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Effect of Tax Audit Practice on Tax Revenue in Jimma City Revenue Administration; A survey on Category “A” and “B” tax Payers

Netsanet Gizaw (MSc.) , Kidist Abebe (MSc.)

Government revenue in the form of tax is the main fisical policy tool to finance domestic growth and to bring about desired level of economic stability. This study was conducted with the objective to investigate the effect of tax audit practice on tax revenue in Jimma city administration by the survey data collected from category “A” and “B” tax payers. 223 sample respondents were selected using proportionate stratified random sampling approach. Both descriptive statistics and binary logistic regression was applied as an econometric tool to analyse the survey data. The finding of the study revealed that out of explanatory variables included in the model age, level of education, practice of tax audit, fairness of tax and tax payers’ knowledge were found statistically significant in influencing city revenue. Yet, tax payers personal financial ability and service delivery of tax authority generated insignificant effect. Hence, tax pudit practice is effective in generating paramount of revenue for the city revenue. Thus, increasing tax pudit practice would enable city revenue administration to sustain generation of revenue from its tax payers. Besides, ensuring tax fairness, giving a continued training to tax payers’ had better been suggested as area of focus by the city revenue administration and when this is done, it will lead to a higher revenue.