Determinants of tax compliance behavior in ethiopia. The results revealed that perception on government spending. Past studies have shown that there has always been a reluctance among taxpayers to pay taxes. Tax rates, tax burden, in come level, tax audits, penalty, etc. Determinants of tax revenue in ethiopia johansen co. Therefore, the intent of this study is to examine the impact of tax audit on tax compliance in ethiopia. In addition to raising revenue directly from audit activities. Factors influencing international accounting system development have been investigated by accounting researchers since the 1960s mueller 1967. The countrys tax mobilization was also the lowest among most african countries and thus, identifying the factors that determine tax compliance behavior has been open for empirical investigation. Factors influencing taxpayers compliance with the tax system. Ethiopia like many developing countries suffers from tax revenue loss due to tax noncompliance. Determinants of tax revenue efforts in developing countries. Tax compliance is a major concern among many governments in the world. Economic and social factors of voluntary tax compliance.
Estimating the impacts of tax policy, enforcement, and irs responsiveness 1. By hamelmal azene hgebriel thesis submitted to the school of graduate studies, college of business, economics and social sciences, unity university in partial fulfillment forthe requirement for the degree of master in accounting and finance. Improving tax compliance 2 international monetary fund approved by vitor gaspar prepared by michael keen, juan toro, katherine baer, victoria perry, john norregaard, junji ueda, john brondolo, duncan cleary, eric hutton, oana luca, enrique rojas, mick thackray, and philippe wingender. Iii,issue42,october 2012 41 factors that influence rental tax payers compliance with tax system. Specifically, this study attempts to estimate factors that cause tax evasion and their relative contribution in malaysia. To the knowledge of the researcher, a study on the determinants of tax revenue in ethiopia is scant. Pdf factors affecting tax compliance behaviour in self. Since each country has its own approach to managing tax compliance levels and each has different tax laws and regulations, the factors impacting tax compliance behavior appear to vary among countries palil, 2010. Managing and improving tax compliance 6 summary all revenue authorities are generally required to achieve as good a compliance outcome as possible i. This gets right to the heart of what the irs should be doingaffecting. Factors affecting the performance of value added tax vat. So far, the potential gains from using the insights of the tax evasion literature in. One of the more vexing problems for policy makers in developing and transition economies is encouraging high levels of tax compliance.
To assess how tax compliance influences optimal revenue collection by nakuru county government research hypothesis h 01. Darcy 2011, our measure of tax compliance attitude is new in the context of crosscountry studies in africa. From the works of literature, the smallscale sector is known to be a tough party when it comes to paying tax. To depict the prevalent factors affecting the tax payers tax compliance behavior. This study adopts the firstdifferenced approach to estimating the determinants of tax compliance based on the index of tax compliance for 58 countries over the period 19962000. Pdf analysis of tax compliance and its determinants. However, gender and probability of being audited have no significant impact on tax compliance. The level of tax evasion in one country is related with specific characteristics of that country.
This approach emphasizes both the tax payers responsibility to report their income and to determine their own. In regards to factors influencing kenyan landlord taxpayer. Using the tpb, tax compliance is conceptualized as a function of three broad factors. Statement of the problem one of the more vexing problems for policy makers in developing and transition economies is encouraging high levels of tax compliance. Tax compliance challenges in fulfiling tax obligtaions among smes in zimbabwe. Descriptive research design was used in this study. Pdf challenges of revenue collection muhammed yismaw and. Factors influencing taxpayers compliance with the tax system austlii. Evidence from kaffa, bench maji and sheka zones category b.
This study aimed to assess tax payers attitude on factors that affect voluntary complianceof category c taxpayers in arba minch city, snnpr, ethiopia. Recent research on tax administration and compliance internal. Tax rates, tax burden, income level, tax audits, penalty, etc. This approach emphasises both the taxpayers responsibility to report their income and the need for them to determine their own tax liability. Factors influencing tax compliance among small and medium. Evidence from gedeo zone of southern ethiopia article pdf available august 2018 with 2,195 reads how we measure. Economic factors of tax compliance in the tradition of tax compliance research, a number of factors have been considered important for explaining tax compliance.
It is important to understand how environmental factors shape accounting reporting and disclosure standards in order to predict the progress towards harmonization efforts. Factors affecting voluntary compliance of category c. Pdf on jan 1, 2019, wondimu sebhat and others published analysis of tax compliance and its determinants. To examine the relationship between economic factors perceptions of government spending, compliance cost, tax rates and extent of penalty and compliance of taxpayers. This paper aims to explore factors influencing the effectiveness of tax audit in tanzania. The study is based on the underlying assumption that sustainable strategies for tax compliance should be oriented toward the use of persuasion rather than coercion. Taxation in ethiopia direct and indirect taxes categories of tax payers. Self assessment system sas has become the key administrative approach for both personal and corporate taxation in developed countries including the usa, uk and australia. Tax compliance does not significantly influence optimal revenue collection by nakuru.
In the study, we use an indirectly phrased question to capture tax compliance attitude of individuals in order to avoid direct implication of wrongdoing by the respondent. Alm 1991 and jackson and milliron 1986 defined tax compliance as the reporting of all incomes and payment of all taxes by fulfilling the provisions of laws, regulations and court judgments. Factors that affect tax comp liance among small and. This study sought to identify the factors that influence tax compliance in kenya, specifically focusing on smes operating within nairobis industrial area. Sas have become the key tax administrative approach in developed countries including the usa, uk and australia. Finally on the measures to be done to encourage voluntary tax compliance, the study found out that tax reforms ought to be carried out to encourage tax compliance.
Pdf determinants of tax compliance behavior in ethiopia. Factors influencing tax compliance among small and. Realizing the significant effect of tax evasion on an economy and a lack of study in this area for malaysia, this study attempts to fill the gap. Graduates of 20182019 ay office of graduate programs 1. Evidence from kaffa, bench maji and sheka zones category b tax payers, snnpr, ethiopia. It was found that high tax rates and complex filing procedures are the most crucial factors causing noncompliance of smes. Countrylevel factors affect tax compliance, so studies based on crosscountry data are crucial for understanding the behavior of tax compliance. Factors affecting presumptive tax collection in ethiopia. Tax compliance leads to increases in income and decreases in tax rates. This is the tax imposed on the taxable business income net profit realized from entrepreneurial activity. Therefore, this study was conducted using smes in zaria, northcentral nigeria to evaluate and rank the factors that encourage noncompliance with tax obligation by smes. Blackwell 2007 carried out a metaanalysis of studies and found that raising either the fine rate or the probability of audit will increase tax compliance.
For many years, the internal revenue service irs has presumed that its activities promote better income tax compliance in the general populationboth through deterrence and. Tax non compliance occurs through failure to file tax return, misreporting income or misreporting allowable subtractions from taxable income or tax due kirchler, 2007. The issue of tax compliance has long been discussed. Aside the trust issues, there are several noneco nomic and economic factors affecting tax evasion in ghana.
The federal democratic republic of ethiopia, national planning commission. While this has been done in some previous studies using afrobarometer data levi et al. Factors affecting tax compliance attitude in africa. Tax compliance has been an important subject of research in a large number of developed and a number of developing countries. Hence, one measure that can be used to improve the level of tax compliance is tax audit. This issue is independent of the overall tax take from gdp. Factors that affect tax comp liance among small and medium. The basic idea in the theory is that tax compliance is a function of three broad factors.
Factors affecting tax compliant attitude in africa. Only a little has been dealt with the issue of tax revenue performance in ethiopia. Pdf challenges of revenue collection muhammed yismaw. Determinants of tax audit effectiveness in tanzania. Central to the motivations of self assessment system introduction is an. Taxable business income would be determined per tax period on the basis of the profit and loss account or income statement, which shall be drawn in compliance with the generally. For this purpose, they are appropriated a finite level of. Tax awareness, perception, voluntary tax compliance, snnpr, ethiopia. Interview and questionnaires were used to get information from the respondents. Pdf factors influencing taxpayers voluntary compliance attitude. The revenue of the ethiopian government comes from different sources. Estimating factors affecting tax evasion in malaysia. Therefore, this study was conducted using smes in zaria, northcentral nigeria to evaluate and rank the factors that encourage non compliance with tax obligation by smes.
Determinants of tax audit effectiveness in tanzania emerald. The purpose of the study was to examine the factors affecting voluntarily tax compliance in kenya. While a number of studies have analyzed the principal determinants of tax revenue, in this paper we extend the literature by using a. However, tax payer s tax awareness level and perception and the extent of their influence on voluntary tax compliance decision was not well investigated and similar studies in this topic have not been carried out particularly in snnpr, ethiopia. Tax compliance and its determinant the case of jimma zone, ethiopia 1amina ahmed 2 saniya kedir, 1,2 msc, jimma university, business and economics college email. According to kirchler 2007 definition, tax compliance is taxpayers willingness to pay their tax liability as per tax laws and regulations. Factors affecting tax compliance behavior of addis ababa.
Factors affecting tax compliance among malaysian smes in e. This research sought to obtain opinions about tax compliance behaviour of small and medium business profit taxpayers in addis ababa. The determinants of individual income tax compliance. To examine the relationship between economic factors perceptions of government spending, compliance cost, tax.
Hence, the purpose of this research is to bring attitudes and these factors to light in relation to the rental. Pdf factors influencing taxpayers voluntary compliance. It was found that high tax rates and complex filing procedures are the most crucial factors causing non compliance of smes. The objective of this study is to examine factors affecting category a tax payers in addis. This paper attempts to provide results of a study on the importance of tax knowledge in determining tax compliance behavior in self assessment system sas in malaysia. The problem of voluntary tax compliance is as old as taxes themselves. Factors influencing taxpayers voluntary compliance attitude with tax system.
External factors affecting voluntary taxpayers compliance. Factors influencing taxpayers voluntary compliance attitude with. In case of wolaita zone revenue authority, southern ethiopia the study has focused on identifying factors that affecting vat revenue performanceand its management prcitces in soddo, areka, and boditi towns in wolaita zone. The factors like equity and fairness of the tax system, level of awareness of taxpayers, effectiveness and efficiency of tax authority, sociocultural factors and political factors. Compliance is also greater when the individuals perceive some benefits from a public good funded by the tax payments while changes in fine rates appear to have little effect on tax compliance behavior murphy, 2004. Ubira etheses tax knowledge and tax compliance determinants. Factors affecting tax evasion nevila kiri phd candidate, faculty of business, university aleksander moisiu, durres, albania kiri. Growth and transformation plan of ethiopia gtp ii 2016. Factors affecting the performance of value added tax vat revenue collection administration practices. The effect ranges from a decline in compliant attitude from 6% in kenya, to 8% in uganda and south africa and as high as 12% in tanzania. Financial and tax reporting conformity has been associated with a decrease in value relevance of accounting earnings ali and hwang, 2000, and a decrease in capital mobility young. This study contributes to current global literature in this field of the relative importance of tax knowledge in affecting tax compliance, as well as exploring the factors that make people pay taxes in a self assessment system, and discusses methods of increasing voluntary compliance.
Accordingly, using oneway anova, two samples and one sample t test, this study examined the determinants of tax compliance behavior in ethiopia. In this study, we therefore examine the factors affecting attitudes towards compliance. Going beyond the ambit of tax policy instruments one can look at social norms to understand. By gaining an understanding of these underlying factors, kra and the government will be able to make changes that will greatly improve taxpayers tax compliance level, with the end result being increased government revenues, allowing the tax authority to give quality service to taxpayers and the government as a whole providing more and. The relationship between competence of revenue clerks and optimal revenue collection by nakuru county government is not significant. Factors affecting tax compliance behavior of addis ababa number two medium taxpayers branch office, in addis ababa, ethiopia. Tax knowledge and tax compliance determinants in self. The research work is based on my desire to investigate the factors that affect tax compliance in ethiopia particularly addis ababa medium.
1337 552 103 749 921 439 694 456 1030 1133 2 215 1018 1234 275 36 495 346 1102 1155 543 1443 1178 14 1499 1402 770 29 309 800 742 616 1317 891 1108 1105 922 1197 119 1469 559 918 408 179