INSTITUT D’ENS

This chapter will cover background to the study, statement of the problem, objectives of the study, research hypotheses, scope of the study, justification of the study, definition of key terms and conceptual framework.

1.1   Background to the study

Taxpayers, regardless of their economic standing, are psychologically resistant to paying their tax obligations, which leads to tax evasion and avoidance. On its side, the government implements tax-enhancing mechanisms such as tax reform that allows for self-assessment, attractive tax allowances, an e-payment system, tax payers’ instructional programs, and fines, among other things. Despite this, tax avoidance and evasion is common (Alstadsæter et al., 2019).=

Taxation is perceived as a load which each citizen ought to bear to sustain his or her government because the government has certain functions to perform for the benefits of those it governs or rule. In developing countries, tax non-compliance is a serious challenge facing income tax administration and hindering tax revenue performance compared to developed countries. Even though various tax reforms are geared towards increasing tax revenue for several years, total revenue collections have remained consistently low and are relatively shrinking (Alabede et al., 2011).

When a taxpayer is suspected of committing tax fraud in the form of tax evasion, such as failure to file tax returns, filing incomplete or inaccurate returns, or failing to register for tax purposes, a tax investigation is conducted. The activity is primarily carried out by tax inspectors with specialized training and expertise in investigation techniques, with or without the assistance of police investigators and enforcers, with the goal of uncovering all aspects of tax fraud and obtaining evidence for possible prosecution (Dularif et al., 2019).

Globally governments around the world are losing $427 billion each year to tax avoidance and evasion as companies and wealthy individuals shift their money to tax havens. The United States government is the single biggest loser in absolute terms, missing out on about $90 billion in tax revenue a year. Poorer countries, meanwhile, are losing a larger share of their total tax revenue to the abusive practices and about 5.8 percent vs. 2.5 percent in high-income countries. Africa loses about $25 billion a year, mostly from corporate tax abuse. That equals about 7 percent of the continent’s average tax revenue each year, Europe loses $184 billion a year, more than half of which is from private tax evasion. The losses equal about 3.4 percent of the region’s average tax revenue while Asia loses about $73 billion, or about 1.5 percent of the region’s annual tax revenue. North America loses $95 million, or about 2.3 percent (Kemme et al., 2020).

Taxes are often regarded as the government’s most important and fundamental source of income; monies that are required to fund crucial programs, services, and infrastructures that benefit society. Despite the advantages of paying taxes, the majority of taxable entities engage in tax evasion. Individuals, corporations, trusts, and other entities engage in tax evasion when they refuse to pay their taxes or declare a disproportionate value of earnings in order to avoid paying taxes. Tax evasion is defined as a purposely wrongdoing attitude involving a breach of tax rules, norms, and ethics pertaining to citizenry obligations to avoid paying taxes (Alstadsæter et al., 2019).

The government of Uganda has been suffering from a widening fiscal deficit and a rising debt burden. Fiscal deficit was 8 percent of Gross Domestic Product (GDP) in 2018/19 from 6 percent in 2017/18 and net present value of debt rose to 32 percent of GDP in 2018/19 from 30 percent (GoU 2018). Fiscal deficit and debt have largely been driven by small tax collection. Lakuma and Lwanga (2017)  attribute  low tax collection in Uganda to inadequate  administrative capacity, the presence   of  a large  informal sector,  weak  checks and balances, and the lack  of social  norms  for tax compliance. Also, tax mobilization efforts in low-income countries are generally low due to exemptions and tax evasion (Reinikka & Svensson 2002). Consequently, Uganda’s tax to GDP ratio has stagnated between 12-13 percent since 2004/5  (Ssewanyana & Kasirye 2015). Indeed, Uganda compares poorly to its regional neighbours with regard to tax revenue mobilization  for instance,  the corresponding  tax realization  rates for  Kenya,  and Tanzania  were  16 percent   of  GDP respectively  in 2016 (World Bank 2018).

Collecting income taxes is even harder than collecting other taxes, such as trade taxes, because income tax collection requires a much more elaborate system of monitoring,  enforcement,   and compliance   (Besley and Persson 2014). The  USAID (2013) tax database shows that in 2012/13, Uganda collected 1.86 percent of GDP in income tax, which was  low compared  to the low-income countries average (3.30 percent). In this regard, reducing tax evasion is an urgent issue in Uganda, as the government seeks finances to reduce the infrastructure deficit, expand access and quality of social services and reduce dependency on aid and debt (Mawejje & Ouma 2015).

Despite such efforts, tax Evasion in Uganda is still a challenge. Some SME entrepreneurs are illiterate and hire tax consultants to help them file returns and interpret trade laws and regulations especially for tax purposes. There are also complaints by traders about delayed administrative feedback especially in clearing imports at various customs points (Kato, 2017). Most SMEs survive at the mercy of clearing agents who sometimes may not offer satisfactory advice, hence tax disputes between URA and the tax payer  (Kato, 2017)

Tax evasion in Uganda is one of the highest in East African region, this to larger extend led to Uganda revenue authority failing to achieve its targets , this is indicated by the fact that 2017/2018 URA achieved a tax deficit of 602 billion shillings, 2016/2017, tax deficit was 458 while 2015/2016, tax deficit was 404 billion shillings. This is against the backdrop of investments in key infrastructures to fight against Tax evasion. Some of strategies adopted by URA in controlling Tax evasion includes the following user friendly systems like E-registration, e-taxation, e-Tin registration, and e-payments to reduce on the collection deficits and reduce Tax evasion (Lakuma, 2019).

However despite the Government adoption of numerous strategies to eliminate Tax evasion the organization is still facing high levels of tax evasion. Its against this Background that this study intends to investigate into the effects of tax audit and investigation on tax evasion control in Uganda with specific reference to URA.

1.2 Statement of the problem

According to Kangave et al.(2016) one of the main challenges facing Uganda revenue authority is Tax evasion, as result, the institution has adopted several systems to ensure efficiency in its colleting of taxes and meeting its national mandate, for example several Information systems in URA was adopted in 2003 into the  domestic taxes department to increase revenue collection, improve quality of administration, reduce costs of compliance and provide services to the tax payers all the time from anywhere by encouraging tax compliance and reducing Tax evasion.

Despite the adoption of technologically advanced systems like the ASYCUDA World by URA in 2010 with an aim of improving on revenue collection to minimize deficits, enhance organizational performance, URA is still faced with numerous challenges like Tax evasion and as a result the government has been losing more than 10 billion Ugandan shillings to tax evasion annually, this has also further led Uganda revenue authority failing to achieve its targets , this is indicated by the fact that 2017/2018 URA achieved a tax deficit of 602 billion shillings, 2016/2017, tax deficit was 458 while 2015/2016, tax deficit was 404 billion shillings.  These challenges faced by URA therefore warrants examining the effects of tax audit and investigation on tax evasion control in Uganda with specific reference to Uganda revenue Authority.

1.3   General objective of the study

The general objective of the study is to examine the effects of tax audit and investigation on tax evasion control in Uganda.

1.4   Research Objectives

This study will be guided by the following research objectives;

1. To examine the influence of internal audit on Tax evasion.
2. To investigate the influence of Tax registration on Tax evasion.

• To examine the influence of Tax collection on Tax evasion.

1.4.1 Research question

1. What is the influence of internal audit on Tax evasion?
2. What is the influence of Tax registration on Tax evasion?

• What is the influence of Tax collection on Tax evasion?

1.5 Research hypotheses

This study aims at answering the following research hypotheses

H1: There is no significant relationship between tax internal audit and tax evasion in URA.

H2: Tax registration does not have significant influence on Tax evasion.

H3: Tax collection does not have significant influence on Tax evasion.

1.6 Justification of the study

The study will be carried out because of the following reasons. Uganda revenue authority being a tax collection body is responsible to deliver the targets and enable the government to meet its expenses.

Revenue collection remains a key challenge in African and Uganda in particular (Mukunda, 2017). This is mainly on account of limited tax compliance. In the last three decades, Uganda has embarked on improvements to broaden the tax base and increasing domestic revenue mobilization. Modernizing the tax administration systems is among the initiatives (World Bank, 2018b). In comparison with regional neighbours, Uganda’s tax revenue to GDP is still below the 16 per cent Sub-Saharan average and lags behind her East African Community (EAC) neighbors too (World Bank, 2018b).

1.7 Significance of the study

The findings of the study are expected to be significant in the following ways;

This study is intended to provide policy makers, that is the Ministry of Finance Planning and Economic Development and tax law makers in parliament insights to base any possible amendments to suit the local needs. This will drive voluntary compliance among tax payers.

The Uganda Revenue Authority has so far tried several means to enforce tax compliance. This study will provide additional information to URA to understand how best to enhance tax compliance among business.

To other researchers, it is important to tell the nature of the relationship between tax administration systems and tax compliance, thus this study will provide a current reference material.

To the researcher, this study will boost the knowledge on taxation and hence be a milestone in the career growth as well as academic achievements.

1.8   Scope of the study

The scope of this study will be confined to the geographical, subject and time scope.

1.8.1 Content scope

The study will concentrate on;  the influence of internal audit on Tax evasion, the influence of Tax registration on Tax evasion and  the influence of Tax collection on Tax evasion.

1.8.2 The geographical scope

The study will be carried out from Uganda Revenue Authority (URA). URA is one of the subsections under the Ministry of finance, Uganda Revenue Authority is located at plot 95 Kampala road, Nakawa Industrial Area, Kampala, Uganda. URA is found in Nakawa Division of the city of Kampala, approximately 6.5 kilometers (4 miles), by road, east of the city centre, off of the Kampala-Jinja Highway.

1.8.3 Time scope

The period of data to be considered from Uganda Revenue Authority will be from 2017 to 2022 this is because, during this period, Uganda Revenue Authority adopted several strategies to enhance its tax auditing strategies.

1.9 Organization of the study

The study will describe the Background, the problem statement, objectives of the study, research questions, research hypothesis, significance of the study, scope of the study justification of the study and organization of the study.

CHAPTER TWO

LITERATURE REVIEW

2.1 Introduction

In this chapter, the researcher reviewed the relevant literature. The review begins with the theory and then the relationship between audit and tax evasion, the relationship between identification, registration and tax compliance and the relationship between tax assessment, audits and appeals and tax evasion.

2.2 Definition of key terms

Tax Assessment

The tax assessment process describes the tasks including record keeping, engaging skilled personnel on tax matters, gathering all the information requirements for taxation purposes and using the appropriate methods provided within the law to determine the tax due at a point in time for any tax paying entity (Law Insider, 2020).

Tax Assessment means any notice under which such Tax Authority imposes, purports to impose or indicates that it may impose tax on the company (Law Insider, 2020). Tax assessment means (in any jurisdiction): (a) any assessment, notice, letter, determination, demand or other document issued by or on behalf of any tax authority (whether issued or made before or after the date of this Agreement and whether satisfied or not at the date of this Agreement); and (b) any return, amended return, computation, accounts or any other documents required for the purposes of taxation; in any case, from which it appears that: (i) a tax liability has been, or may be, imposed on any group company; or (ii) an increased or a further payment to a tax authority is required to be made by any group company; or (iii) that a Group Company is denied or is sought to be denied a relief (Law Insider, 2020).

Tax Collection

Tax collection includes collection methods, collection procedures, manpower collection and collection costs or efficiency (Cawley & Zake, 2010).

 Tax compliance

According to Alm (2011), the scope of tax compliance includes, reporting income and paying all taxes in accordance with the applicable laws, regulations, and court decision. Tax compliance typically means, true reporting of the tax base, correct computation of the liability (accuracy), timely filing of the return, and timely payment of the amounts due (timeliness) (Franzoni, 2011).

For many taxpayers the uncertainty inherent in the tax system makes paying taxes akin to a game of chance. Some people gamble on the ambiguity of the law and intentionally under-report their earnings, whilst at the other end of the spectrum, others overcompensate for any possible profit and pay more than they owe. There is great variety of taxpayer behavior patterns in between these extremes (Hendy, 2013; Dubin & Wilde, 2014). Existing theories have failed to clarify the complexities of taxpayer decision making and thus failed to establish a useful platform for agencies to influence and encourage voluntary compliance.

Ocheni (2015) defines tax compliance as an ability of a tax liable body to submit accurate, complete and satisfactory returns in conformity with tax laws and regulations of the state to the authority for the purpose of tax assessment (Badara, 2012).

Penalizing tax evaders or going after delinquent taxpayers are not in themselves the object of tax administration, although it would serve to encourage voluntary compliance if the taxpayers believe that the tax administration can effectively detect and punish non-compliance. Tax compliance according to Organisation for Economic Co-operation and Development (OECD) (2010) is a problem associated with how to enter and report all information timely, filling in the correct amount of taxes owed and taxes paid on time without any coercive action.

There is evidence that tax compliance leads to increases in income and audit rates and decreases in tax rates.  It is also better when the taxpayers perceive some direct benefits from taxation (Almetal, 2013). Non-compliance results in missed government income.  With limited taxes government is unable to finance public goods like education and health yet on the other hand compliant tax payers shoulder a big tax burden  (Nicoleta, 2011).

Uganda has a very low VAT Gross Compliance Ratio (VATGCR) of 26.50 in comparison to the World and Sub-Sahara Africa (SSA) averages of 65.48 and 38.45 respectively. This low rate may be due to the significant number of exemptions. From an economic efficiency perspective, a moderate VAT rate with a broad consumption base and few exemptions is always preferred to a high rate with many exemptions. Cawley and Zake (2010) also indicate that VATGCR has remained low because administration capacity and compliance did not improve as much as expected. Further, Uganda‘s Corporate Income Tax Revenue Productivity (CITPROD) and Personal Income Tax (PIT) productivity (PITPTOD) measures of 0.03 and 0.11, respectively, indicate that Uganda uses these taxes less efficiently in generating revenue than the world averages of 0.13 and 0.14 for CITPROD and PITPROD, respectively.

Tax Filing

A tax return is a form or forms filed with a tax authority that reports income, expenses, and other pertinent tax information. Tax returns allow taxpayers to calculate their tax liability, schedule tax payments, or request refunds for the overpayment of taxes. These are filed annually with various incomes and or fees (KPMG, 2019). Globally, becoming formal is not a priority of SMEs; after all, this does not guarantee increased revenue thus making them easy dodgers of taxation (Alcazar, Andrade & Jaramillo, 2010). Therefore, SMEs find no urgency in formalization. The complexity of filing, and hence the compliance burden, that individual taxpayers face varies widely.

Tax payers with more diverse income sources tend to find it more complex to calculate their tax liabilities. This is worsened by the low levels of literacy among some tax (Fichtner, Gale & Trinca, 2019).

Tax Reporting

Tax reporting is a core competency within the Tax function. Earlier efforts to enhance tax reporting processes through outreaches beyond offices have resulted in evident improvements. However, there is still need for more efforts to improve efficiency and functionality (Price Waterhouse and Coopers & Lybrand (PwC) , 2016). Production of accurate reports in more compressed timeframes, while adding value to the overall organization strategic decision making process remains a challenge. Increased global tax compliance requirements combined with outdated, inefficient, manual processes consume valuable resources and increase risk.

Tax payment

Asingwire (2019) based her study on selected SMEs in Kikuubo Trading Zone with a sample size of 332 respondents comprising 324 SMEs and 8 URA staff. The study findings revealed that most SMEs were not complaint regarding paying of taxes. More than 60% of the selected SMEs were not fully committed to paying taxes. The challenges faced included high cost of involving consultants, poor record keeping, bad attitude towards the way how tax payers’ money is used by government and an unfair taxation system among others. However, the respondents had a belief that tax compliance can be achieved if tax payer sensitization and education is looked into and the taxation system revised to make it fair to SMEs among others.

Tax administration systems

Zhamalov (2010) considers tax administration as the tax relations evolving system, which coordinates activities of tax authorities in a modern economy. Tax relations in this case assume fiscal and organizational forms. Organizational relations of the tax authorities formation and functioning system establish the applicable taxation procedures, according to the Tax Code. Fiscal tax relations occur when the taxpayer fulfills tax liability. The main elements of tax administration are structure and hierarchy, rights and obligations of tax authorities; procedure for collecting, processing and verifying tax reporting; applying tax exemptions and sanctions; support and generalization of tax statistics; international tax relations regulation. According to the research of Richard (2015), the main tasks of tax administration consist of three different, although related, actions – identification, evaluation and collection. Arturo (2013) shows that tax administration comprises of taxpayer registration, taxpayer services, processing of tax declaration filings and tax payments, tax payer audits, tax payer objections (administrative appeals), tax payer appeals, collection of tax arrears (as opposed to current tax payments) and tax-fraud investigations.  Lemgruber, Masters and Cleary 2015) show that tax administration operations comprise of taxpayer registration, return filing, taxpayer audit and verification, arrears and dispute resolution. For simplicity and comprehensiveness, the current study adopts the measures used by Lemgruber, Masters and Cleary (2015).

Tax Identification and Registration

Tax registration includes identification of legal taxpayers/business, issuing ID numbers, location and addresses of business or taxpayers and registration procedures (KPMG, 2019; Verberne, 2017). Gaps in tax registration are usually connected to poor tax compliance

(Atawodi et al.,2012). Tax payer identification paves the way for tax registration and both processes move together. In Uganda, a TIN (Tax Identification Number) is a legal requirement and it applies to all taxpayers regardless of their tax transactions and it provides evidence of tax registration (Verberne, 2017).

SMEs usually have to operate in an overbearing regulatory environment with the plethora of regulatory agencies, multiple taxes, cumbersome importation procedure and high port charges that constantly exert serious burden on their operations. Such a system imposes several burdens on the SMEs thus promoting their evasion (Atawodi.O.W,& Ojeka,AS, 2012), and this results in a tax system that imposes high expenses on the society.

2.3 Theoretical Review

Motivational Postures Theory (Braithwaite, 2003)

This study is guided by the Motivational Postures Theory (Braithwaite, 2003). The aim is to capture the attitude which is reflected from the taxpayer on the registration and assessment, tax audits and verifications and tax regulation and controls as established by tax authorities. Braithwaite (2003) stated that the authorities may have legal legitimacy, but this does not guarantee them psychological legitimacy. Individuals and groups evaluate authorities in terms of what they stand for and how they perform.  As evaluations are made, revised, shared and accumulated over time, individuals and groups develop positions in relation to the authority and develop a social distance (Braithwaite, 2003). Social distance will determine the level of acceptance and rejection of the taxpayer through the tax system which in turn will affect their compliance behavior. Posture motivation is formed from the position (distance) between taxpayers with regulators and regulations that lead to beliefs, feelings and attitude interconnected.

Five motivational postures that have been identified by (Braithwaite, 2003) are divided into two parts. Two of the first postures reflect a positive orientation toward authority, namely motivations posture commitment and capitulation. While the three postures of the second part describe the resistance (defiance) of the tax system that motivation posture of resistance, disengagement and game playing. Commitment reflects beliefs about the desirability of tax systems and feelings of moral obligation to act in the interest of the system (URA in this case) and pay one’s tax with good will. Capitulation reflects acceptance of the tax office as the legitimate authority and the feeling that the tax office is a kind power as long as one acts properly and refers to its authority. Resistance reflects doubts about the intentions of the tax office to behave cooperatively and benignly towards those it dominates and provides the rhetoric for calling on taxpayers to be watchful, to fight for their rights and to curb tax office power. Disengagement is also a motivational posture that communicates resistance, but here the disenchantment is more widespread, and individuals and groups have moved beyond seeing any point in challenging the authorities. The tax office and the tax system are beyond redemption for the disengaged citizen, the main objective being to keep both socially distant and blocked from view. The fifth posture is game playing. Game playing is a tax behavior which relates to the taxpayer’s view on tax regulations to seek opportunities (loopholes) that can be used in order to find the weakness of the rule.

The Theory of Planned Behavior  (TPB)

The TPB has its origins in the earlier theory of Expected Utility but introduces a number of additional explanatory variables which are, according to Ajzen and Fishbein (1980, p. 4) “designed to explain virtually any human behavior”. If they are correct in their claims that “behaviors are not really difficult to predict”, then the TPB has the potential to aid the tax office, in predicting, supporting and thus re-shaping taxpayer behavior (Härtel, Langham & Paulsen, 2012).

TPB proposes a direct relationship between intention and behavior. This relationship is critical to any significant change in policy. Intention is an essential component of tax compliance as it is only through the willing participation of taxpayers that revenue is collected. Thus predicting taxpayer intention to comply is as important as predicting the actual compliance behavior. Determining if behavior is motivated by unwillingness to comply (as opposed to external factors preventing compliance) will shape the treatment to improve performance of the behavior (Härtel, et al., 2012). The tax authority would design interventions that preemptively address the cause of the non-compliance rather than administer solutions post hoc which may encourage further non-compliance.

In addition to intention, the TPB addresses the issue of behavioral control with the inclusion of two variables, perceived behavioral control and actual control. Perceived behavioral control is composed of two elements: the individual’s controllability of the behavior and their self-efficacy in performing the requisite behavior. This variable encapsulates the factors which determine an individual’s persistence and effort in performing the actions necessary for the behavior. Actual control is only a recent addition to the model (2010) but is an essential component when investigating behaviors that are complex or require the individual to overcome performance obstacles. Actual control has been defined as “the relevant skills and abilities as well as barriers to, or facilitators of, performance” (Fishbein & Ajzen, 2010).

The TPB is a strong model for predicting all types of behavior. Nevertheless, weaknesses in the model relate to effective operationalization of variables and its applicability in certain contexts. Few studies have empirically tested the full TPB model due to the misapplication of key methodological factors, such as the correct specificity of behavioral measures or the temporal instability of intentions. Additional difficulty is met when the behavior is complex or when it involves a third party.

In view of the above, Business continue to use the loopholes and avoid being entered into the tax bracket. This on the other hand angers those in the tax bracket who feel the injustice of ‘paying for others’ and wish also to jump out. All this challenges , the authority (URA) to reinforce its administrative authority and the cycle continues. On the above note, these theories provided guidance to the study.

2.4 Review of Study Constructs in relation to Tax audit

Tax Registration

2.6 Conceptual framework

                 Independent Variable                                                      Dependent   Variable

Source: Adapted from literature by (Lemgruber, M & Cleary, 2015; Alm, 2011; Ocheni, 2015; Maseko, 2014).

In the conceptual framework above, tax audit is thought to influence tax evasion. Tax audit is the independent variable, studied in terms of internal audit, registration and assessment, (Lemgruber, Masters & Cleary, 2015). All these elements are thought to influence tax evasion.

Working definitions

Tax registration: Taking note electronically of manually the details of potential tax payers for inclusion in the taxpayer database.

Tax assessment: The determination of the amount of tax due for every tax payer at a certain point in time.

Tax collection: The actually gathering or receiving of taxes by cash, cheque or electronically

Returns filling: The record and sharing of the expected tax payment to fall due in a given financial year for a tax paying entity (individual or organization).

Tax reporting: The declaration of the details pertaining to tax payments made or about to be made.

Tax payment: The actual release of the assessed tax to the tax authorities like URA or its representatives including banks, tax clearance agents or URA representatives.

2.7 Research Gap and Conclusion

From the above review, most authors seem to agree that tax compliance is a serious challenge to most revenue authorities in both the developed, emerging and under developed economies. There is a however, a diversion in approach as to what is the best way to improve tax internal audit  systems to generate better compliance which eliminate tax evasion. Braithwaite (2003) explains tax motivation through the Motivational Postures Theory. A number of authors point out the relationship between tax reduction of Tax evasion and tax internal audit system of organiation (Palil,2010; Amayi & Machogu, 2013; Gerit, 2011; Hendy, 2013; OECD, 2014; Barbutamisu, 2011; Byamukama, 2013) . However, it is not clear whether the above relationships pointed out are relevant to effects of tax audit and investigation on tax evasion control in Uganda case study of Uganda Revenue Authority (URA). Besides, statistical evidence is lacking or inadequate hence creating a gap to be closed. This justifies the need for afresh empirical study to bring out the Ugandan context.

CHAPTER THREE

METHODOLOGY

3.0 Introduction

This chapter presents the research methods that will be used to carry out the study. It covered the research design, Area of study, target population, sample design, sample size, research instrument, measurement of variables, Data Collection Procedure, data analysis and Ethical considerations of the study.

3.1 Description of the study area

The study will be carried out from Uganda Revenue Authority (URA). URA is one of the subsections under the Ministry of finance, Uganda Revenue Authority is located at plot 95 Kampala road, Nakawa Industrial Area, Kampala, Uganda.URA is found in Nakawa Division of the city of Kampala, approximately 6.5 kilometres (4 miles), by road, east of the city centre, off of the Kampala-Jinja Highway.

3.2 Research design

The study will use a cross-sectional survey research design because of the nature of the variables that is at hand;  to produce data required for quantitative and qualitative analysis and to allow simultaneous description of views, perceptions and opinions at any single point in time.. The study also will use qualitative and quantitative methodologies for data analysis. Quantitative and qualitative methodologies will be used in tax internal audit on tax evasion. Quantitative research is based more directly on its original plans and its results are more readily analyzed and interpreted. Qualitative research is more open and responsive to its subject. (Christina Hughes, 2006).

3.3 Study population

Study population is defined as the entire group of people that a researcher wishes to investigate (Sekaran, 2003). The entity comprises of 239 employees, 1 Executive director,12 management staff, 40 Division Heads, 5 Regional Heads, and 181 staff members at URA whose duties influenced Tax internal audit..

3.4 Sample design

It is impossible to study the whole targeted population of the study and therefore the researcher will take a sample of the population this is also further supported by Mugenda and Mugenda (2003) who notes that a research should choose a sample out of the whole targeted population. A sample is a subset of the population that comprises members selected from the population. Using Krejcie and Morgan’s (1970) table for sample size determination approach, a sample size of 181 respondents will be selected from the total population of 239 employees.

Table 1: Showing Population and Sample size of respondents

Source: URA Employee List, (2017)

3.5 Data collection

The section presents data collection methods that will be used in the study, which include questionnaire survey, interview and documentary review.

3.5.1Questionnaire Survey

Questionnaire Survey method will be  used to obtain the opinion of the respondents regarding the topic under study, according to (Onen & onen, 2013) states that questionnaires are important in research because the respondents are given time to think and they don’t feel intimidated. Questionnaire gives the respondents ample time to respond to the questions when ready and they can be kept for future references. This method will be deployed to capture information from Staff Members, Regional Heads, and Division Heads.

3.5.2    Interview

Face-to-face interview is a data collection method when the interviewer directly communicates with the respondent in accordance with the prepared questionnaire (Polak  & Green, 2015).

This method enables to acquire factual information, consumer evaluations, attitudes, preferences and other information coming out during the conversation with the respondent. Thus, face-to-face interview method ensures the quality of the obtained data and increases the response rate.

Interviews will be used because they fetch a variety of ideas needed for the study and give a deeper understanding of the topic. The method will be used to generate information from Managers and the Executive Director.

3.5.3    Documentary review

This will be used to supplement the data that acquired from the interviews and questionnaires. The researcher will analyze the documents and publications related to the study topic. Documents that are expected to be reviewed include URA reports, Journals, and Newspapers.

3.6 Data analysis

Mugenda and Mugenda (1999) and Mbaaga (2000) both defined data analysis as a process of bringing order, structure and meaning to the data gathered to create information out of it. Data analysis will therefore be done with quantitative and qualitative methods. The quantitative (Questionnaires) and qualitative (interviews) will be analyzed separately and then combined during discussion of the findings.

3.6.1 Quantitative Data Analysis

Data processing will be done by entering the data into a statistics package for social sciences (SPSS) version 24.0 in line with the research questions. Data analysis will be done by also using this statistics package for social sciences (SPSS) to formulate frequency tables where the percentages, frequency, mean, variance and standard deviation will be obtained.

Under quantitative analysis, process includes editing, classification, coding and presentation. Data will be summarized in frequency tables, percentage; data will be analyzed with the use of statistical package for social scientist (SPSS). Quantitative data will be collected through structured questionnaires and it will be cantered into a computer, tabulated and analyzed.

Spearman’s correlation coefficient and regression analysis is recommended by Amin (2005, P.378) will be used during data analysis in order to test the strength, degree and direction of the effect of internal audit and investigation on tax evasion. The formula will be used for this study because it is compatible with SPSS program in addition to being appreciated in analyzing data under which the data is arranged.

3.6.2 Qualitative Analysis

Qualitative data will be analyzed using content analysis.it involved gathering and analyzing data based on the content, where by the raw data collected from the field will be read through to enable the researcher to get familiar with the data. At this process the study will use noted cards to organize the available data to accelerate further analysis. Data will then be evaluated and analyzed to determine its accuracy, credibility, usefulness and consistency which aides acceptance or rejection of the research hypothesis.

3.7 Validity and reliability

3.7.1 Validity

For quality control, a pre-test of the research instruments to establish their validity will be done. The instrument will be given to the researcher’s two supervisors to give their opinions on the relevance of the questions using a 5-point Likert scale of strongly disagree, disagree, not sure, agree and strongly agree. The data will then be considered valid for the study.

3.7.2    Reliability

The reliability of the research instrument will then be pretested by administering it to selected respondents and will be examined for their reliability by using Cronbach’s Alpha value. Although the standards for what makes a “good” α coefficient are entirely arbitrary and depend on your theoretical knowledge of the scale in question, many methodologists recommend a minimum α coefficient between 0.65 and 0.8 (or higher in many cases); α coefficients that are less than 0.5 are usually unacceptable, especially for scales purporting to be un dimensional (Goforth, 2015)

3.7 Ethical Considerations

The study will be conducted after attaining an introductory letter from INES-RUHENGERI University to be presented to the respondents. The researcher will also ensure that participation is voluntary without any forceful tendencies. The privacy of respondents will be sheltered by only using the study for academic purposes and not asking for personal details. The researcher also acknowledges all the sources used. The entire report will consider facts as found and will not subject them to bias and prejudgments.

 Organization of the study

Organization of the study is the map that may guide readers through the reading and understanding that is, how will you organize your study to systematically address your research questions?, how will your chapters be sequenced and constructed to reflect the organization of your study USC University of southern California. (2019). So this research will be comprised of six chapters that is, chapter one which is comprised of (introduction, background, problem statement, research objectives, research question and hyposis, choice of the study, scope of the study, significance of the study, conceptual frame work), then chapter two which will include (conceptual review and theoretical literature), chapter three which include ( Research design, study population, sample size, sample procedure, source of data, data collection methods and instruments, validity and reliability, data processing and analysis, and ethical consideration), chapter four which will include (Data presentation, Analysis and interpretation of finding), then also chapter five which will include (Summary, discussion of the findings, conclusion and recommendation) and then finally reference followed by appendix questionnaire.

REFERENCES

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