existing literature on taxpayer
audits and also provided a recommendation on how tax compliance can be enhanced
through tax audit initiative. The findings revealed that audit case selection (β = 0.479, p
<0.05) and tax audit staff capacity (β = 0.136, p < 0.05) are directly related to tax audit
effectiveness in South Rift Valley Region. However, the tax disputes resolution
mechanisms (β = -0.009, p ˃ 0.05) and interpretation of tax laws (β = -0.042, p ˃ 0.05)
are inversely related to tax audit effectiveness in the area as per the joint regression
model. The study recommends that there is need to improve on the audit case selection
procedures. There is also need for KRA to organize regular training for all its staff to
enable them to be more competent in their work. The study also recommends that
additional policy interventions be made on the tax dispute resolution mechanisms to
enable the expedition of tax disputes and prevent accrual of dues and unresolved
disputes. Finally, tax laws need to be simplified to improve the application and
administration of the tax laws and procedures. | en_US |
