Research propos.ppt for accounting stude

It is good

1. Research proposal Research proposal in bank Prepared by mesfin [email protected]

2. ACKNOWLEDGMENTS Above all, I would like to express my deepest heartfelt thanks to God whose hand support me all in my life time, and for this research proposal he gives me the potential in all aspects.
And also,I would like to express my heart felt gratitude to my Advisor Mr. Sintayehu G. (MSc.) for his guidance and valuable support for the preparation of this research proposal.
In addition, I would like to thank my classmate because of the availability from all of them while discussing the topics, and ideas of this Research proposal session.

3. ABSTRACT This study will be assess the existing VAT audit practice in the case of Ethiopia Revenue and Customs Authority, Hawassa Branch and find out the extent to which the VAT audit contributed to enhancing government revenue in the context. This study will be conducted based on data obtained from ERCA, Hawassa Branch, specifically focusing on VAT audit. The unit of analysis is VAT audit and the concerned section is the audit unit (wing) in the organization. Additionally the study will be conducted to investigate the tax audit practice, and to identify the main problems of the tax audit program performed that affects tax revenue collection and taxpayers‟ voluntary compliance in the Ethiopian tax system. The study will be adopted both quantitative and qualitative approaches

4. CHAPTER ONE
1 INTRODUCTION .1 Background of the Study
Government has played an important role in the socio economic development of society. Social development may be in the form of raising the level of living and social welfare in the form of providing social amenities to the people. Social amenities are in the form of education, health and sanitation, utilities like electric supply, water supply etc, and recreation facilities. The process of socio-economic development requiring huge expenditure cannot be carried unless the government has the perennial source of income. Every government has two important sources of revenue

5. Introduction is one of the most important sources of revenue to every government. In the earlier days, payment of taxes was optional (Mekelle University, Public Finance and Taxation Module, n.d.). A choice was given to the people to pay the tax and to avail the benefit of social amenities in the form of education, health and sanitation, utilities and recreation facilities. Naturally, everyone interested in availing social amenities used to evaluate the benefit derived by him in exchange for the tax to be paid by him. But the option in the payment of tax created lot of problems for the government in fulfilling their obligations to society. Hence, in modern times, the option was withdrawn and tax became a compulsory contribution by every citizen to the government to enable the government to fulfill its commitments towards society (Mekelle University, Public Finance and Taxation Module, n.

6. Introduction and economic services. Setting up an efficient and fair tax system is, therefore, essential for every nation in the globe, and especially in developing countries like Ethiopia where there has been deep-rooted socio-economic problems and increased demand for government services, infrastructures, and social welfare. The ideal tax systems in these countries should raise sufficient revenue and reduce government borrowing, and should do so without discouraging economic activity.

7. Introduction In order to minimize the complexity of tax administration, enhance taxpayer compliance, and encourage investment, the Federal Government of Ethiopia (FGE) has launched a tax reform program. The government conducted a tax reform program to improve the tax system as a whole. The reform program had two components, overhauling of the tax legislation and improving the tax administration, both of which aimed at establishing a sustainable domestic revenue base through modernizing the tax system, encouraging saving, trade and investment. The tax reform included issues like changing policies to address the problem of insufficient revenue, correct distortions that reduce economic welfare and growth, and take measures to reduce inequalities. On the part of the government, establishing new tax laws and proclamations had made its intention as to collect “new” and “additional” revenue there by widening and deepening its tax base for which it needs to cover its fiscal and budgetary needs (Income tax proclamation,286/2002)

8. Introduction . In doing this, a number of reform measures were taken including policy and legal issues, institutional arrangements, as well as updating the tax system existed for years. The enactment of the income tax proclamation No. 227/2001, which was decreed on the 4th of January, 2001 by the House of People’s Representatives (the parliament) was an important move and indicator of governments’ commitment to pursue the reform program to facilitate compliance and improve efficiency of the tax administration.
Following the income tax proclamation, the FGE continued to issue other tax laws, and two such proclamations include Proclamation No. 285/2002, called the

9. introduction of VAT (Value Added Tax) system that replaced what was known as sales tax is, therefore, one of the most important outcomes of the reform measures taken regarding taxation in Ethiopia. VAT is a transaction tax collected on all goods and services at all stages of production and distribution. It is an indirect tax and is collected on the value added at each stage. Value Added is the difference between the sales and the value of purchases at that stage (Mekelle University, Public Finance and Taxation Module, n.d.). The collection of VAT begins with importers or producers and ends with the retailers. The amount of VAT collected from a transaction at different stages of distribution will be equal to the total amount of sales tax collected from one stage of the distribution on that taxpayer against tax payable by him on sales (Mekelle University, Public Finance and Taxation Module, n.d.).

10. Introduction VAT is the most prevalent form of consumption tax in the world. Globally, the advance of the VAT is the most significant development in the field of the taxation in the past 50 years. VAT started in the 1960’s in Europe and America; while in Ethiopia it started in the 21st century under the above mentioned proclamation. The VAT proclamation in Ethiopia puts forth so many requirements and procedures as to who will pay VAT and how. Implementation of the system is one thing; and monitoring the system, continuous follow up, and ensuring compliance is another thing. The proper administration and operation of these components in turn depend on the accepted working norms and guidelines to frame its contribution to tax management.

11. Introduction Although tax revenue of the Ethiopian government seems to be increasing from time to time, little is known as to how much the tax payers complied with the rules and the degree to which tax evasion has been minimized and/or completely avoided. An important monitoring system to ensure tax payers compliance with the existing VAT proclamation and in turn increase government tax revenue is, therefore, to place an audit system, in particular VAT audit. The purpose of this study is, therefore, to assess the existing VAT audit practice in the case of Ethiopia Revenue and Customs Authority, Hawassa Branch and find out the extent to which the VAT audit contributed to

12. 1.2 Statement of the Problem The VAT system has emerged as a consumption tax of choice. A well designed VAT does not disrupt trade and investment and is highly successful in applying appropriate tax administration system. These neutrality features are important for the proper functioning of common markets, such as the Euro and free trade areas, which does not permit discriminatory tax on imports or subsidies on exports. Beyond that the VAT is productive, stable, and flexible source of government revenue. Since VAT is collected on current basis, say, monthly, its revenue generating capacity is not affected by inflation and the effect of rate changes on revenue is immediately visible. While VAT scores high on neutrality to pay basis, but this should not be acceptable if adjustment to income tax social benefit schemes can be made. In sum, the timing of tax collections under the VAT is as under a retail sales tax

13. Count. . . . . . . . Although a 15 percent VAT is charged on consumption of goods in Ethiopia, the level of compliance among tax payers and/or organizations registered for VAT needs close monitoring. It seems that there are a number of deficiencies in the implementation and management of the VAT system from the perspective of the tax payers, registered businesses, as well as the tax authority itself. Violations of VAT provisions jointly by the tax payers and businesses registered for VAT through collaborating and not disclosing all taxable transactions seems to be a deep-rooted challenge in the existing system, which is likely to degrade revenue generation capacity of the government and hence impair public investment programs in the nation at large. If there is any failure from the side of the concerned tax authority to regularly check (monitor) the system and ensure compliance from businesses, the problem would become very much serious and the tax collected from consumers might end up in the hands of businesses.

14. Count. . . . . . . . . . . . An audit, therefore, plays a central role in VAT administration especially considering historical and cultural norms and practices as well as people’s attitude towards paying tax in the context. As audit plays a central role, preparation and use to VAT audit manual is of the highest priority in facilitating audit and assessment functions. Here, an audit is a selected verification of tax payers declared tax liability which always involves a review of taxpayer’s book of accounts, related records, 3rd party information, general tax payers, and etc. When analysis of the tax payers compliance pattern justifies for audit and investigation of the tax payers files, the tax office either applies spot or compressive audit to test the reliability of the tax affairs dealt with the choice and preference of the one to another is dependent on the magnitude of the tax risk associated with the 0case and the number and qualification of the existing audit.

15. This study aims at investigating the VAT audit practice, problems/challenges frequently encountered in the process, and the contribution of the audit to enhancing government revenue in view of evidence from ERCA, Hawassa Branch Office. Specifically, the study seeks to provide answers to the following question:
Is VAT audit properly planned, executed, and monitored by the concerned employees and officials of the tax authority?
What are the major problems/challenges encountered during VAT audit?
Does the existing VAT audit practice contributed to enhancing government revenue? Count . . . . . . . .