Impact of Electronic Fiscal Device on Perceived Transparency in Tax Audit: A Case of Arusha-Tanzania

• Published in: African journal of business and economic research 2023-09, Vol.18 (3), p.263-280
• Main Authors: Elson Malima, Agnes, Pillay, Surendran, A. Obalade, Adefemi
• Format: Article
• Language: English
• Subjects: Analysis; Audits; Businesspeople; Companies; Developing countries; Entrepreneurs; Entrepreneurship; LDCs; Owners; Questionnaires; Small business; Tax auditing; Tax audits; Tax collection; Tax collections; Tax evasion; Taxation; Transparency; Variance analysis
• ISSN: 1750-4554; 1750-4562
• DOI: 10.31920/1750-4562/2023/v18n3a12

In recent years, the application of Electronic Fiscal devices (EFDs) in developing countries has significantly increased. This increase in use resulted from an increase in awareness of its perceived benefits such as efficiency of tax collection, reduction of tax evasion and improvement of tax audit transparency. This study assessed the effect of EFD use on the tax audit effectiveness and the perceived degree of transparency in tax audit processes among small entrepreneurs in the Arusha region of Tanzania. The study was conducted on small businesses because of their significance in driving the economy of developing countries. Primary data was collected using a close-ended questionnaire distributed to 279 small business owners. An interview was also conducted to supplement the data collected from the questionnaire. Based on the outcomes of one-way analysis of variance (ANOVA) and ordinal regression, this study found that the use of EFDs affected the perceived degree of transparency in the tax audit. The authors recommend that the revenue authority should create more awareness of EFDs and extend its use to other businesses not currently covered. This is necessary to enhance the effectiveness of the tax audit, given its positive impact on transparency.