Summary
According to the researcher, before modern taxation was born taxation was the process of give
and take. But now a day, it is a financial charge or some other type of levy imposed upon taxpayers in
order to fund various public expenditures. These levies are based upon people’s income such as salaries,
business profit, interest, dividend, discount or royalties to obtain revenue (Charles, 2015).
There is a difference in tax collection between developed countries and developing countries.
Developed countries collect much higher tax revenue than developing countries despite comparable
statutory taxation rates, even after controlling for underlying differences in economic activity (ICTS,
2016). Taxation in developing countries is a basic challenge, like poor tax administration, failing to
collect sufficient tax revenues. According to MOR study corruption, smuggling and tax evasion is a
serious problem in our county too.
Therefore, to overcome the above challenges governments, tax policy makers, economic strategist
and researcher should designand implement modern tax administration systems which enable to prevent
and protect the above and the coming problems. According to McKerchar [Link] (2019) it is
thefundamental goal of any revenue authority to collect taxes and duties payable according to the law.
However, when it comes to the obligations imposed on them by law, taxpayers are notalways compliant.
So, the governments challenge to achieve both short and long term goals inthe economy.
In Ethiopia, there are few studies done regarding to the determinants tax compliance behaviour,
follows; Lemessa (2007) with a topic 'A Research Project on Determinants of Taxpayers' Voluntary
Compliance With Taxation; The Case Study Of Dire Dawa City, by using descriptive method of research
finds out that, tax fairness andequity, organizational strength of the tax authority, awareness level of the
taxpayers, socio-cultural factors, and provision of social services by the government are the main
determinant of voluntary compliance in the city. The researcher had also tried to review, Bisrat (2010),
Amina (2013), Tilahun (2016).
Based on above gaps in the studies together with the problems stated in order to attain major
objective of the study, the following research questions would be addressed:
What is the relationship between of economic factory and compliance of taxpayers
behaviour?
What are the main determinants factors of tax compliance behavior?
Which determinants factors are affects tax compliance of Addis Ababa City
Administration taxpayers?
The researcher wants to attain the following objectives:
To examine the relationship between economic factors and compliance of taxpayers
behavior
Page 1
Summary
To determine the complexity of the tax system such as penalty and probability of detection
on tax compliance.
To investigate compliance level of Category “A” taxpayers in Addis Ababa
To identify the relationship between the perceived role of government and tax compliance
To determine referral peer group attitude and perception on tax compliance
To identify the determination of demographic variables such as age, gender, and education
on tax compliance of taxpayers in the study area.
To determine the effect of tax knowledge and education on tax compliance
In order to achieve the above specific objectives, the researcher had formulate 9 hypothesis ;The
complexity of the tax system significantly and having positive related with tax compliance; High
probability of detection encourages tax compliance; The perception on tax rate is negatively related with
tax compliance attitude; Penalty rate is positively correlated with tax compliance attitude of taxpayers;
Perception of the role of government has positively correlated with tax compliance; Tax evasion are
insignificantly and positively correlated with tax compliance; The influence of the peer groups (that is
friends and families) are positively but insignificantly correlated with compliance attitude of taxpayers ;
Female taxpayers have positive attitude on tax compliance than male and State that there is no significant
effect tax knowledge and education on taxCompliance.
This research work can give feedback to tax payers and the tax authority regarding
thesignificance, application and impact of tax audit on tax compliance. .The study also contributes in
evaluating the prevailing tax audit on tax compliance in making some adjustments on the existing tax
auditors. It is intended to provide enormous benefit to tax administration for the MOR (Ministry of
revenue) and specifically Addis Ababa City Administration of Revenue Branch Bureau. It also helps for
the tax administration and tax auditors the area should be need to be improvement. The study focus on
Addis Ababa Administration Revenue Office but it is limited on those purposely in the case of Category
“A” taxpayers and on the selected Sub City namely Addis Ababa City No 2 Middle Level Taxpayers
Branch Office and Nifas Silk Lafto Sub [Link] researcher had faced some limitations, due to COVID
19 impact to assess primary data from different personnel physically might be one limitation.
In this study, basically the practices of tax audit are considered as the major variable under
investigation. Which are; complexity of tax system, probability of detection, tax rate, penalty, perceived
on the role of government, attitude of tax evasion, peer influence group, gender and age, and tax
knowledge and education.
Page 2
Summary
Complexity
Probability of detection
Tax rate
Determinants of tax compliance
Penality
Perceived role of government
Tax evasion
Peer influence group
Gender and Age
Tax knowledge
Dependent variable Independent variable
Source: Modify by extensive reviewing by Researcher (2021)
The research design which has been used in the research was a mixed research approach which
was incorporated both quantitative and a qualitative research method was conducted to [Link]
researcher was adopt mixed methods approach; there were different tools available to the researcher to
collect the require data including questionnaires, interview, and document analysis.
Page 3
Summary
The study population includes at large Addis Ababa City Administration Revenue Office
specifically, Nifas Silk Lafto Sub City Category “A” taxpayers and Addis Ababa No 2 Middle Level
Taxpayers branch offices which contain the five sub cities under its namely AKaki Kality Sub City,
Bole Sub City, Kolfe Keranio Sub City, Kirkos and Nifas Silk Sub City category “A” taxpayers were
the target population. This study was constituted several types of taxpayer which fall in category “A”
by considering a cross sectional data for evaluation according to the nature of their business. These
categories taxpayers are also considered to be higher taxpayers having an annual turnover of more
than one million ETB for category “A” according to revised income tax regulation No.979/2016.
This research had a total target population of 7941 taxpayers. The sample size was determined
using the “Cochran’s (1977) formula;
n1 = n = 378
1 + n/N
Where,
N = Total population size for category “A” = 7,941
n = required return sample size according to Cochran's formula= 378
n1 = required return sample size because sample > 5% of population
Data collection procedure includes structured questionnaire for quantitative data collection
method was conducted.A total of 472 structured questionnaires were distributed. In addition to that,
secondary data from journals, website and literatures as well as official reports of MOR will be use
during [Link] analysis was done by SPSS window version 25 and MS Excel. Quantitative data
findings were triangulated with the qualitative data findings and secondary data findings. Descriptive
statistical are used, techniques like frequencies, percentages, means, standard deviation are presented
using tables. Analysis was done using ANOVA, Spearman correlation and multiple linear regression
models.
The complexity of the tax system, probability of detection, tax rates and peer influence group
that stated are negatively and insignificant relationship between and tax compliance as well as
significantly determines tax compliance behavior since p-value less than it standard error (0.05).
Penalty, tax knowledge and education that stated are positively and insignificant relationship
between and tax compliance as well as significantly determines tax compliance behavior since P value
less than it standard error (0.05).
Perception of the role of government that stated there is positively but insignificant relationship
between perception of the role of government and tax compliance as well as is insignificantly
determines tax compliance since p-value greater than its standard error (0.05).
Page 4
Summary
Finally, the study concluded, there is sufficient evidence to conclude complexity of tax system,
probability of detection, tax rates, penalty, tax evasion, peer influence group and tax knowledge are
factor that significantly affect determinates tax compliance behavior. However, gender, age and
perception of the role of government have no significant impact on tax compliance behavior.
Page 5
