Summary: | Taxation in developing countries is different from the practice in advanced countries. There is, therefore, the need to contextualize tax research in developing countries. One of the significant differences between the two regions is the practice of tax audits. In advanced countries, the probability of tax audit is seen as a deterrence to tax noncompliance. However, this study argues that this may not be the case in developing countries. The paper presents tax audits in developing countries as a three-dimensional process consisting of audit probability, detection and sanction. The paper argues that these three aspects are distinct and must all work together
to ensure an effective audit. For instance, after an audit, there is a need for detection to take place. Otherwise, the entire process will be
ineffective. Furthermore, after detection, there is a need for sanction before the audit process can serve as a deterrent. Detection without
sanction renders the entire process ineffective. In developing countries, audits can take place without detection and detection may occur without any sanction because tax evaders can compromise the system through bribery and corruption. The paper makes a significant contribution both to the literature and practice. There is a need for
researchers to focus on the three dimensions of tax audit in developing countries rather than a holistic audit probability, as found in some
studies from advanced countries. Additionally, practitioners should measure tax audit effectiveness based on the three dimensions
proposed in this study.
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