The Influence of Tax Audits on Revenue Collection at the Tanzania Revenue Authority

Abstract

This study aimed at assessing the influence of tax audit on revenue collection in Tanzania Revenue Authority (TRA). Specifically, study examined the influence of comprehensive audit, limited scope audit and single-issue audit on revenue collection. Study consisted of six TRA tax regions namely: Kinondoni, Tegeta, Ilala, Temeke, Kariakoo and Large Taxpayer Department. This study was guided by Classical Theory of Tax Compliance and Agency theory. This study adopted a cross-sectional research design. From a population of 365 of tax audit staffs and revenue collection staffs, sample size of 191 was drawn. In sample selection, the researcher used stratified and random sampling techniques (probability) and purposive sampling techniques. Questionnaires, interview guide and documentary review were used in data collection. In data analysis, linear regression analysis was used. Findings of first objective showed that, unit increase in number of comprehensive audits is associated with an average change of 22.94% in revenue collection at TRA. Also, unit increase in number of limited scope audit conducted is associated with an average change of 37.61% in revenue collection. Lastly, a number of single-issue audits conducted is positive (β=0.2531) and significant at 5% in influence revenue collection. Thus, 1 unit increase in number of single-issue audits conducted is associated with an average change of 25.31% in revenue collection. Qualitative analysis show that different types of audits impact financial oversight and revenue collection in various ways. Limited scope audits focus on specific financial areas with reduced work on investments, requiring asset certification and often leading to increased revenue collection by targeting key transactions. Single audits comprehensively review financial statements and federal fund expenditures, enhancing compliance, transparency, and revenue optimization for nonprofits and government entities. Comprehensive audits (value for money audits) ensure efficient resource utilization, corporate compliance, and optimal operational procedures, contributing to improved revenue collection in Tanzania by enforcing financial accountability. Thus, study concluded that conducting comprehensive audits, limited scope audits and single-issue audits positively impacts revenue generation at the TRA. It is recommended that TRA carry out thorough audits going forward because they significantly and positively affect revenue collection, according to the findings. In order to promote long-term, equitable, and sustainable economic growth, TRA should aim for more expenditure predictability for increasing expenditures in people and physical capital.