EFFECT OF TAX ACCOUNTING ON TAX COMPLIANCE. THE CASE STUDY RWANDA REVENUE AUTHORITY (RRA) (2018-2021)
Abstract
Tax payment is a civic duty and an imposed contribution by the government to contribute to the principal source of revenue to provide public goods and services to its citizenry. It is a compulsory unrequited payment to the Government. The general objective of the study was to identify the effect of tax accounting on tax compliance. The case study Rwanda Revenue Authority (RRA) (2018-2021). Specific objectives were to: assess the impact of preparing profit and loss accounts to tax compliance, examine the contribution of preparation of tax returns to tax compliance and evaluate the effect of accounting for business expenses on tax compliance. The study adopted across sectional research design. The target population of this study was 400 respondents made up of 100 RRA employees and 300 taxpayers in Kigali city conducting tax accounting. A sample of 200 respondents was selected out of the total population of 400. Stratified Sampling was used to group the respondents and formations into strata. The study relied on primary data and secondary data informed by RRA investigated cases, related materials published by government authorities, work of other researchers and authors in the form of journals, books, bulletins and newspapers articles as well as sources from the internet. The researcher used quantitative methods to quantify the problem by way of generating numerical data. A regression analysis was used to identify the effect of tax accounting on tax compliance. From the findings there is a strong positive relationship between tax accounting on tax compliance in Rwanda at RRA at a Pearson correlation coefficient r=0.984. The results revealed that there were strong positive and significant effects of preparation of profit and loss statement on Tax compliance (β = .444; t = 1.815; p < 0.05). And registered of relevant taxes (β = 1.075; t = 1.815; p < 0.05). There were positive effects of preparation of tax return on Tax compliance (β = .230; t =. 850; p > 0.05). However, there was weak but significant effects of accounting for business on Tax compliance (β = 1.231; t = 3.616; p < 0.05.). The study concluded that failure to prepare profit and loss accounts (tax accounting) is a very serious social menace and it can cause a major setback on Rwanda economic development. From all indications it was clear that if government engages in overhauling the tax administrative machineries, the problems of tax evasion and avoidance will be reduced to the barest minimum. The study recommended that Rwandans at all spheres should be educated on their civic responsibility to pay tax. Coupled with this, governments should make an overall review of tax laws especially, the personal income tax laws, and then the personal allowances which are no longer in tune with economic realities. Future research could be conducted via a longitudinal study in which a comparison of more years and might provide different results from this ‘point in time’ study. For example a study into how changes in levels of tax knowledge, taxpayers’ financial situations and changes to tax laws and regulations potentially affect compliance decisions could be beneficial. Using data from the tax administration and comparing this with data from questionnaires should also be beneficial as a further data sources for a compliance study of this kind, although the chances of accessing data from the tax authority are very limited.
Keywords: Profit and Loss Accounts, Tax Returns, Accounting for Business Expenses, Tax Compliance
CITATION: Musasizi, C., & Bigirimana, F. (2022). Effect of tax accounting on tax compliance. The case study Rwanda Revenue Authority (RRA) (2018-2021) . The Strategic Journal of Business & Change Management, 9 (2), 523 – 538.
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DOI: http://dx.doi.org/10.61426/sjbcm.v9i2.2281
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