TAX AUDITS AND THE BURDEN OF PROOF: INCOME RETURN VERIFICATION CHALLENGES FOR TANZANIAN SMES

The study examined the impact of tax audits on the burden of proof on examined returns of income among SMEs in Dar es Salaam City in Tanzania. Specifically, the study intended to examine how the issued notice of deficiencies affects the burden of proof on taxpayers on the production of evidence and persuasiveness to the tax authority. The study applied a cross-sectional design and quantitative and qualitative approach, where, data were collected from targeted respondents and analysed quantitatively to establish the relationships between variables. Data were analysed through a descriptive statistical method and presented in frequency tables. Primary and secondary data were collected through a combination of methods including key informant interviews, structured questionnaires, and focus group discussions. The study revealed that education level has a greater impact on tax audit notice of deficiencies and taxpayers’ burden of proof from the examined return of income point of view. The education level of the respondents indicates that 41 (60%) out of 68 of the respondents had a primary education level. The study concluded that understanding the impact of a tax audit with respect to notice of deficiencies, the burden of proof, and audited taxpayers’ perception from the examined returns of income can influence tax compliance once taxpayers have basic tax laws education. Specifically, by understanding better why taxpayers usually bear the burden of proof, the tax authority will be in a position to use appropriate measures that will bring in balance the burden born by taxpayers on the production of evidence and persuasiveness to tax officers. The study recommends that tax authorities with other stakeholders such as tax consultants, accountants, and auditors should ensure taxpayers are equipped with basic tax laws education from their childhood, at primary schools, and post-primary schools