THE EFFECT OF VALUE ADDED TAX ADMINISTRATION ON

REVENUE PERFORMANCE: THE CASE OF GAMO GOFA ZONE,

SOUTHERN, ETHIOPIA

ARBAMINCH UNIVERSITY

COLLEGE OF BUSINESS AND ECONOMICS

DEPARTMENT OF ACCOUNTING AND FINANCE

A THESIS SUBMITTED TO THE DEPARTMET OF ACCOUNTING AND

FINANCE, SCHOOL OF POST GRADUATE STUDIES IN PARTIAL
FULFILLMENT IN THE REQUIREMENTS FOR THE DEGREE OF MASTER
OF SCIENCE IN ACCOUNTING AND FINANCE

By AMARECH BEYENE BEZABIH

ID NO RMA/003/07

PRINCIPAL ADVISOR: SHAIK ABDUL MUJEEB (PROFESSOR)

CO-ADVISOR: MR NEGALIGN MAMO (MSc)

JUNE, 2017

ARBAMINCH, ETHIOPIA

6
THE EFFECT OF VALUE ADDED TAX (VAT) ADMINISTRATION ON
REVENUE PERFORMANCE: THE CASE OF GAMO GOFA ZONE,
SOUTHERN, ETHIOIPA

AMARECH BEYENE

A THESIS SUBMITTED TO THE DEPARTMET OF ACCOUNTING AND

FINANCE, SCHOOL OF POST GRADUATE STUDIES IN PARTIAL
FULFILLMENT IN REQUIREMENTS FOR THE DEGREE OF MASTER OF
SCIENCE IN ACCOUNTING AND FINANCE

7
 DECLARATION

I hereby declare that this MSc thesis is my original work and has not been presented for a
degree in any other university, and all sources of material used for this thesis have been
duly acknowledged.

Amarech Beyene

Signature ------------------------------------

Date---------------------------------------

8
 Examiners ‘Thesis Approval sheet

School of Postgraduate Studies

Arbaminch University

We, the undersigned, member of the Board of Examiners of the final open defence by
Amarech Beyene have read and evaluated her study entitled “The Effect of Value Added
Tax (VAT) Administration on Revenue Performance: The Case of Gamo Gofa zone,
Southern, Ethiopia” and examined the candidate’s oral presentation. This is, therefore, to
certify that the study has been accepted in partial fulfilment of the requirements for the
degree of Master of Accounting and Finance (MSc).

Name of Chairperson Signature Date

Mr Taye Tadese (MSc) ------------------- ------------------

Name of External examiner Signature Date

--------------------- ------------------ -------------------

Name of Internal examiner Signature Date

----------------------- -------------------- --------------------

Shaik Abdul Mujeeb (Prof) Signature Date

(Principal Advisor) ------------------------- -----------------------

Mr Negalign Mamo (MSc) Signature Date

(Co-Advisor) ------------------------ ------------------------

SGS Approval Signature Date

------------------- ----------------- -----------------------

9
 ACKNOWLEDGEMENTS

I would like to express all the glory and honour to the God Almighty whose grace enabled
me to succeed in my study despite the challenges I was confronted with.

I also would like to extend my deepest and heartfelt gratitude to my major advisor Shaik
Abdul Mujeeb (prof.) and co-advisor Negalign Mamo (MSc) for their unreserved and
valuable support and guidance during my study and thesis work.

My appreciation also goes to Geze Gofa Woreda administration offices, finance and
economic development office, and Trade and industry development offices for their full
sponsorship of my study, moral, material and financial support for last three years.

I am glad to my husband Mr Delelegn Degela and my son Albert Delelegn & daughter
Kalikidan Delelegn for their devotion to share more responsibilities that when I carried
during my study.

My heartfelt thanks also goes to D/r Yechale Kebede, Mr Taye Tadesse, Mr Afework
Birhanu, Dr Melekamu Mada and Dr Anto Arkato for their particular support while I was
faced painful events during my study.

10
 TABLE OF CONTENTS

DECLARATION ...................................................................................................................
8

ACKNOWLEDGEMENTS .................................................................................................
10

TABLE OF CONTENTS.....................................................................................................
11

LISTS OF TABLE...............................................................................................................
14

LIST OF FIGURES ............................................................................................................

15

ACRONYM AND ABBREVIATION ...................................................................................

16

ABSTERACT ......................................................................................................................
17

INTRODUCTION ..............................................................................................................
18

1.1. BACK GROUND OF THE STUDY ........................................................... 18

1.2. STATEMENT OF THE PROBLEM ........................................................... 20
1.3 OBJECTIVE OF THE STUDY ................................................................... 22
1.3.1. GENERAL OBJECTIVE OF THE STUDY ............................................. 22
1.3.2 SPECIFIC OBJECTIVES OF THE STUDY .................................................
1.4. RESEARCH QUESTIONS ........................................................................ 23
1.5. SIGNIFICANCE OF THE STUDY ............................................................ 23
1.6. SCOPE OF THE STUDY ........................................................................... 23
1.7. LIMITATION OF THE STUDY ............................................................... 23
1.8. ORGANIZATION OF THE STUDY .......................................................... 24
CHAPTER TWO: ............................................................................................. 25

LITERATURE REVIEW .....................................................................................................

25

2. 1 THEORETICAL EVIDENCE OF VAT ADMINISTRATION .................... 25

2.1.1 DEFINITION OF VAT................................................................................. 25
2.1.2. DEVELOPMENT OF VAT......................................................................... 27
2.1.3 CONTRIBUTION OF VAT TO ECONOMIC DEVELOPMENT .............. 28
2.1.4 OBJECTIVES OF VAT................................................................................ 30
2.1.4. TYPES OF VAT .......................................................................................... 30
2.5, WHO HAS TO BE REGISTERED FOR VAT: ........................................... 32
2.5.1. OBLIGATORY REGISTRATION....................................................................................... 32

11
 2.5.2 VOLUNTARY REGISTRATION: ........................................................... 33
2.6 VAT IN E THIOPIA ........................................................................................ 33
2.2. EMPIRICAL EVIDENCE OF VAT ADMINISTRATION ......................... 34
2.2.1. VAT ADMINISTRATION ................................................................................................... 34

2.2.2 WHO ADMINISTERED VAT? ............................................................... 35

2.2.2.1 IDENTIFICATION AND R EGISTRATION OF VAT ........................................ 19
2.2.2.3 VAT COLLECTION PROCESS ................................................................... 19
2.2.2.4 VAT REFUND...................................................................................... 20
2.2.5. VAT F ILING AND P AYMENT ..................................................................... 22
2.2.6. CONTROL OF FILING AND PAYMENT .............................................. 22
2.2.7. VAT INVOICE .......................................................................................... 23
2.2.9. VAT PENALTY ..................................................................................... 26
2.2.10. ELECTRONICS CASH REGISTER MACHINE .................................. 26

CHAPTER THREE ........................................................................................

32

3. RESEARCH METHDOROLOGY .............................................................

32

3.1.1. GEOGRAPHICAL L OCATION AND C LIMATE ......................................................... 32

3.1.2Economic Features ................................................................................................. 32

3.2 R ESEARCH M ETHOD .................................................................................... 33

3.4. S AMPLING T ECHNIQUE ................................................................................ 34
3.5 S AMPLE S IZE DETERMINATION ..................................................................... 34
3.6 .DATA C OLLECTION T ECHNIQUES ................................................................ 36
3.7. VALIDITY AND RELIABILITY T EST OF DATA ............................................. 36
3.8. DATA S OURCES .......................................................................................... 36
3.9 QUESTIONERS ............................................................................................ 37
3.10 SEMI S TRUCTURED INTERVIEW ................................................................ 37

CHAPTER FOUR ..........................................................................................

39

4.1. INTRODUCTION ..................................................................................... 39

4.1.1 NUMBER OF RESPONDENTS ........................................................................ 39
4.1.2. E DUCATIONAL BACK GROUND OF RESPONDENTS ....................................... 40
4.1.3 R ESPONDENTS A GE PROFILE ...................................................................... 42

4.2 DESCRIPTIVE STATISTICS/ANALYSIS................................................. 42

12
 4.2 .1 BUSINESS CATEGORY OF RESPONDENTS ...................................... 42
4.2.2 R ESPONDENTS LEVEL OF A WARENESS ON VAT R ULES AND R EGULATIONS 43
4.2.3 ISSUES R ELATED W ITH VAT R EGISTRATION ............................................. 44
4.2.4 T OOLS FOR COLLECTING VALUE ADDED TAX .............................................. 45
4.2.5 PROBLEM RELATED WITH VAT ADMINISTRATION ........................................ 46
4.3.1 DOCUMENT ANALYSIS ............................................................................... 49
4.3.2 VAT C ONTRIBUTION ON T OTAL R EVENUE ................................................ 50
4.3.3 T AX P AYER P ROGRESS IN VAT R EGISTRATION .......................................... 50

CHAPTER FIVE ............................................................................................

53

5.1. INTRODUCTION ..................................................................................... 53

5.2 C ONCLUSIONS ............................................................................................. 53
5.3 RECOMMENDATIONS .................................................................................... 56

REFERENCES ...............................................................................................
59

1 APPENDIX: Interview question to Tax officials ........................................

66

2. APPENDIX questionnaire to be answered by Tax expert/employees/ ......

67

3. APPENDIX V .............................................................................................
72
13
 LISTS of TABLE

CONTENTS PAGES

Table 2.1. world country with VATTable2. ..............................................................................

30
Table 2.2: Invoice or Credit System method of Computing VAT.............................................
33
Table 3.1 Used sampling Method for respondent ......................................................................
35
Table 4.1. Demographic profile of the Study Area...................................................................
39
Table 4.2. Sex of respondents ....................................................................................................
40
Table 4.3. Age profile ................................................................................................................
42
Table 4.4. Business Category of respondents ............................................................................
42
Table 4.5. Level of Awareness on VAT rules and regulations ..................................................
43
Table4.6. Responses related with VAT registrations.................................................................
44
Table 4.7. Settlement in Collection time ...................................................................................
45
Table 4.8. VAT Administrate problems ....................................................................................
46
Table 4.9. Respondents with Audit Value .................................................................................
47
Table 4.10. Audit Performance from Secondary Data...............................................................
48
Table 4.3.1. VAT progress from 2004- 2008 budget years .......................................................
49
Table 4.3.2. VAT Contribution on total revenue .......................................................................
50
Table 4.3.3. Tax payers registration progresss 2004-2008 .......................................................
50
Table 4.3.4. Sectors Category of tax payer targeted registers ...................................................
51
14
 LIST OF FIGURES

Contents Page

Figure 3.1. Location map of study area ---------------------------------------------- 45

Figure 4.2. Progress of VAT collection profermance ------------------------------- 47

Figure 4.3 Tax payer progress in VAT------------------------------------------------ 48

Figure 4.4. Number of tax registrant pr ------------------------------------------------ 51

15
 ACRONYM AND ABBREVIATION

ETRM Electronic Tax Registration Machine

VAT Value Added Tax

EU European Union

IMF International Money Fund

EFIRA Ethiopian Federal Inland Revenue Authority

GDP Gross Domestic Product

SIGTAS Standard Integrated Government Tax Authority System

CRM Cash Register Machine

FDRE Federal Democratic Republic of Ethiopia

GTP Growth &Transformational Plan

ERCA Ethiopia Revenues & Customs Authority

ASCDM Authority System for Customs Data Management

SNNP Southern Nations Nationalities, and Peoples Region

FEDO Finance & Economic Development Office

GGZRAMBO Gamo Gofa Zone Revenue Authority Main Branch Office

16
 ABSTERACT

The purpose of this study was to assess the effect of Value Added Tax (VAT)
administration
on revenue performance in Gamo Gofa Zone. The total population of the target group of
the study area 686 VAT registered tax payers from sample woredas. Out of 686 to achieve
this objective, the study has applied purposive sampling technique to select 253
representative respondents. Mixed research designs both quantitative and qualitative
methods were adopted. The secondary data were examined from annual reports of the
authority from the year 2004-008E.C.The Quantitative data were collected through
questionnaire and entered into statistical package for social science (SPSS) software
version 20 and analysed using tools of descriptive statistics such as: mean, frequency&
percentage. The qualitative data collected informer interview through prepared checklists
and semi-structured questions respectively were interpreted and analysed to triangulate
the data which were collected and analysed by using quantitative method. Generally, the
cumulative findings shown that lack of awareness among tax payers; limitation of payer
identification & registration; lack of effective audit practices; lack of supply and usage of
ETR machine are the effects for VAT administration in the study area. Established and in
depth creation of awareness, institutional capacity building, strong follow- up and
implication of the declared laws, rules and regulations, design to use modernized
monitoring mechanism, follow networking system that, SGTA (Standard Government Tax
Administration) & push tax payers to use cash registration machine are major
recommendations by the researcher according to its findings.

Key words: VAT Revenue, VAT Administration, VAT Registrants

17
 CHAPTER ONE

INTRODUCTION

1.1. BACK GROUND OF THE STUDY

VAT first introduced in 1954 by a French economist Maurice Laurie who was joint
director
of the French tax authority.

Emergence and rapid development of VAT is among the most important tax development
of the later 20th c (Owens, A. C.2010).

VAT is an indirect tax charged on domestic consumption of goods and services as well as
on imported goods. It can be considered as the most important tax innovation of the
second
half of the twentieth century. The system of VAT is so designed that the final levy
and burden of the tax on the goods is borne by the final consumer . It is primarily
collected
by business firms or individuals at all stages of production and distribution beginning with
importers and producers of raw materials and ending with retailers. In line with this
perception, VAT is implemented in many developed as well as developing countries
(Haile
Mariam, 2011).

The theory is that the end consumer carries the burden of VAT, not the business, which is
merely collecting the VAT on behalf of tax authority it is now a major part of the tax
structure of most Western European nations as well as the rest countries of the continents
throughout the world. Although the reasons for adopting the VAT differ from one country
to another, the main argument is that a properly designed VAT raises more revenue with
less administrative and economic costs than other broadly based taxes (Sijbern et.al,
1998).

Most country of the world wants to generate large amount of revenue to boost their level
of Economic growth and national development. This is because of the fact that, both the
government and revenue were hand and glove and they are the two sides of one coin as
there is no government without collecting and improving collection from different
sources.
(Bird, . M.,2010).

The global trend to introduce VAT is more continuing EU (European Union)

countries. Most of them are Germany, Denmark, Finland, Greece, Hungary, Ire land,
Italy,
and so on. Nowadays, 160 countries have made Value Added Tax part of their tax system,
and from 53 member of countries of African union 44(83%) of them are introduced VAT,

18
53 EU (Europe union) 11 from South Africa union counters, 19 Caribbean, central And
North America 7 from Oceania countries and 26 from Asean countries introduced
VAT(IMF Report,2014). Cote d‟Iviore is the first country in Africa to introduce VAT
(James ,2015)

However, weak tax administration, particularly in developing and transitional economies

is the principal problem to the successful implementation of Value Added Tax
(Bird,2004).

According to (Cho.S.M.W.2003), one of the focuses of the tax policy reforms is

reforming
indirect taxation, the reform to indirect taxation was the introduction of Value Added Tax.

The main objective of most governments in developed and developing countries are to
encourage and guide their economic and social development. These governments continue
to reach out for the goal of government stimulated and directed development (Wawire,
2011).

Ethiopia's tax reform program has one of the focuses of the tax policy reforms is
reforming
indirect taxation introduced VAT since January, 2003. As a replacement of seals tax,
VAT
is the principal source of revenue for the Ethiopian government. The rate of VAT is 15%
of the value for every taxable transaction by a registered person, all imported goods other
than an exempt import and an import of services Value Added Tax. For instance, in the
2006–07 fiscal years, Federal Value Added Tax Revenue (on domestic transactions)
accounted for about 41 percent of total federal revenues from (Shimeles, A. G,2005).

According to (Bird,2003) these responsibilities include a range of related activities such

as
taxpayer identification and registration, invoicing, filing and payment requirements,
control
of filing and payments, refunds, audits and penalties. VAT administration is also
concerned
with issues of who should administer the tax, what organisational setup to use and what
resources are available.

Improving tax administration has long been a matter of concerned with developing
countries. Since all countries need revenues, all countries have revenue administrations.
Money alone is not enough; but it is necessary for any state to function, and the most
reliable way to get it is with an effective tax administration. In addition, however, the tax
system constitutes one of the major interfaces between citizens and state in any country.
So, how taxes are administered and it may affect not only the political future of the
government of the day but also, more fundamentally, public trust in Government. Tax

19
administration may thus play a critical role not only in shaping economic development
but
in developing an effective state (Bird, 2004)
Again, as Bird and Gendron (2005) stated, even if all or some of the proceeds of the tax
are
to be the states, either on the basis of estimated consumption or on some formula basis, a
single central VAT has substantial advantages and avoids many problems.

As compared to sales tax VAT is more complex in spite of its complexities, the global
trend
to introduce VAT in more countries is continuing. Until recent years, VAT was collected
by the Ethiopian Customs Authority and Along with its branch offices and however, very
recently the administration of VAT revenue has been delegated to regional governments
(Liam Ebrill, M.-P. b. 2001).

As (Yesegat. A, 2008) stated that, since September 2004, the ERCA has delegated to
regional governments the administration of VAT for sole traders exist in their respective
authorities clarifying the trend in decentralizing the VAT administration. Changes in tax
policy and tax structure in any country usually reflect changes in administrative realities
as
much or more than they do change in policy objectives. Therefore, the study focused on
Gamo Gofa zone purposively because of the fact that VAT administration launched in
SNNPRS in general and Gamo Gofa zone in particular is not short period of time but the
registrant’s number is not as such satisfactory compared with its potentiality. Hence, this
study is made to examine the effect of Value Added Tax administration on revenue
performance and collection activities.

1.2. STATEMENT OF THE PROBLEM

Most developing countries are currently dependent more on external financial resources to
fund their development activities. Ethiopia is one of among developing counters more
than
half of their budget is financed from external sources, these is not satisfy social interest
Therefor mobilizing internal revenue is the main opportunity rather than depending on
external sources. These internal revenues are collected from tax and non-tax revenues.
The
tax revenue paid by citizens to the state in order to carried out the planned objectives of
the
government to address the public demand (Yesegat, 2004).
Therefore, " taxable income shall mean the amount of income subject to tax after
deduction
of all expenses and other deductible items allowed under this proclamation and
regulations

20
issued there under" proclamation No 286/2002 Section one Article (11). Value added tax
(VAT) is indirect tax revenue which is collected from multi stage of production,
distribution, and consumption chain of goods and services from the registrants. It is the
principal source of revenue for the Ethiopian government. To this end, since January
1/2003
Ethiopia has launched VAT as one of the tax component by proclamation No 285/2002
and
replacing the prior sales tax due to: VAT enhance saving and investment:
However, as (Yesegat, A.2004) suggested that, in revenue collection there are a gap
which
includes tax payers’ identification and registration, VAT filing and payment, VAT
refunds,
VAT audits, penalties and VAT invoicing. In addition to these, the author further
discussed
as lack of tax awareness among the society and strong education programs as well as lack
of trust between taxpayers and administrators as major gaps to the VAT system in the
country.
As (Simon, Yibrach & Abiy,2013) reported in their study ‘‘problem and prospects of
value
added tax implementation’’ in the case of Tigrai region they suggested that on their
finding
,numbers of VAT registered businesses fail to offer VAT receipts up on payment,
providing
used VAT receipts as a means to evade from the system.

The level of enforcing business firms to provide bill during payments is low as majority
of the consumers fail to ask for receipt during payments, similarly many consumers fail to
tear down the receipt as it gives the chance to use illegal businesses for tax evasion. Even
though, the revenue collecting process encountered with many challenges, VAT plays an
energetic role for the national development of Ethiopia and it enables to succeed the
current
growth and transformations plan (GTP) of the country(Jalata,2014).
Therefore Ethiopian government should make a full-fledged effort to efficiently collect
and
effectively utilize such tax revenue through closing the door towards the issues of
corruptions which can be possible through making the VAT administrations more
fashionable than ever before (Dasalegn, 2014).

According to (Habtamu, et al, 2015), the ‘‘challenges in administration of Value Added

Tax’ which includes Resistance against Value Added Tax registration, Low level of tax
awareness, weak audit and enforcement capacity of the tax authority, sell goods and
service
without tax invoice by Value Added Tax collectors, Tax laws enforcement problems, are
the challenges which affect collecting sufficient revenue in terms of Tax collected from
VAT.

21
Nowadays, encouraging results are observed as far as collecting revenue is concerned.
Since VAT was introduced within 13 years in G.C. showing dramatic changes in
generating
government revenue. Data shows that still there is gap to the effective VAT taxation and
the legislation (Haile Mariam, 2011).

Therefore Gamo Gofa is one of the study areas that have been addressed mainly in terms
of VAT administration on revenue performance. Since different researchers tried to
identify the major challenges in the VAT administration which reduced the collection of
revenue from VAT in deferent area. Moreover, as research knowledge and interface there
is no studies conducted in the effect of VAT administer on revenue performance in Gamo
Gofa Zone tax and revenue authority office and other studies conducted in the study area
in other sides of taxation is also limited. Based on the above research gap to the
knowledge of the researcher motivate to do the revenue generation in the Gamo gofa
zone particularly in Arab Minch and sawula towns, and Geze gofa woreda. Due to there
are challenges which hinder the VAT administration as not expected and on-going
challenges are awareness, problems in terms of tax payer identification, usage of cash
registration machine and auditing practice still going on in SNNPRS in general and in
the study area in particular. Therefore, the researcher believes that, these the gap of
administrative activity may affect the effectiveness of the collection of VAT in the Gamo
Gofa Zone as well.

1.3 OBJECTIVE OF THE STUDY

1.3.1. GENERAL OBJECTIVE OF THE STUDY

The main objective of this study is to investigate the effect of VAT administration
on revenue performance in Gamo Gofa Zone. Based on this broad objective the
researcher developed the following specific objectives:

1.3.2 SPECIFIC OBJECTIVES OF THE STUDY

 To investigate major VAT administration processes and activities are being undertaken
in the study area.
 To assess actual VAT administration practice comply with the existing tax laws and
standards.
 To investigate the contribution of VAT on Revenue Generation in study area.
 To assess the major challenges of VAT administration in study area.
22
 1.4 .RESEARCH QUESTIONS

Major questions:

What is the effect of VAT administration for Revenue Generation in Gamo Gofa Zone?

1.4.1. Specific question:

 What major VAT administration processes and Activities are being undertaken in the study
area?
 Does the actual VAT administration practice comply with the existing tax laws and
standards?
 To what extents VAT contributes to the Revenue Generation in the study area?
 What are the major challenges of VAT administration in study area?
1.5. SIGNIFICANCE of the Study

 For the authority providing a deeper understanding of the critical effect of VAT
administration on revenue performances.

 For the governmental and policy makers use as the source of input for policy decision
making and reforms in VAT

 For another researchers and academician it use as reference material

1.6 SCOPE OF THE STUDY

The scope of the study is limited to VAT only; it did not consider other types of taxes. In
addition, it is going to be conducted in ERCA Gamo Gofa Zone Main Branch Office.
Hence, the Study doesn’t include the revenues collected through the other tax part of the
authority. The scope of the study is also limited to only five years’ time interval from
2004-
2008E.C and doesn’t investigate the VAT administration since its establishment.

1.7. LIMITATION OF THE STUDY

Adequate and reliable information is important to undertake any kind of survey. And
hence
protection exists in cleared the questionnaires to avoid biases. Moreover, briefing is given
about the purpose of the study, and explanation is given on some questions.

However, unwillingness and carelessness from some tax officials while giving documents
is the shortcomings. The absence of enough reference materials regarding the VAT
implementation and related problems in the authority. In addition to this Lack of
experience
of the researcher were other limitations of conducting these study
23
1.8. Organization of the study

The study organized in five chapters. In Chapter one presents the introduction parts.
Chapter two presents literature review. Chapter three presents research design and
methodology. Chapter four presents results and analysis. Finally, chapter five presents
conclusions and recommendations.

24
 CHAPTER TWO:

LITERATURE REVIEW

This chapter consists of concepts and definitions, theoretical related literature reviews, the
conceptual framework and empirical aspects of the VAT administration under this study.
It looks the detail challenges that hamper VAT administration process regarding:
registration, collection process, transferring and refund mechanism, the service
deliverable,
the VAT auditing, the law enforcement process, the habit of taxpayers and ethical
problems
of both the taxpayer and execution bodies. These are main sub topic of this chapter.

2. 1 THEORETICAL EVIDENCE OF VAT ADMINISTRATION

2.1.1 DEFINITION OF VAT

Different authors who wrote about defined VAT, which is also known as goods and
services
tax (GST) or consumption tax, in different ways. Value added tax or VAT is an indirect
tax, which is imposed on goods and services at each stage of production, starting from
raw
materials to final product. VAT is levied on the value additions at different stages of
production. VAT is widely applied in the European countries. However, now a number of
countries across the globe have adopted this tax system (Economy Watch, 2010).

VAT is an indirect tax levied on domestic consumption of goods and services imported. It
is designed to be paid on the value added which is the difference between the value of
sales
and value of purchase at the point of transaction throughout the production and
distribution
chain. Any producer owes tax only in the value added; in practice this means that the
producer will have refund for VAT paid on all the purchases or inputs. Value added tax
(VAT) is an indirect tax that is changed whenever a tax payable person makes taxable
supply of goods and services in the course of the business and imports, although it is a tax
on consumer expenditure. VAT is a tax not on the total value of goods being sold, but
only
on the value added to it by the last seller who is liable to pay a tax not on its gross value,
but on the value that is the Gross value minus the value of inputs (Liam Ebrill, M.-P.
b.2001).

The Ethiopian tax system involves different types of direct and indirect taxes, including
various income taxes such as employment, profit, corporate and rental, interest income
taxes and so on. Moreover, a value added tax (VAT) was introduced since 2003 instead of
25
a sales tax. Various tariffs are also levied, mainly on import items (proclamation No
285/2002).

According to this proclamation, VAT in Ethiopia, is payable if they are supplies make in
Ethiopia, made by a taxable person, made in the course of furtherance of a business, are
not
specifically exempted or zero rated. Supplies, which are made in Ethiopian, not exempt
Known as taxable supplies. Tax is a contribution from individuals out of their private
property for the maintenance and defence of government, so that it may perform its
functions and the ends of the state are realized.
Tax is a financial charge or other levy imposed on an individual or a legal entity by
government'' (Yohannes, et, al, 2009).

A direct taxis one for which the formal and economic incidence are essentially the same,
i.e. the taxpayer is not able to pass the burden to someone else. Direct taxes are paid
entirely
by those persons on whom they are imposed’’ (Yohannes and Sisay, 2009). ''Indirect tax
is
the tax is not directly falling for payment on the taxpayer, but is indirectly paid as a part
of
the price of goods the consumers consume. It consists of value added tax, custom duties,
stamp duties, excise tax and turn over taxes'' (Yohannes et, al, (2009).

VAT is one kind of indirect tax that imposed on multiply steps on consumption and
production of goods and services in uniform rate and exempting some items of goods and
services due to economic, social and administrative reasons which are associated with
welfare benefits. As a result, VATs are considered to be very efficient devices for
increasing government revenue as well as its popularity (Kloeden, 2011).

VAT is one of the most popular taxes around the world, the main reason for this
popularity
is that VAT provides a buoyant revenue base that usually yields significantly more
revenue
than other taxes on consumption and the VAT is neutral and efficient as it does not tax
investment or cascade tax liabilities (Santos, 2002).

The VAT administration directly deals with businesses in order to execute the tax policy.
The features of VATs are self-assessment and self-enforcement way of the tax collection
methods, the registrants have an encouragement to ask their providers for accurate

receipts in order to subtract input costs on their VAT bills and other features of VAT is
refundable because the registrants must be collect the declared amount from the
customers

26
and pay to the concerned government bodies in the meantime collect their overpayments
from concerned governments bodies (Pomeranzy, 2010). Therefore, its benefit is that
broaden tax base by increasing tax payers and decreasing tax load from small number of
the taxpayers that maintain fair distribution of tax burden and maintain good governance
and stability in the country.

Good tax administration system comprise: identification and assessment of compliance

risks, providing strategies for that risks, accessible, dependable and timely information
service as well as the accurate and timely treatment of requests and appeals, in addition to
these, VAT administrations are identifying taxpayers, registration of identified potential
tax payers, processing returns, controlling transaction flows and collections, making
refunds, auditing taxpayers, assessment of VAT evaders, prosecution and proposals for
legislative change (OECD, 2001 ) and (Adjei, et al).

Different types of VAT evasion observed in the world which needs many efforts in order
to eradicate it from the world in general and from Ethiopia in particular. Based on this
fact,
the frauds which are challenge full for VAT administration are: shadow economy fraud,
suppression fraud, insolvency fraud, carousel fraud, bogus traders (Cnossen, 2010).

2.1.2. D EVELOPMENT OF VAT

Emergence and rapid spread of VAT is among the most important tax development of the
later 20th c VAT invented in 1954 by a French economist Maurice Laurie who was joint
director of the French tax authority. The theory is that the end consumer carries the
burden
of VAT, not the business, which is merely collecting the VAT on behalf of tax authority.

According to international monetary fund report 2014, more than 4 billion, 70% of the
world population new live in countries with VAT, raise about 18 trillion in tax revenue,
roughly one quarterly of all government revenue over (72%) of them have made VAT
part
of their tax system, and from 53 member of countries of African union 44(83%) of them
are introduced VAT, 53 EU(Europe union ) 11 from south Africa union counters, 19
Caribbean, ,central And North America 26 Asean counters,7 Oceania countries and
currently 160 countries introduce VAT in the world(IMF,2014). in Ethiopia January
1/2003
and in SNNPR State the same time which given in proclamation No 285/2002.
27
 2.1.3 CONTRIBUTION OF VAT TO ECONOMIC DEV ELOPM ENT

Value added tax (VAT) contribution to economic development of any nation is not
minimum, with this realities its contribution to GDP different from continent to continent
in continent different from country to country.

According to (James, 2011) it has been introduced in more than 140 countries in world.
The annual revenue increases up to US$18 trillion, and is paid by more than 4 billion
people. The main reason for this recognition is that VAT provides a buoyant (positive)
revenue base that usually yields significantly more revenue than other taxes on
consumption. VAT revenue in Barbados and Jamaica, for example, is equivalent to 9% of
their GDP (dos Santos, 2002) and in Ethiopia VAT revenue accounted 41% for 2006-
2007
fiscal years (EFIRA, 2007).

In across country analysis an IMF study in 2001 noted a number of empirical regularities
with respect to trade country size and government size. Countries that have implemented
a
VAT have relatively higher per capita GDP levels and rely less on international trade
(Bird
and Gendron, 2006).

However, to perform this suit product there are some challenges such as the relatively
high
compliance cost for small firms and the exposure of the refund system to fraud have
always
been inherent in the structure and operation of VAT. These problems have been
exacerbated in recent years by the increased fiscal weight being placed on VAT in many
countries, particularly in emerging economies seeking fiscal revenues to respond to new
pressures arising from the need to reduce tariffs to accord with the requirements of the
WTO and regional trade arrangements. Experience in a variety of countries suggests that
several conditions are needed for success in such major tax reforms as adopting and
implementing VAT.

Among the factors commonly mentioned are political commitment which was vital
factors
to carry out the tax tasks, thorough advance preparation, adequate investment in tax
administration, an extensive public education program, consideration of local conditions,
"no one size fit for all"(NOSFA) principle’ and the need for visible offsets to perceived
distributional downsides, support from the business community, and by no means least,
good timing. On the technical level, thorough advance preparation, adequate investment
in

28
tax administration, and extensive public education have all proved critical to success in
some countries for VAT administration (Bird and Gendron, 2007).

There are other factors which are distorting the VAT registrants. First, several countries
override the VAT threshold for compulsory registration for certain sectors not considering
of their sales turnover. Secondly, voluntary registration mandate was given for the small
potential taxpayers accordingly their annual sales turnover which made them to understate
their annual sales turn over as they like. For example, Kenya, Mauritius, and Uganda have
high percentages of taxpayers below the registration threshold from overriding it, while
Zambia on the other hand has the least voluntary registration was currently reintroduced.
Ghana also has a high proportion of small VAT taxpayers given a very low threshold and
compulsory registration of all retailers (Kloeden, 2011).

Ethiopia gives more attention to the domestic revenue mobilization from these tax
revenue
administration reforms were the basic measure had been taken. According to the pillars of
gross and transformation plan (GTP), of federal democratic republic of Ethiopia ministry
of finance draft explains "on the revenue side, implementation of the on-going tax reform
program is going to be further enhanced through strengthening tax administration and
collection'' (MoFED, 2010). During the period of GTP, efforts will be geared towards
promoting compliance and equipping tax collection institutions with adequate
enforcement
power which will further boost revenue mobilization at federal and regional levels.

The Government will accelerate the pace of implementation of the tax reform program
through further enhancing the capacity of tax collection institutions, implementation of
the
TIN system throughout the country, improvement of the presumptive tax system,
development and implementation of an audit program to cover all taxes and expansion
and
improvement of the administration of the Value Added Tax (VAT)". Based on these
fundamental pillars the traders whose annual sales turnover is 500,000 birr and exceeds
that
amount had been as a threshold set for VAT registrants on proclamation No 285/2002.
Even
if the threshold and the legal procedure were set, there are challenges when performing
VAT revenue collection.

Those 160 countries in the world that have implement VAT Number of country based on
region are as follows:-
29
 Table 2.1. World country with VAT
S.no Region No. of Country
1 Asean 26
2 Asia 19
3 Europe 53
4 Oceania 7
5 Africa 44
6 South America 11
7 Caribbean, 19
Central & North
America
Total 160
Source: IMF, 2014 REPORT.

2.1.4 O BJECTIVES OF VAT

According to (Sijbern, Cnossen, 1998)as cited by (Haile M.M,2011) Taxes are a
compulsory levy, imposed by government and those who are taxed have to pay the sums
of irrespective of any corresponding return of service or good by the government.

Taxes are important sources of public revenue. The existence of collective consumption
of
goods and services necessitates putting some of our income into government hands. Such
public goods such as roads, power, municipality services, and other infrastructures have
favourable results on many families, business enterprises, industries and the general
public’s. Although the specific reasons for adopting the VAT differ from one country to
another, the main argument is that a properly designed VAT raises more revenue with less
administrative and economic costs than other broadly based taxes.

Furthermore, a VAT does not influence the methods of doing business. The tax bill is the
same for a product made in the corporate or non-corporate sector with capital-intensive or
labour-intensive technology or for one made by integrated or specialized firms. The VAT
also ensures neutrality in international trade by freeing exports of tax and by treating
imports and domestic goods the same; this is an important attribute in an interdependent,
high-tax world. As a transactions tax, which must be shown on invoices, the VAT is
harder
to evade than an income tax (Bird and Gendron, 2007).

2.1.4. TYPES OF VAT

In the modern world there are four types of VAT namely, consumption, production and
income VAT.
30
2.1.4.1. Consumption VAT

In this type of VAT, the firm is allowed to deduct from the gross value of its product not
only the non-capital input purchased from other firms but also the capital equipment
purchased. Thus, in consumption type VAT, tax base is the difference between gross
value
and total value of inputs purchased (capital and non-capital).

2.1.4.2. Production VAT

In the production type VAT, the value of the inputs purchased by the firm from other
firms
is not deducted in full. Only the value of non-capital purchase is deducted. Furthermore,
no
Depreciation is permitted on the purchase of capital goods even in subsequent years.
Thus,
the tax base in production type VAT is equal to gross value less value of non-capital
goods
Purchased.

2.1.4.3 Income VAT

According to income type VAT, the firm is allowed to deduct the depreciation on the
capital
goods (during the year) apart from the full value of its non-capital purchases. Here, firms
cannot deduct the entire value of the capital goods purchased during the year but they can
deduct the respective amount of depreciation attributable to that year country or
countries in which the item is produced rather than consumed (ITD, 2005).

Tax evasion: A person, who evades the declaration or payment of tax, commits an
offence and in addition to any penalty may be prosecuted and be subject to a term of
imprisonment of not less than five (5) years (Main, 2005, p. 12).

Output tax:- is the VAT that a business pays over taxable supplies made and can be
recovered only on so far as your business in VAT registered and make taxable
output. Output VAT is the VAT collectible by a taxable person at the time of sale of
taxable
goods and services (supply). It is the VAT chargeable on sales of taxable goods and
services
whenever a taxable person supplies taxable goods or services to other person. VAT must
be included in the price charged for those taxable goods or services. This is the output
VAT
for the supplier.
Output VAT is not a component of the sales price rather it is a liability to the taxable
person
which is collected on behalf of the Tax Authority. The logic of VAT is that during a VAT
accounting period, a VAT registered person pays VAT on its purchases, which is called
input VAT; and the person charges VAT on its sales, which is called output VAT. At the
end of the VAT accounting period, the difference between the amount of output tax and

31
input tax represents either VAT payable to the Tax Authority or VAT Refundable from
the
Tax Authority.
Input tax: - the VAT that a business collects over on taxable supplies (VAT paid on
sales). Input VAT is the VAT payable by a taxable person on goods and services supplied
to him and on goods which he imports for the purposes of a business carried on by him
and
for which registered for VAT. Viewing the concept from the other angle, it is the VAT
payable on purchase of taxable supply including capital goods and operating and
administrative expenditures. For a VAT registered person (taxable person) input VAT is
not a component of the cost of purchase/import rather the registered person is entitled to
take input VAT deduction against the VAT charge on sales or is recoverable from the Tax
Authority. Hence input VAT is a receivable for a registered person.

VAT payable: - this is the VAT to be paid to the authority /ERCA/ by the taxable person.
It is computed as: VAT payable = Output tax – input tax
Zero rating: - the supply is charged with VAT at 0% but credit can be taken for VAT
paid
on purchase used to make supplies.

2.5, WHO HAS TO BE REGISTERED FOR VAT:

In Ethiopia, registration for VAT is categorized in to three:-

1. Obligatory registration
2. Voluntary registrant
3. Based on Business type

2.5.1. OBLIGATORY REGISTRATION

Any person conducting a commercial enterprise or instancing to conduct commercial

enterprises or intending to conduct a commercial enterprise may apply to be registered for
VAT. However if the taxable turnover of the enterprise, which is gross income for 12
calendar monthly exceeds or is likely to exceeds birr 500,000, the person conducting the
enterprise must be register for VAT with FIRA( The Federal Inland Revenue). In VAT
proclamination285/2002 If the turnover is below birr 500,000 of business activity one
may
apply for voluntary registration
32
2.5.2 VOLUNTARY REGISTRATION:

A person, who carried on taxable activity and is not required to be register for VAT, may
voluntarily apply to the authority for such registration. If he/she regularly is supplying or
rendering at least 75% of his good and services to registered persons (Misker, 2008)

Benefit of voluntary registration: Input VAT can be recovered if a person is registered. It

will therefore be beneficial to voluntarily register where the person makes mainly zero -
rated supplies

2.6 VAT IN ETHIOPIA

Since the major shift in economic policy from the command economy to market oriented
economic system in 1992/93, the Government of Ethiopia has taken a series of tariff and
tax reform measures with the objective of doing away out dated tariff and tax laws, to
strengthen customs and tax administration, to improve the balance of trade to attract
domestic and foreign direct investment, to facilitate trade and liberalize trade, and to
generate adequate revenue to cover current and capital expenditures hence to finance
poverty reducing project send development in general.

During the period of 1993/94 to 2002/03 the federal revenue to GDP ratio has increased
from 8.9% in 1993 /94 to 11.87% in 2002/03 while national tax revenue to GDP ratio has
increased to 15% in 2003/04 from 10. 9% in, 1993/94 to 102. 9% in 2002 /03 As in the
case
internationally, the value added tax (VAT) was introduced since January 1/2003 with the
objectives of reducing distortions by other indirect taxes, to compensate for import tariff
revenues lost as a consequence of trade liberalization and due to governments need to
increase its revenue during the fifteen months of the implementation of VAT, there is an
indication that the tax will bolster revenue as the C- efficiency ratio rises. Coupled with
many unregistered liable businesses, it seems that the tax base has been eroded.

Though, collection of VAT at customs entry point doesn't have any problem the taxes of
the federal Inland Revenue authority in the identification. Hence, coupled by a series of
reduction in the import tariff, excise tax and income tax and widening of the budgetary
deficit, introducing a neutral and efficient tax, i.e. the VAT with broad tax base was
considered. Value Added Tax (VAT) has become a major tax instrument worldwide. The
global trend to introduce VAT in more countries is continuing. VAT has also become an
indispensable component of tax reforms in developing countries.
33
Ethiopia's tax reform program has introduced VAT since January, 2003. VAT revenue
performance and its neutrality and efficiency are also the reasons for superiority of this
tax
in contrast to other common tax instruments such as the turnover tax. The emerging
conventional wisdom, based largely on practice and numerous country case studies,
suggests that a single rate VAT (with the rate between 10 and 20%), with very few
exemptions and, therefore, a broad base is superior to a VAT with multiple rates and
many
exemptions which reduce its base and complicate administrations. Ethiopia's standard
VAT rate of 15% and 10% equalization for services and 2% for goods have to be studied
in the medium term whether or not they could broaden the tax base and register high
revenue performance (Munoz and Cho, 2003).

2.2. EMPIRICAL EVIDENCE OF VAT ADMINISTRATION

2.2.1. VAT ADMINISTRATION

As Bird (2004) noted that the basic tasks of tax administration consist of three distinct
though connected activities, i.e. identification, assessment and collection.

Further, Bird and Grand colas (2008) noted tax administration consists of several related
but separable processes registration, filing, payment, audit, and enforcement. In
accordance
with Tait, (1988) the introduction of VAT is usually the greatest change in tax system of a
country and there is also a possibility to perform the reform of tax administration. It
would
be better for countries in transition to adopt simple taxes - with a broad base and low rates
- to give the tax administration the chance to adjust to the new system. Although the
needs
of organizational and technical aid can be easily obtained from foreign experts, a
successful
reform of tax administration is necessary "critical mass" of domestic experts that can be
better aquatinted with the domestic conditions and situation (Tanzi and Zee, 2001).

As Grand colas (2008) noted VAT performance in Africa may depend on significant
variations to the conventional view of VAT practice, and that the main objective of a tax
administration should be to improve voluntary compliance. The level of VAT compliance
is particularly influenced by the design of the VAT and the quality of the tax
administration;
and discusses that the lack of skilled tax administrators poses a struggle for developing
countries, including those in Africa.

Grand (2008), suggest that the overall performance of the VAT systems in Africa depends
on three main factors: “The capacity of policymakers to take into consideration the
structural weaknesses of the tax administration commitment to apply the designed penalty

34
system; and development of a client-oriented tax administration and an effective audit
Program. In general detail strategies to modernize the tax administration, such as
simplifying filing and payment processes and streamlining refund process.

According to Santos (2002) an argument often used against the introduction of VAT is the
weakness of the tax administration. VAT performance would be poor under a weak
administration. However, if a tax administration is weak, its strengthening is a priority
regardless of what taxes the country has in place. During the process of deciding whether
to introduce a VAT, the tax administration’s weakness should be a concern, but not an
overriding factor. If such weaknesses are a real problem, they will have to be tackled
under
any scenario. In fact, some countries have used the VAT introduction to set up a new,
more
modern tax administration. With the correct perspective and commitment, this process can
naturally lead to a strengthening of the tax administration.

The VAT is administered by the domestic tax administration in the majority of the
surveyed
countries (29 out of 36), reflecting the uncontroversial decision of the authorities to
administer the VAT in the same domestic tax department as the previous sales or turn
over
taxes. In these cases, discussions focused on the respective merits of establishing separate
VAT offices or administering the VAT, with the income tax, in function based offices
(Ebrill, 2001:126).

2.2.2 WHO ADMINISTERED VAT?

VAT is administered by the ERCA, the Regional Government’s &Finance Bureaus. The
ECA administers VAT on imports into the country. With its VAT department, large
taxpayers’ office and branch administers federal and joint VAT on domestic transactions,
while regional governments’ finance bureaus administer their own VAT revenues (VAT
proclamation, 285/2002).

With this overview of the design and administration of VAT in Ethiopia the following
sections present how the tax authorities perform their responsibilities with respect to the
major VAT administration tasks, including taxpayer identification and registration, VAT
filing and payment, control of VAT filing and payment, VAT invoicing, VAT auditing,
penalties and VAT refunds.
35
2.2.2.1 IDENTIFICATION AND REGISTRATION OF VAT

Before turning to the discussion of the tax administration tasks, it is sensible to briefly
review the major design features and administrative organs of VAT in Ethiopia. Items of
design VAT is imposed on the supply of goods and services other than exempted supplies
(such as bread and milk). VAT is based on the invoice credit method in which taxpayers
are given credit for the VAT paid on inputs when it is supported by the relevant
documents.
The tax is also based on the destination principle in that imports are taxed but not exports.
VAT is chargeable at a standard rate of 15 per cent on all taxable supplies of goods and
services other than those zero rated (mainly exports). VAT registration is required by
businesses that have annual turnover of Ethiopian Birr (ETB) 500,000 and more (Yesegat,
2008).

However, other fears were created in the meantime such might be evasion and biasness
were exist in the process of identification and registration. In Ethiopia, where the
awareness
level of taxpayers, the practice of taxpaying traditions and the capacity of tax
administrators
appear to be more or less low, in such situation the complex fraudsters mechanism could
not be managed. Moreover, it needs technological solutions in order to overcome such
missing trader intra-community (MTIC) fraud is technology intensive. So it will require
technological responses. (Ainsworth, 2011).

2.2.2.2 VAT COLLECTION PROCESS

The former sales tax was imposed on imports, domestically produced goods and a few
specified services at a top rate of 15% whereas, many items of agricultural products,
consumption goods, pharmaceutical products, printed books, financial services and work
contracts were taxed at 5%, and Water, electricity, medical and educational services were
completely exempt. At that time the imposition of sales tax is not on a regular basis and
the
base is not regularly revised due to this reason its economic contribution is low with
compared to the current VAT tax imposition (Muñoz and Cho1, 2003).
The VAT collection process has been carried out through both the government body, legal
entities and all the VAT registered taxpayers under the provision of proclamation No
285/2002 of (Article 33). Generally consumer pays VAT, knowingly or unknowingly.
According to the VAT legislation in Ethiopian as in many other countries, the
responsibility
of paying VAT to the government on a VAT-able/taxable transaction rests on the supplier
of goods or the provider of a service. VAT registered business has to know all the details
19
associated with the collection of taxes. With that provision each and every entity should
collect and transfer the collected amount to the provided account (Salehen, 2013).

2.2.2.3 VAT Assessment

After review by the Authority, it appears that a person has understood his tax obligation.
The Authority issues an additional assessment within 5 years after the end of the
accounting
period concerned; and in the case of fraud or wilful negligence, notwithstanding any
limitation in any other law, assessment make at any time. If the Authority makes an
additional assessment within 30 days of the notice and demand, the person assessed does
not pay the additional assessment or appeal the assessment as provided in VAT
proclamation, the person is in default, (Proclamation No.285/2002, Art.29).

2.2.2.4 VAT REFUND

Grand colas (2005) and Jantscher (1990) noted that sited by (Yesegat, 2008) VAT refunds
are one of the challenges of VAT administrations in developing countries. In managing
refunds and combating refund frauds, different countries use schemes including denial of
refund claims (except to exporters), carrying forward of refund claims, demanding a third
party certification36 of the claim, demanding guarantee, requiring taxpayers to have
separate VAT bank accounts, zero rating of supplies to exporters and remission of input
VAT on certain goods (mainly capital goods).Some of these schemes are not only to
combat
refund frauds, but are also intended to reduce the strain on business Cash flows.

VAT registered person shall got refund if at least 25% of the value of a registered person
in a single transaction of substantially all of the asset of a taxable activity provide a notice
in writing signet by the transferred is finished with 21 days after the supply taken place is
taxed at a zero rate the authority shall refund the amount of VAT applied as a credit in
excess of the amount of VAT charged for the accounting period within a period of two
months after the registered person files an application for refund accompanied by
documentary proof of payment of the excess amounts.

In the case of other registered persons the amount of VAT charged for the accounting
period
is to be carried for word the next five accounting period is to be carried for word to the
next
five accounting periods and credited against payment for these period and any unused
20
 excess remaining after the end of this five month period shall be refunded by the authority
with a period of two months after the registered person files an application for refund
accompanied by documentary proof of payment of the excess amounts. Where the tax
authority satisfied for refund application in over paid tax the tax authority shall.

According to proclamation No 285/2002 the transfer of the collected VAT input credit to
the concerned tax authority on the prescribed period of time. VAT is based on the invoice
credit method in which taxpayers are given credit for the VAT paid on inputs when it is
supported by the relevant documents. VAT is chargeable at a standard rate of 15 % on all
taxable supplies of goods and services in Ethiopia other than those zero rated (mainly
exports).

1. Every registered person is required:

a) To file VAT return with the Authority for each accounting period, whether or not tax is
payable in respect of that period; b) To pay the tax for every accounting period by the
deadline for filing the VAT return.

2. The VAT return for every accounting period shall be filed no later than the last day of the
calendar month following the accounting period.

3. In case where a registration takes place with retroactive effect under (Article 18, (4)
(c)),
the registered person is required to pay VAT for taxable transactions taking

First apply the amount of the excess in reduction of any tax levy interest of penalty
payable
by the person under the customs proclamation the income tell proclamation and excise tax
proclamation.

The repay any amount remaining to the person amount to be refunded is more than 50 %
by registered person is entitled to refund and the tax authority is satisfied but does not pay
the refund within specified date the authority shall pay the person the refund plus interest
set at 25%over and above the highest commerce’s lending interest rate that prevailed
during
the preceding quarter (proclamation No.285/2002, Art. 27).

Like other countries in Ethiopia, as shown previously, for the purpose of refunds, the
VAT
legislation categorizes taxpayers into two groups: zero rated businesses (mainly exporters)
and other (non-exporting) businesses (Yesegat, 2008). A successful refund management
mechanism is essential to safeguard the VAT as a tax on consumption and to avoid
21
misrepresentation of the resources allocation, maintain fair competition among traders and
reduce serious cash flow problems for businesses.

2.2.5. VAT FILING AND PAYMENT

All payments, including those on estimated assessments, should be accompanied by

returns. VAT is a transaction-based tax, and consequently should be reported and
controlled as often as possible. Many countries require monthly filing and payment.
However, this could result in a large number of returns and payments, which the
administration could be unable to administer. Thus, some administrations have decided in
favour of monthly returns and payment for the largest taxpayers and quarterly returns and
payment for other taxpayers.

Longer filing and payment periods, while reducing the number of returns and payments to
process, make administration more complicated. Control of compliance with filing and
payment requirements and information crosschecking are more difficult to implement
where longer filing and payment periods are in place. Longer filing and payment periods
also affect revenue (Santos 2002).

As Bird and Gendron,(2005) noted that Registrants are normally required to file returns
on
a monthly basis if their annual taxable sales exceed some specified limit, with smaller
taxpayers filing bi-monthly, quarterly, or even annually. There seems to be little
empirical
study of the relative costs and benefits of such different filing periods, but the practice is
almost universal. Returns generally have to be filed within a month (or less) of the end of
the relevant taxable period. Some countries have different types of returns for different
taxpayers, especially when some file on a ‘simplified’ or ‘quick’ basis and some are
subject
to special high-rate excise (VAT) rates.

2.2.6. CONTROL OF FILING AND PAYMENT

In administering VAT in Ethiopia tax authorities use computer programs, namely:

Standard
Integrated Government Tax Administration System (SIGTAS) and Automated System for
Customs Data Management (ASCDM). The computer programs are used to maintain
taxpayer register and process VAT returns. Detection of non-filers seems to be carried out
mainly manually. As the outcomes of the in-depth interviews with tax officials showed,
the
tax authority tries to identify non-filers in collaboration with the Ministry of Trade and
Industry. In Ethiopia every trader is required to renew business license annually with the
22
pertinent offices under the Ministry of Trade and Industry or regional governments. To
renew business licenses, traders are required to produce evidence from tax authorities that
all taxes have been paid. The tax authorities on their part, before providing the evidence to
taxpayers, check if there are delinquent taxes (including VAT).

In addition, tax authorities end eavor to follow-up non-filers identified by the computer
programs. However, because of shortage of manpower, such follow-ups are usually
carried
out once in a 3 to 6 month period.

The above practice affecting to controlling VAT filing and payment delay the collection
of
the tax and risks the governments Revenue. It is, hence, suggested that to ameliorate the
potential impact of non-filers on the revenue performance of the tax, strengthening the
administration capacity of the tax authorities, and effectively using the computer
programs
coupled with timely follow-up of non-filing taxpayers are worthwhile to
consider(Yesegat,2008).

2.2.7. VAT Invoice

According to Santos (2002) invoices are a critical component of VAT. The correct use of
invoices must be enforced by tax administrations. Tax practitioners often say that an
invoice is like a check issued against the Treasury. So, all precautions should be taken to
ensure that they are adequately used. Tax administrations have to decide on the contents
of
the VAT invoice.

Usually, invoice information should include: the taxpayer identification number of both
the
seller and the purchaser; the name and address of the seller; the name of the purchaser; the
date the invoice is issued; the invoice number, a description of the goods, indicating a unit
and total selling price; the amount of VAT resulting from that transaction; the total
amount
of the invoice, including the VAT payable, the date the invoice was printed, and the serial
number of invoices printed in that batch. Special provisions should be made for taxpayers
who use computer systems to print their own invoices. Decision also has to be made on
whether invoices or tickets issued to final consumers will show VAT paid. Most countries
prefer not to show the VAT paid by final consumers, as these invoices, as opposed to
invoices between VAT payers, should not grant VAT credit.

Compliance with invoicing requirements is another important issue. Countries have to

decide how to control printing, issuing and the use of invoices. False or altered invoices
are
23
one of the concerns in VAT administration. Several countries have dealt with it through
the introduction of strict invoicing regulations.

Many of them require the taxpayers to obtain tax administration authorization before
printing invoices. Some countries have introduced systems to register the print shops that
print invoices and require them to inform tax authorities the taxpayer Identification
number
and range of the invoice numbers printed. Some countries have available Web-based
systems that allow print shops to get authorization for printing invoices and informing the
range of invoice numbers printed. When the taxpayers use computerized invoicing
systems
and print their own invoices, they should get authorization from the tax administration
before printing. The invoices Tax administrations, which have adopted these systems,
have
all the necessary information on valid invoice numbers available to them.

2.2.8 Auditing and Law Enforcement Process

As Bird and Gendron (2005) noted perhaps the safest statement that can be made about
VAT administration in any developing and transitional economies (DTE) is that auditing
procedures should be modernized and strengthened. Audit is the core of any tax system,
especially of essentially self-assessed taxes like VAT. In most countries, the data exist to
begin to design sound audit design policies for those already in the tax net. In principle,
such audits should be done both randomly and on a more selective basis taking into
account
the ‘risk profile’ of different types of taxpayers. For example, since VAT is applied in
effect
to the difference between sales and purchases (or the ‘gross margin’ as it is often called
with respect to retailers), a critical factor is the reported mark-up coefficient supplies as a
ratio of inputs. When this ratio is equal to or less than 1, a taxpayer is in effect reporting
that his sales are less than his purchases, thus claiming that his ‘gross profit margin’
(value-
added, under another name) on such sales is negative.

As (Yesegat, 2008) the quality of auditors (VAT administrators at large) that appears to
be
poor coupled with their relatively small number is affecting the effectiveness of the audit
program. This is, in turn, likely to impact on the revenue that could be generated through
effective audit programs and on the use of effective audits as tools of deterring
noncompliance. It is, thus, worthwhile for the government to consider the possibility of
recruiting and retaining a sufficient number of qualified VAT administrators, auditors in
particular.

24
 As (Nethanet.B, 2014) in the title of ‘‘Assessment of tax audit practice’’ the cause of
Hawassa city administration recommended that to achieve the objectives of government
revenue objective a well-structured tax audit program is vital to ensure the fiscal health of
the country, and sustain the health of the tax system by reducing tax gap through voluntary
compliance improvement and additional tax collections. Further, it might provide valuable
support in identifying areas of the tax law that require clarification or addressing
deficiencies in the law, and to influence compliance across the broader taxpayer
community
at all levels. Generally the effective VAT audit increases the performance of revenue
generation.

In order to talk the above bottlenecks the following auditing procedure are attempted to be
performed based on its identified risk criteria.

 Registration checks: mainly for new businesses, particularly small and medium-size ones.
These are unannounced visits to the premises of a business to ensure that it has registered
with the tax administration and to confirm that: the taxpayer has a clear understanding of
its obligations; appropriate records are being kept; proper invoices are being prepared and
issued. This type of audit should not require more than a half day.
 Desk audits: these are made annually (usually after the filing of the income tax return) and
are intended to detect mathematical errors as well as other anomalies in the returns which
would result in the assessment of additional tax liabilities.
 VAT refund audits: a pre-refund audit should be undertaken for all first refund claims;
audits of further claims should be carried out selectively (based on risk criteria). Refund
audits should focus on verifying the refund for the period covered by the claim.
 Single issue audits: are directed at verifying items for which errors have been detected in
returns (such as an unusual credit claim). An issue-based audit should focus on no more
than one or two tax returns, and should not last more than two-three days.
 Comprehensive audits: all cases where serious under reporting or evasion have been
detected during a registration check, desk verification, or an issue-oriented audit, should
be
subject to a comprehensive audit. It entails a full examination of all tax liabilities over a
period of several years, up to the limit provided for in the law. It takes from 30–90 and 5–
10 days for medium and large enterprises and for small enterprises respectively.
 Tax fraud investigations: these involve the most serious cases of non-compliance which
 may have criminal implications. Fraud investigations require searching of premises,
seizure
25
of evidence, testimony from witnesses, etc. And are normally carried out by specialized
investigators in accordance with criminal law. Fraud investigators may be assigned to the
audit department or a separate department within the tax administration for criminal tax
offences (Okello, 2008).
2.2.9. VAT PENALTY

As Bird and Gendron (2005) noted if someone is caught cheating on VAT, the tax
administration must first act quickly to stop the practice, then impose civil penalties
(including e.g. intercepting income flows to delinquent taxpayers, grabbing assets, and
perhaps temporary business closures of the sort that have proved effective in some Latin
American countries) as appropriate, and, finally, and only in especially serious cases
proceed to the lengthy and difficult level of criminal prosecution. A simpler way to build
credibility for a penalty system without going to the extreme of launching a criminal case
may sometimes simply be to publicize the administration of penalties, including the
names
of the people or organizations penalized, through the media. considering that VAT is still
young (introduced for the first time in the year 2003) in Ethiopia, focusing on the
implementation of strict penalty provisions (like imprisonment of taxpayers) instead of
taxpayers’ education may have negative impact on the attitude of taxpayers beyond its
deterrence effect. Further, the lack of consistency and transparency in administratively
imposing the penalty may open a room for corruption. It is, thus, advisable to try to
implement what is legislated in the law regarding penalties (on the financial penalty
aspect).in these regard the transparency and consistence are employed to improve the
performance of revenue.

2.2.10. ELECTRONICS CASH REGISTER MACHINE

It is a machine that uses a firm ware that is installed in an electronics programmable chip
and only store readable memory and record the sale of gods or services instead of the
regular sales receipt. The introduction of ETRM (Electronics Tax Registration Machine)
has assisted in cutting costs that the business and government used to incur in processing
VAT; ETRMs helped to decreases tax evasions, and lastly the introduction of ETR need
to
create enough awareness and strong regular audit follow up to get those fruit full benefit
of
ETRs. Electronic tax Registers reduce the operating cost of the government that were
incurred to collect VAT and also business income. ETRs while improving the efficiency
and effectiveness of government operations, provides timely and accurate tax information
26
to businesses and increases the availability of electronic tax filing. It was found that ETRs
have enhanced the revenue collection resulting from sound sales and stock audits
(Yalemtesfa, 2011).

In Ethiopia, ETRs machines use has become mandatory, following the reforms made on
VAT administration. Use of ETRs machines among VAT registered taxpayers is
correlated
with high levels of tax compliance attitude in the target population (Dr Abdu. Tesafa,
2015).

2.2.11. VAT REVENUE PERFORMANCES

Traditionally, the effectiveness of VAT in raising revenue is measured by the ratio of
VAT
revenue to GDP. Countries with similar standard of VAT rate can have significant
different
ratio of VAT revenue to GDP. More generally, the efficiency ratio as defined by (Ebrill
and Keen, 2001) as the ratio of VAT revenues to GDP divided by the standard VAT rate.
It has been mostly used as a general indicator of the performance of VAT (Ebrill and
Keen,
2001).

Another method of measuring the effectiveness of VAT is C-efficiency ratio. C-efficiency

ratio as defined by (Ebrill and Keen 2001) is the ratio of the share of VAT revenue in
private
consumption (rather than GDP) to the standard VAT rate. A uniform tax on all
consumption
has a C-efficiency ratio of 100 per cent. Thus, it shows that all goods and services are
covered by the tax and also there is high literacy or awareness from the taxpayer side.
Any
deviation from a single tax rate on private consumption will be depicted by a higher or
lower value of C-efficiency ratio. The C-efficiency is more informative than the
efficiency
ratio as it is based on private consumption.

According to Tait (1988) VAT is designed to raise large amounts of revenue (typically 5
to
10% of gross domestic product) without creating economic distortions. In practice, many
countries, because of political pressures to use the tax system to correct social inequities
and because of their inability to tax certain sectors use exemptions and multiple rates that
erode the neutrality of the VAT. As Bird and Zolt (2003) stated tax systems exist
primarily
to raise revenue to fund government operations.

Lack of sufficient revenue often results in large budget deficits. Except when short-term
fiscal stimulus may be considered appropriate for macroeconomic reasons, deficits
generally have undesirable macroeconomic consequences such as crowding out private
investment and increasing inflation. Preventing deficits requires good control over both
the
27
expenditure and revenue sides of government. The legislated budget must be structured
each year to operate strictly within estimates of likely revenue receipts. While this may
seem obvious, even these initial conditions for good tax and budgetary policy are not
satisfied in a number of countries.

Kefela, (2009) noted the average taxation ratio of developed countries as a proportion of
GDP lay between 29 and 32%, whereas the corresponding range for developing countries
in the medium-income category was from 17 to 22%. The average taxation ratio in the
poorest countries lies between 13 and 16%. The problem is a vast gap exists between the
tax payments required by law and those actually surrendered to the state. The taxation
authorities – often inadequately staffed, institutionally weak and lacking in political
support
are not in a position to collect the amounts outstanding.

In developing and transitional economies in which revenue constraints generally bite,

fulfilling this laundry list is usually too much to expect. Unsurprisingly, few countries
have
managed to do it all. One result is that many problems have been encountered in
implementing VAT in most DTE—ranging from flaws in tax design (e.g. inappropriate
thresholds) to failures in implementation (weak registration procedures, poorly
functioning
refund systems, insufficient audit(.Bird and Gendron , 2005).

According to Tanzi and Zee (2001) the ideal level of tax revenue; determining the optimal
tax level is conceptually equivalent to determining the optimal level of government
spending. Unfortunately, the vast literature on optimal tax theory provides little practical
guidance on how to integrate the optimal level of tax revenue with the optimal level of
government expenditure.

Nevertheless, an alternative, statistically based approach to assessing whether the overall

tax level in a developing country is appropriate consists of comparing the tax level in a
specific country to the average tax burden of a representative group of both developing
and
industrial VAT is one of the main sources of government revenue in all EU member
states.
Across the EU as a whole, VAT brought in €783.7 billion of revenue in 2009, 6.6% of the
EUs GDP and 17.3% of all taxes raised.

In the current fiscal context, a key attraction of the VAT’ is its ability to generate
significant
amounts of revenue. Among non-U.S. OECD members in 2006, While the primary
motivation at the moment for considering a VAT is its revenue-raising potential, in the
past
28
supporters have promoted the VAT as a possible substitute for the federal income tax,
either
abolishing the income tax altogether and substituting a VAT, or lowering income tax rates
and substituting VAT revenues in a revenue-neutral tax reform. Along these lines it is
interesting to examine the effect of introducing the VAT into the EU, because most
member
nations said that they were going to adopt a VAT to redesign their tax structures to
comply
with the EU regulations, but were going to undertake their reforms in a revenue-neutral
manner.

In fact, as ( Holcombe and Mills,1994) report, throughout the EU, tax revenues ratcheted
up substantially when the VAT was introduced. The evidence is all the more clear
because
the VAT introduction was staggered, as EU countries introduced it from 1967 to 1973.
Statistical analysis shows a clear racketing up in the level of revenue, followed by an
increase in the growth rate of revenue, after the introduction of the VAT (.Holcombe,
2010).

The VAT is in theory a tax on consumption, but in practice, calculating the amount of
VAT
due is as complex as calculating the amount of income tax due, as Strachan (1981), a tax
administrator in the UK, notes when describing the administration of the UK’s VAT. To
see how administrative and compliance costs arise, one needs to understand some of the
details regarding the way a VAT is administered (Gale and Harris, 2011).

Improved domestic resource mobilization is an essential feature of the strong policy

framework developing that transitional country need to have in place in order to be able to
benefit from the opportunities afforded by globalization rather than passively suffer from
the fluctuations that may otherwise be inflicted on countries with weak governance and
policy structures. Money alone is not enough for good government; but it is necessary.

Similarly, good tax administration is not sufficient in itself, but it is necessary for
effective
and efficient domestic resource mobilization (Bird, 2004).

However, as (Yesegat,2008) identified that, in revenue collection there are a gap which
includes tax payers’ identification and registration, VAT filing and payment, VAT
refunds,
VAT audits, penalties and VAT invoicing. In addition to these, the author farther
discussed
as lack of tax awareness among the society and strong education programs as well as lack
29
of trust between taxpayers and administrators as major challenges to the VAT system in
the country.

(Simon, yibrach & Abiy,2013) suggested that on their finding, Significant numbers of
VAT
registered businesses fail to offer VAT receipts up on payment, providing used VAT
receipts as a means evade from the system. The level of enforcing business firms to
provide bill during payments is low as majority of the consumers fail to ask for receipt
during payments, similarly many consumers fail to tear down the receipt as it give the
chance to use illegal businesses for tax evasion.

Even though, the revenue collecting process in countered with money challenges, VAT
plays an energetic role for the national development of Ethiopia and it enables to succeed
the current growth and transformations plan (GTP) of the country. Therefore Ethiopian
government should make a full-fledged effort to efficiently collect and effectively utilize
such tax revenue through closing the door towards the issues of corruptions which can be
possible through making the VAT administrations more fashionable than ever before
(Dasalegn, 2014).

(Haile Mariam’s,2011) work entitled, “Implementation of Value Added Tax and its
Related
Problems in Ethiopia (The Case of ERCA)” presents findings with respect contribution of
VAT to development indicated that the revenue collected through VAT to the government
is sufficient due to different reasons: society could not understand about the benefits of
VAT to the country's development, weak tax administration and follow-up systems with
respect to taxpayers, the higher level of the threshold that doesn't encompassing all
potential taxpayers, Lack of skilled manpower and equipment’s, Less efforts of
identifying
and rewarding genuine registrants, existence of unethical employees and taxpayers in case
of identification and registration. Therefore, the authority has to solve all of these
problems
so as to attract the taxpayers and achieve the desired objectives maximum collection of
VAT revenue. In addition to the above recommendation this can be carried out by hiring
more qualified and professional employees and reducing the threshold to the lower level
as
well as strengthen its enforcement and follow-up activities

According to (Habtamu et al, 2015) in their journal article they added that challenges in
administration of Value Added Tax, which includes Resistance against Value Added Tax
registration, Low level of tax awareness, weak audit and enforcement capacity of the tax
30
authority, sell goods and service without tax invoice Value Added Tax collectors, Tax
laws
enforcement problems, are the challenges which affect collecting sufficient revenue in
terms of Tax collected from VAT. Nowadays, encouraging results are observed as far as
collecting revenue is concerned. Since VAT was introduced showing dramatic changes in
generating government revenue. But Data shows that still there is grate gap to the
effective
VAT taxation and the legislation.

(Dakito’s 2011) work entitled, “Empirical Analysis of the Contribution of VAT for
Economic Development and Social Spending in Ethiopia” explicates the following
results.
Moreover, the problem with respect to VAT in the country is lack of awareness regarding
to the nature of the tax from the tax payers. On the other hand, the problem from the
administration point of view is that, the authority is considering VAT as “money
machine”
and its simplicity to collect tax rather than creating awareness regarding to what does
mean
by VAT and how and who is going to pay the tax. Generally, the problem of VAT in the
context of Ethiopia is the same as to the problem of the former sales taxes, tax cascade.
This is mainly because of misunderstanding of the concept of VAT by the business men
and failure by the tax authority to create awareness regarding how and who is going to
pay
VAT tax after all to the government. Creating awareness is important for effective
collection of VAT revenue and uses that amount for micro- economic purpose. Hence,
this
study aims to assess the challenges of VAT administration in Gamo Gofa Zone and to
suggest possible solutions for the effective performance of VAT administration in the
study
area. There for researcher designed to strengthen the strong facts and then correct the
weak
points, there must be a soundly research which is systematically conducted and to know
the tax administration of revenue performance in study area.
31
 CHAPTER THREE

3. RESEARCH METHDOROLOGY
This chapter describes specific procedures that the researcher anticipates adopting
procedures for addressing the research problem and what intended to do to answer the
research questions. The methodology chapter includes location of the study, research
design, total and sample population, sampling procedure and sample size, data gathering
instruments and data analysis ways are as follows.

3.1. DESCRIPTION OF STUDY AREA

3.1.1. G EOGRAPHICAL L OCATION AND C LIMATE

Gamo Gofa is one of the 14 Zones in the Southern Nations, Nationalities, and Peoples'
Region (SNNPR) in Ethiopia. The zone is bordered on the south by the Dirashe special
woreda, on the south west by Debub Omo Zone and Basketo special woreda, on the north
west by Konta special woreda, on the north by Dawro and Wolayita Zone on the north
east
by lake Abaya is one of the border in Gamo Gofa Zone, and on the south east bordered by
the Amaro special woreda.

The zone has a total area of 12,581.4 km2 and The Zone has 15 districts (woredas) and 2
town administrations. Namely, Arba Minch Zuria, Mirab-Abaya, Boreda, Chencha, Dita,
Kucha, Daramlo, Bonke, Kemba, Zala, Ubadebretsehay, Oyida, Demba Gofa, Geze Gofa
and Melokoza; and 2 reform towns are Arba Minch and Sawla. Arba Minch town is the
administrative and business center of the zone, located at 505 km from Addis Ababa and
275 km south west of Hawassa. The general elevation of Gamo Gofa zone ranges from
600
to 3300 meters above sea level around Guge Mountain. The total population of the zone is
estimated about 1597767 based on the 2007 Census with a population density of 80
inhabitants per kilometre square.157,446 or 9.88%urban in habitants a further 480 or
0.03%
are pastoralists. A total of 337,199 households were counted in this Zone.

3.1.2 E CONOMIC FEATURES

Gamo Gofa Zone has, Huge natural resource, conducive climate, has international airport,
which is visited by many tourists, It has Nechsar national and Maze national park. Which
inhabits wailed animals, unique birds & Zebra which many tourists visit each year. The
park is surrounded by Abaya & Chamo lakes, thick Forest and Reliable stability & free
32
mobility in these zone. The 85% of population livelihood in agricultural activities, the
Zone
is known for its banana, apple and fish production. The remaining 15 % are urban
population and they habited by deferent business activity some of them are government
employers.

According to the data from Zone Revenue Authority, there are 1070 VAT taxpayers in
Gamo Gofa Zone revenue authority.

3.1. Location map of study area

Source: Author’s Computation on GIS from Ethno-GIS and CSA data 2014

3.2 RESEARCH METHOD

Mixed method was used in this research about VAT administration activity general and
revenue performance as these two types of data complement each other. The numbers and
the broader information available from the quantitative research methods are quite
important for future decisions. In addition to statistical investigation conducting
discussion
with key informant and carrying out observations are crucial to understand the problem in
33
depth. Therefore both quantitative and qualitative research methods are mixed method in
this research.

3.3. THE STUDY POPULATION

Participants of the study were registrant of Value added Tax payer in Gamo Gofa Zone,
Tax officials and official employees of revenue in the study area. The total population of
the target group of the study area 686 VAT registered tax payers from sample woredas.
Six
Tax employers were selected from three woredas (two from each) & three office heads
(one from each) 9 respondents among government officials were selected purposively.
Hence, the total population of the study is equal to the sum of Value Added Tax registered
in the Zone, tax officials and Tax employees were totally 695 were selected as target
population (Annual report of Gamo Gofa Zone revenue administrated Branch Office).

3.4. SAMPLING TECHNIQUE

For time and financial constraints reaching all woreda in the zone is practically
impossible.
Thus, attempt was made to take data from part of the population purposively from one
woredas and two town administrations namely, Arbaminch; Sawla towns’ administration
and Geze Gofa woreda were selected. This is because; Arba Minch and Sawla are reform
towns in Gamo Gofa zone so, that reform towns have high potentials in VAT registration
and tax administration compared to the other woreda towns. Geze Gofa woreda was
selected due to, the researcher have evidence for its potential to raise more government
revenue including VAT promising cash crop area, but there was a gap to rise by using the
opportunity of its potentiality so that, to assess this gap the researcher selected
purposively
this woreda. Finally selected the respondents that filled the questionnaire were selected
from VAT registration list as using simple random sampling techniques and Tax employs,
office heads and Gov’t officials were select by using Judgmental sampling system.

3.5 SAMPLE SIZE DETERMINATION

To determine sampled subject from the total population of the target group simple random
sampling techniques was employed. The reason of using this sampling technique is each
element of the study population has equal chance and independence, generalized and
known population. The total population of the target group of the study area were the
34
registrant list of Value added Tax payer in Zone, Tax officials, and employees of Revenue
Authority branch office of selected woreda are target population.

So that to select Value Added Tax registrant’s taxpayers, simple random sampling
techniques was appropriate. To determine the actual sample size of the study population
for the purpose of this research Yamane (1968) sample size determination formula were
applied as follow:

Therefore the sample frame form selected woreda for the sample determination by using
the given formula identify the sample size for VAT registrants are:
𝑵𝟏
n. So n=𝟏+𝑵(𝒆)𝟐

n = required simple size

N= target population

686
𝑒 =margin of error/5%/ so that n = Total sample to be drawn 253
1+686 (0.05)
2
2

Base on the sample size the proportional allocation of the sample draw from each woreda
by using the following formula find respondents for raw data collections.

Pi = 𝒏(𝑵𝟏)𝑵Pi = probability of individual respondents

n =total sample size

N1=Targeted population

Table 3.1. Used sampling methods for respondent

S.no Tax payers according to their Number of VAT Sample

woreda registrants size
𝑵

1 Sawla town 117 43

2 Geze Gofa woreda 51 19
3 Arbaminch town 518 191
Total 686 253
Source: researchers own survey

Arbaminch = n =𝟓𝟏𝟖𝟔𝟗𝟓 x 253 =191

𝟓𝟏
Geze Gofa = n =𝟔𝟗𝟓x 253= 19

35
Sawla town = n = 𝟏𝟏𝟕𝟔𝟗𝟓 x 253=43

Total sample size of respondents 253

Therefore the actual samples size from the three woreda plus nine in number of
employees
and office heads purposely selected from three woredas are the study population were
data
was collected.

3.6 .DATA COLLECTION TECHNIQUES

Two primary data collection methods used for this study were questionnaire and
interviews. A face to face interview was conducted to collect survey data. This technique
is preferred over other forms because it allows respondents to clarify questions and it
enables to pick up nonverbal indications from the respondent. However, one of the
drawbacks is that there are costs involved in the form of transport, time and energy.

So it is planned to interview purposively three branch higher officials. Surveying people

is one of the most commonly used techniques to collect quantitative data. The main
instrument used to collect empirical data was the questionnaire. It requires numerical data
to be collected about how many people hold similar views on the subject matter.

To quantify these characteristics, a standardized questionnaires had been designed. The

questionnaire design was based on the research objectives and the literature review. It was
written in English but had to be translated for some respondents to Amharic language.
Effort was made to make it simple and understandable.

3.7 DATA SOURCES

The study employed both secondary and primary data. The primary data were provided by
open ended and close ended question were presented to VAT registrant taxpayers, the tax
officials, and for the employee of selected woreda ERCAO. And more to explain the in
dependent variable of revenue performance and dependant variable of VAT
administration
secondary data were explored through reviewing related literature, policy documents, and
proclamations, annual reports, brochures and Websites from Internet were explored from
the Zone.

3.8 VALIDITY AND RELIABILITY TEST OF DATA

The validity of data was tested before processing and destructing all questioners. This
were
helps to establish the reliability of the tools that were used in data collection. This
36
was done by pre-testing the questionnaires using sample of 6 respondents from VAT
payers, similarly verified by interviewing 6 respondents. Haw could tax payers
understand about VAT rules and regulations and about general VAT administration
activities in addition to these pre tested haw tax payers understand to the given Questions.
Therefore this method is supported to correction of the mistakes and errors within the
tools
of data collections to verify how they are reliable to produce significant information from
the field. Reliable data were acquired to reduced statistical errors.

3.9 QUESTIONERS

To collect relevant and reliable data from the selected sample respondents, both open and
closed ended questionnaire were prepared and administered. To assess the effect of VAT
administration on revenue performance each respondent was required to indicate his/her
attitude freely the questioner was prepared in English language and translated into
Amharic language in order to make the questions clear, avoid ambiguity as well as to be
easily understood by the respondents. The questionnaire was edited by the English
language
teachers to check the equivalency of translation to the Amharic meaning.

The data collection process was managed by the researcher and also data was collected
with
the help of enumerators that were be selected from the area which had sufficient know
how in VAT administration and the likes who were trained by the researcher on how to
collect the data. Close supervision was undertaken by the researcher to avoid errors and
mistakes and timely correction was given as much as possible.

3.10 SEMI STRUCTURED INTERVIEW

One of the methods used for collecting information were key informant interview. As
explained by Creswell (2009), Interviews are important to gather information that may
not be secured through other techniques, because they give an opportunity to listen
respondents in person. Therefore, Semi structured interviews were prepared for
purposively selected tax officials, the representatives of the trade communities in the
zone key informants were interviewed at mutually agreed on their respective offices, tax
officials provided place for consumer society representatives and answered to the
questions only according to their perceptions and attitude about VAT related issue.
37
3.11 Data Analysis Methods
After the data was collected, processed, organized manually, and used descriptive
statistics to describe the major problems. Beside on this, the date was as presented by
using percentages, chart, and table by the help of statistical package for social science
(SPSS) software version 20 was employed. The qualitative part of the data which
collected through interview and document was analysed and described qualitatively in
detail to support the finding of this research.

38
 CHAPTER FOUR

4. Result and Discussion

4.1. INTRODUCTION

The main purpose of this study was to investigate the effect of VAT administration on
revenue performance in Gamo Gofa Zone. In consequence, the basic questions raised to
understand how the VAT registrants become aware of the VAT revenue administration
system in the study area, the challenges held by the VAT revenue administration system
in
terms of identification, awareness creation, settle in collection process and VAT auditing
practice and its value to increase the amount of revenue from VAT are the major objective
of these study. The study was delimited to assess the effect of VAT administration on
revenue performance in Gamo Gofa zone. This focuses on VAT registrant’s tax payers in
this zone.

Hence, misconceptions were regarding its effect, its application, and its benefit to the
national economy and its advantage to diversifying counters infrastructures. These
misunderstandings cover the way for the researcher to think about the gap of the
effect of Value Added Tax administration on revenue performance and the problems it
encountering. Accordingly a survey was conducted to identify, asses and analyse the
effect
of VAT administration by distributing questionnaires for information gathered from VAT
registered taxpayers and employees of ERCABO. Based on the results of the findings,
VAT administration has faced different problems when it comes to the ground. Among
these issues described as follows.

4.1. Demographic characteristics

4.1.1 NUMBER OF RESPONDENTS

Table
S.no 4.1. Demographic
Variables profile ofFrequency
study area Percentage Cumulative %
1 Arba Minch 174 75.3 75.3
2 Sawla 39 16.9 92.2
3 Geze Gofa 18 7.8 100
Total 231 100
Source: the researcher Own Data Survey, 2016
39
 As it showed on the (table 4.1) that 253 questionnaire were distributed to
both
employees and VAT registered taxpayer for the sampled towns and woreda
administrations. Out of 253 questionnaires 231(91.3 %) were filled and
returned properly. As the result shown on the above table the majority of 174
i.e. 75% of the study subjects were from Arbaminch town and 17% and 8%
of
the rest were from Sawla town and Geze Gofa woredas respectively. This
reflects that majority of subjects that participated on the study were from
Arbaminch town because of its, high potential on VAT registration. High
potential trade exchanged, huge investment concentration and high
opportunity on tourism attractions rather than Sawla, so that Arbaminch
town
are more powerful to increase the number of VAT payers.

4.1.2 SEX CATEGORY OF TAX PAYERS

Variables Frequency Percent Cumulative
Table 4.2. Sex of respondent Percent
Male 154 67 67
Female 77 33 33
Total 231 100.0 100.0

Source: the researcher Own Data Survey, 2016

Sex of tax payers has composed both male and female. As the survey results
revealed on the above table, from the total of sampled tax payers, about 154(67%)
were male and the remaining 77(33%of them were female. This indicates that
numbers of female tax payers are low comparing with that of male clients, this is
because females devote most of their time in homecare and informal businesses.

.
40
4.1.2. EDUCATIONAL BACK GROUND OF RESPONDENTS

Educational States of respondents.

120
98
10
0 82

80

60 42
35.1
29
40 24

10.4 13
20
First Degree Diploma G 1 to 12 Illitrate

Frequency Percentage Linear (Frequency)

Source: the researcher Own Data Survey, 2016

From the figure 4.1 above, it has been revealed that from the total of
respondents
24(10.4%) of subjects were first degree holders, 82(35.1%) of them had
achieved
college diploma, 97(42%) of them educated from grade 1-12 and the rest of
29(13%) were illiterate. This replies that majority of the respondents can read
and
write. As it is discussed on the above, the majority of the respondents have a
good
level of educational qualification which enables the respondents to have idea of
the Value Added Tax administration. And also enables them to understand the
implementation of VAT and It is safe to interpreted they were able to
understand
the objective of taxation and specifically VAT, since they were educated
enough
having certificate and above education rank.
41
 4.1.3 Respondents Age profile of Tax payers

Table 4.3. Age profiles

s.no Variables Frequency Percent Percent

Age
1 20-30 35 15.2 15.2
2 31-40 59 25.5 40.7
3 40-50 65 28.1 68.8
4 above 50 72 31.2 100.0
Total 231 100.0 15.2

Source: the researcher Own Data Survey, 2016

As it showed on the table 4.3 above, from a total of 231 sampled subjects one three of
them
i.e. 31% were aged above 50 years old, 65 (28%) of subjects were aged between 41 to 50
years old, 59 (26%) of them were aged between 31 to 40 years old and the rest of 35
(15%)
of subjects aged between 20 to 30 years old. This shows that the majority of respondents
of the study subjects were aged above half of 50 years old. This means majority of the
respondents were people with high tax paying experience. They can be considered as
matured enough of having awareness about tax and taxation principles.

4.2 DESCRIPTIVE STATISTICS/ANALYSIS

4.2 .1 BUSINESS CATEGORY OF RESPONDENTS

Table 4.4. Business category of respondents

S. Variables Frequency Percent Cumulative
no Percent
1 Manufacturing 9 4 4
2 construction type 26 11 15
3 agricultural product 43 19 34
4 Electronics 24 10 44
5 Commodity trading 64 27 72
6 Service 65 29 100
Total 231 100 100

Source: the researcher Own Data Survey, 2016.

As table above 4.4 shows that the majority of 64 (27%) of respondents engaged on
commodity trading, 65 respondents or 28% of subjects involved on service sectors and the
42
rest of 19%, 11%, 4% and 11% of respondents responded that they were engaged on
agricultural product, construction, electronics and manufacturing sectors respectively.

This implies that more than half of the respondents were engaged in trading and service
sectors.In addition to this, officials and interview made experts indicated/disclosed that
most of merchants who engage in the service and commodity trading involve to establish
new type of business also. In manufacturing sector respondents are very less. This
indicates that most of the people are willing to do trading instead of manufacturing,
because
it takes more time and make investment also more.

4.2.2 RESPONDENTS LEVEL OF AWARENESS ON VAT RULES AND

REGULATIONS
S.no variables Frequency Percent Cumulative %
1 yes 88 38 38
2 partially 112 48.5 48.5
3 no 31 13.5 13.5
Total 231 100 100

Source; the researcher Own Data Survey, 2016

In this section the researcher interested to know how the VAT registered tax payers
understand about VAT rules and regulation and how far are they aware. As the data
shows above the table (4.2.2) from the total 231respondents, 88(38%) of the respondents
answered that they aware of the tax administration rule and regulations to implement it
properly, 112(48.5%) of respondents said that they were partially awareness about tax
administration rules and regulation properly and the rest of 31(13.5%) of respondents
replied that they don’t have any information about VAT administration activities.

From these finding the researcher can be conclude that, the majority of tax payer they
have
no sufficient concept VAT rules and regulations. There for revenue Authority needs tried
to create tax awareness through electronic media, printed materials and other opportunity.
Based on this result the researchers interviewed with revenue authority branch tax
officials
and tax experts asked them ‘’ how do you evaluate your customer and tax payer
awareness
level?’’ they forward that, VAT registered businesses are after selling goods and services
they do not get invoice to customers and similarly customers also not ask to receive
receipt
but they notice ‘’ Do not pay if a receipt is not issued’’ practically transactions are sold
without invoice.

43
The other issue is they increase or decreasing the figures that actual purchased goods and
services. As an interview with the zone tax officials, they admit the existence of the
problem
and held that the office uses its own investigation system, most often sending
investigators
to the business revolving place , and trying to control transactions without VAT.

According to the officials, if the goods sold without VAT are discovered, and,
administrative and criminal measures will be taken. Literature shown that, Customers`
non-awareness of tax especially about VAT is clearly seen in their experience of not
asking
for receiving invoices after shopping and getting services. Their carelessness to read and
act according to written notice like “Do not pay unless invoice issued!” and other
information is exposed to VAT evasion. Smooth customers` cooperation has a great role
in
increasing government revenue (Jerene, W.2016).

4.2.3 ISSUES
S.no RELATED WITH VAT
Variables REGISTRATION
Frequency Percentage Cumulative
%
Table1 4.6. Whypoor
TaxVATpayers unwilling to VAT21registration
administration 9 9
system
2 fear for losing their 80 35 44
customer
3 fear of competition with 57 25 69
unregistered
4 no potentials for VAT 21 39 100
register
Total 231 100 100

Source: researcher Own Data Survey, 2016

As it is revealed on the table above, 4.6 out of 231 subjects 21(9%) of respondents said
that the tax payer in their area are not voluntary to registered VAT due to poor quality of
VAT administration system, 80(35%) of them replied that due to fear for losing their
customer is the main cause to reluctant to voluntarily VAT registration, 57(25%) of
respondents said that they fear for abnormal market competition with unregistered sellers
and 73(31%) of them replied that they fear for lack of list capitals to compute with the
others in the market. Therefore, the result is indicated that majority of business societies
are not willing to VAT registers volunteers due to fear of abnormal market competition
with unregistered business sellers.

44
In terms of advantage researcher raised some questions like being registering for VAT is
important or not. However, they think that registering for VAT is good. But they fear that
they might lose their customers due to unequal treatment for all firms to register VAT in
their area. Direct interview was made with tax experts and head officials with similar
questions. The reflection of the experts and head officials were not fare away from the
study
found answers from the study subjects.

They said that fear of abnormal competition with unregistered similar firms is hinders
voluntary VAT registration all over Gamo Gofa Zone level. This indicates that the
dominance of VAT unregistered businesses, resulted in abnormal market competition and
losses normal market share and profitability by registered businesses.

Similar research conducted by (Yesegat, 2008) implied that VAT registration encourages
investment and export likewise it also affects the VAT registrants in different ways:
primarily the market shifts towards to non VAT registrants. Secondly the existing highest
threshold level exempts several potential taxpayers. Thirdly the current market prices
maximize the annual sales turnover for non VAT registrants. Another study conducted by
Dinqu (2015) pointed that, the existence of unfair competition among the traders and
reduction of government revenue were not easy effect.Therefore, this situation can lead to
losing large amount of tax revenue to the government.

4.2.4 TOOLS FOR COLLECTING VALUE ADDED TAX

Table4.7 Settlement in collection time

S.no Variables Frequency percentage

1 Cash registration 87 38%
machine
2 Invoice 144 62%

Total 231 100%

Source: researcher Own Data Survey, 2016

In Addition to primary data, secondary data shows that users of cash registered
machine as follows:
45
Table 4.8 cash registered machine users in Zone 2004-2008 E.C
N Branch office Numbers Buyer of cash Users of Users%
O of payers registered machine CRM
1 Arbamimch 518 304 258 49.80
town
2 Sawula town 117 71 52 44.4
3 Geze Gofa - - -
Woreda
Total 635 375 310 48.81
As it observed from the above table, 4.7 the majority of 144 (62.3%) respondents replied
that they collect VAT by using hand writing /binding/ invoices, 87 (38%) of them replied
that, they collect VAT by using electronics cash registration machine. This result reflects
that majority of tax payers collect revenue from VAT by using hand writing /binding/
invoice. And also secondary data was evidence for this as we seen in table 4.8, has been
the machine user among the total woreda only Arbaminch and sawula towns are cash
registered machine users .Researcher interviewed tax payers briefly what they think of the
reasons that make the traders not to collect the taxes by using electronic cash registration
machine.

They argue that, in the side of authority lack of providing enough machine and shortage of
supply and in other side tax payers have no interest to purchase electronics cash registration
due to self-regard and they think that the machine is in convenient to tax evasion register
on day to day turn over.

Additional evidence that using ETRs machines among VAT registered taxpayers does
contribute to the improvement of VAT compliance among taxpayers (Mushammed,
Tesfaye, 2015). So that, what we conclude from this, Cash registered machine was facilitate
business activity in other side reduces tax evasion. Therefore having honour business
society, effectively collected revenue and maximize revenue performance.

4.2.5 PROBLEM RELATED WITH VAT ADMINISTRATION

Table 4.8 VAT Administration problem

S.No Variables Frequency Percentage Cumulativ

e%
yes 165 71% 71
no 66 29% 100
total 231 100% 100
Source: the researcher Own Data Survey, 2016
46
As data shows on table above 4.8 out of 231 respondent’s 165 (71%) replies that VAT
related tax administration have problem and the rest of 66 respondents i.e. (29%) of them
said there is no problem with VAT related administration. This indicated that there is
some
challenge related with VAT related tax administration.

As interview was made with head officials and tax employees, in order to get definite
information. They argue that lack of improved infrastructure like: high way, Electricity,
Information and communication technology and other related services hinders to achieve
good performance in VAT related tax administration. On the other hand beside of tax
payers are reluctant to register VAT and, lack of taxpayer’s awareness are also mentioned
as the part of the problem.

Similar research conducted by Habtamu, (2015) found that, Awareness gap of Taxpayers,
resistance against registrations for Value Added Tax by some traders, weak culture of
taxpayers, poor Value Added Tax administration system. All these problems hinder the
Administration of Value Added Tax (Habtamu Dheresa,2015).

As (Wondwosen Jerene,2016) Administrative limitations in resource allocation,

awareness creation, providing trainings and feedbacks, controlling and follow up to
combat VAT evaders and employees’ corruption involvement is observed as some of the
key internal factors among others hindering tax collection.

4.2.6. THE CONTRIBUTION OF VAT AUDIT ON REVENUE PERFORMANCE,

REDUCING OF ILLEGAL TREAD AND TAX EVASION

Table 4.9 Respondents of Audit Value

S.no Variables Frequency Percent Cumulative%

1 Excellent 35 15 15%
2 moderate 71 31 31%

3 weak 87 38 38%
4 Total 231 100

Source: researcher Own Data Survey, 2016

Data shows on Table 4.9 above, out of 231 sampled subjects the majority of 87 (38%)
respondents said that the value of VAT audit on revenue performance is weak, 71 (15%)
of them were said that value of VAT audit on revenue performance is moderate and 35
i.e.
47
 15% of them said that the value of VAT audit on revenue performance is Excellent.
Therefor it indicate that majority of firms are believe that the value of VAT audit on revenue
performance is weak.

Based on this finding the researcher interviewed tax auditors ,the purpose of audits and the
selection of tax payers to audit criteria, they respond that the authority followed above
75% are risk based audit and the rest of 25% are focused on service audit.

Year S.no Audit Acquired birr

Plan Audited Percent Target Achieved Percent

2004
1 70 88 125.71 10,000,000 8,084,031 80.84
2005
2 76 74 97.37 4,913,441 7,436,953 151.36
2006
3 250 96 38.40 27,400,000 15,077,395 55.03
2007
4 380 145 38.16 24,666,000 23,484,393 95.21

2008 5 422 131 31.04 14,846,974 11,850,478 79.82

Total 1198 534 330.68 7,286,415 65,933,250 904.8%

Source: Gamo Gofa zone Tax and Revenue Authority from 2004-2008 annual report

According to annual report of Revenue Authority from (2004-2008 E.C) they planned to
audit and collect revenue from audit result are targeted to audit 1198 actual preformed 534
tax payer audited in number that are 44.6% and targeted to collect revenue from audit
result, 7,286415 and actually achieved that, 65,933,250 million.

Therefore, from this it can be observed that low audit rate which might have negative
impact on the revenue potential of VAT and the level of compliance. Similarly they achieve
low audit rate and collect high rate of performance. The depth interview made with tax
officials and they said that VAT audit in Gamo Gofa zone are selected by the criteria by
the audit selection committee.

The selection criteria include: credit declaration, nil VAT declaration, non-filers, unusual
VAT filing patterns, and information obtained from third parties. The reason is they
cover the total tax payer transaction audit in a given budget year due to resource
limitation, luck of practiced manpower in audit department.

48
Similarly literature suggested that the effectiveness and efficiency of Audit work was
affected by staff qualification, experience and resources for audit (Nethanet.B, 2014).

So that, the skilled manpower, resource allocation and qualified staff is absolutely
connect each other to effective audit work.

4.3 SECONDARY SOURCES

4.3.1 DOCUMENT ANALYSIS

In this section the researcher discusses results of data collected from secondary sources
targeted and collected revenue reports. According to this report from Gamo Gofa Zone
Revenue Authority, the total targeted revenues and performance for five years were as
follows:

Table 4.3.1. VAT progress from 2004-2008 budget years

S.no Budget year E.C Target Collected Percent%

1 2004 35,000,000 34,108,506 97.45

2 2005 103,532,240 120,444,827 116.34

3 2006 50,000,000 90,100,000 180.2

4 2007 3,900,000 8,702,019.80 223.13

5 2008 11,704,292 26,790,147 228.84

Total 200,626,532 280,145,500 139.6%

Source: from Gamo Gofa Zone Revenue Authority 5 years report.

As stated in the objective, this study had an aim of studying the total revenue generated in
the last five years from VAT in the last five years (2004-2008 E.C). As data shows
that VAT revenue is increasing year to year. As interviewed with tax officials and
employers showed, that this is because in the year after 2006 tax payer due to its transition
of VAT registrants from manual recording to cash register machine as obliged by the
regional government.
49
 4.3.2 VAT CONTRIBUTION ON TOTAL REVENUE

As stated in the objective, this study has an aim of studying the total revenue generated in
the last five years and then study the proportion contributed by VAT. (2004 - 2008E.C) a
total of 757,876,829 birr was collected by the Gamo Gofa Main Branch of the Ethiopia
Revenue and Customs Authority. Out of this total amount 280,145,500birr was collected
from VAT and this accounts for 36.96%of the overall revenue generated. This clearly
shows how significantly VAT is contributing to the economic development of the Zone.
The detail is given table below.

Table 4.3.2.VAT contribution on total revenue

S.no Budget year Total revenue VAT revenue VAT Contribution On

collected Total Revenue %
1 2004 163,694,182 34,108506 20.8
2 2005 254,685,343 120,,444,827 47.29
3 2006 297,827,163 90,100,000 30.25
4 2007 463,460,543 8,702,019.80 1.9
5 2008 578,209,598 26,790,147 4.6
Total 757,876,829 280,145,500 36.96%

Sources: Source: from GGZ RA from year 2004-2008 E.C

4.3.3 TAX PAYER PROGRESS IN VAT REGISTRATION

From the above data, Table 4.3 shown that, VAT Target Registered tax payers increased
year to year, and actual registration tax payers also increased number wise. By observing
the above data, the government authorities failed to reach their target in increase actual
registered tax payers during 2004-08(28.94%). In the above period only in the year 2005
actual registrants’ percentage is better than other years. There is big gap of reaching their
targets in increasing the actual tax payers registered number. That is why, tax revenue
generation will fall down. Hence, the government authorities should take necessary steps
to improve the actual registrants for improvement of tax revenue data shown below

50
 Table 4.3.3. Tax payer’s registration progress 2004-2008

S.no Budget Year Target Registered Percent

%

1 2004 357 84 23.5

2 2005 455 156 34.28
3 2006 632 201 31.80
4 2007 1004 297 29.58
5 2008 1249 332 26.58
Total 3697 1070 28.94

Source: from Gamo Gofa Zone Revenue Authority 5 years report

4.3.4 TAX PAYERS IN BUSINESS CATEGORY

Figure 4.4. Number of tax registrant Progress

Source: from Gamo Gofa Zone Revenue Authority 5 years report.

From the above figure disclosed that the government total number of targeted registered
during 2004-08 was 3697 whereas actual registered number was only 1070, which was
equivalent to 28.94%. It means the government authorities fail to increase the actual
number of registrants. However, researcher found that in commodity trade (50.81%),
Service sector (39.76%) and wholesale business (34.03%) actual registrations are far
better
comparatively other sectors. Even though, from the observation of the above table, there
51
is big need to motivate by the government for actual registrations in various sectors
particularly manufacturing (9.88%) and agriculture (8.67%). If the government is able to
increase in future the actual registrations in manufacturing and agriculture sectors, it can
able to generate more tax revenue.

52
 CHAPTER FIVE

CONCLUSIONS AND RECOMMENDATIONS

5.1. INTRODUCTION

This chapter makes conclusions that are drawn from the findings of the study, which were
presented, discussed and interpreted in chapter four. In addition, the chapter includes the
recommendations that are forwarded to identify VAT administration limitations and their
effects which influenced the Gamo Gofa Zone Ethiopia Revenue Custom authority Main
Branch office on revenue performance. The main purpose of this study was to investigate
the effect of VAT administration on revenue performance in Gamo Gofa Zone. In
consequence, the basic questions raised to understand how the VAT registrants become
aware of the VAT revenue administration system in the study area, the challenges held by
the VAT revenue administration system in terms of identification, awareness creation,
settle in collection process and VAT auditing practice and its value to increase the amount
of revenue from VAT are the major objective of these study. This focuses on VAT
registrant’s tax payers in this zone.

5.2 CONCLUSIONS

Government for the sake of smooth administration and improvement of tax revenues,
ERCA delegated regions and city administrations to collect VAT from their registered
taxpayers starting from September 2003 (ERCA, 2003). Gamo Gofa Zone, is one of
delegated to VAT administration from South Nation Nationality People Region (SNNPR)
it has more than five years’ experience in VAT administration to collect tax revenue to
the
government; researchers’ survey observed that most of VAT registrants were registered
for
VAT in the last two years comparatively. In terms of category of business, most of the
registrants were from service providing sectors and trading commodity than other
categories.
As it indicated from major VAT administration processes and Activities of Gamo Gofa
Zone
Main Branch Office, day to day activity based on tax rules and regulation were Timely
service delivery to create strong enforcement, make clear and accountable work
environment must be created by the Tax administration, Creating awareness to tax payers
for payment of tax timely, providing information timely through Radio in areas language,
magazines, workshops, broachers, house to house supervision and openly discusses with
53
tax payers to reduce tax evasion and corruption, recognize model tax payers as well as tax
officials, adjusting rules and regulation based on tax payers feedback/opinion, creating tax
day celebration, bring awareness of tax procedures and payment of taxes to the tax
registrants if they do not follow impose penalty on the tax payers, make a notice before
taking any harsh measurement. By doing in this manner VAT administration authority
people will increase their VAT tax revenue than other kinds of taxes.

In terms of awareness the majority of the study subjects have no sufficient awareness
about
tax administration rules and regulations. According to tax experts and officials who made
interview, from both sides means from sellers and customers it lucks issuing and
receiving
invoice as modern market culture especially on ordinary market. They also maintained
that
even though it is not sufficient, awareness creation were made especially for sellers and
business centres to issue receipt for their customers before market exchange. They added
that it enabled that different notice and burners with the message of public awareness.
However, practically transactions are sold without invoice.

In terms of advantage researcher raised some questions like being registering for VAT is
important or not. However, they think that registering for VAT is good. But they fear that
they might lose their customers due to unequal treatment for all firms to register VAT in
their area. Direct interview was made with tax experts and head officials with similar
questions. The reflection of the experts and head officials were not fare away from the
study
found answers from the study subjects. They said that fear of abnormal competition with
unregistered similar firms is hinders voluntary VAT registration all over Gamo Gofa Zone
level. This indicates that the dominance of VAT unregistered businesses, resulted in
abnormal market competition and losses normal market share and profitability by
registered
businesses.

Majority of tax payers collect revenue from VAT by using hand write invoice. Researcher
interviewed tax payers briefly what they think of the reasons that make the traders not to
collect the taxes by using electronic cash registration machine. They argue that, in the side
of authority lack of providing enough machine and shortage of supply and in other side
tax
payers have no interest to purchase electronics cash registration due to self-regard and
they
think that the machine is in convenient to tax evasion register on day to day turn over.
54
Some of challenge related with VAT related tax administration. Deepest interview was
made with head officials and tax employees, in order to get deep information. They argue
that lack of improved infrastructure like: high way, Electricity, Information and
communication technology and other related services hinders to achieve good
performance
in VAT related tax administration. On the other hand beside of tax payers are reluctant to
register VAT and, lack of taxpayer’s low awareness are also mentioned as the part of the
problem.

Majority of firms believe that the value of VAT audit on revenue performance is high
Based
on this finding the researcher interviewed tax auditors ,the purpose of audits and the
selection of tax payers to audit criteria, they respond that the authority followed above
75% are risk based audit and the rest of 25% are focused on service audit. Therefore, the
authority of Gamo Gofa Zone tax collection main branch office needs emphasis on this
issue. Tax audit is vital for reducing tax evasion and tax audit has positive effect on
reducing tax fraud and tax evasion (Netsanet.B, 2014), in other side reduced tax evasion
and fraud, increase the revenue collection performance.

Low audit performance which may have negative impact on the revenue potential of VAT
and the level of compliance. Similarly they achieve low audit rate and collect high rate of
performance. The depth interview was mad with tax officials and they said that VAT
audit
in Gamo Gofa zone are selects by the criteria by the audit selection committee. The
selection criteria include: credit declaration, nil VAT declaration, non-filers, unusual VAT
filing patterns, and information obtained from third parties. The reason is they cover the
total tax payer transaction audit in a given budget year due to resource limitation, and luck
of skilful manpower. So that, we conclude from the finding of view VAT audit is
significantly reduce tax evasion and fraud as same time it have a great value to maximize
revenue.

According to the responses of the respondents depend up on the given possibility the
following are the challenges of the VAT Tax Authority. These are lack of human
resources
especially Value Added Tax auditors, lack of taxpayers awareness, lack of education for
taxpayers, lack of good qualification of tax office at worda level, lack of qualified
accountants to taxpayers, limitation of infrastructure in woreda town to implement VAT
55
 effectively, selling of goods and services without tax invoice(without bill), weak culture
of
tax payers, fear of competition with unregistered tax payers, are the challenges which
affect
the collection of sufficient tax revenue. If these limitations are overcome by tax revenue
authorities, definitely they will improve tax revenue collections to the government and
they
can improve their performance also.

5.3 RECOMMENDATIONS

The following are the major recommendations that come out from the research results
towards both the Tax revenue authority and for business community.

Recommendations to the Tax Revenue authority are:

 To provide quality services the authority should increase the number of qualified
employees, make arrangement of consistent training and development program for the
staff.
right administration point of view the revenue authorities should establish strong tax audit
unit, appointing genuine leaders on department, hire skilled and ethically outstanding tax
auditors are need to improve recovery of more tax revenue and performance.
 Conduct a consistent awareness creation programs to update or upgrade the business
community/registrants and non-registrants and should convey concepts, rules and
regulations, advantages and uses of the Value Added Tax by using mass-medias or
exchange mediums like television, radio, newspapers, creating accessible websites,
distribution of broachers, preparations of different seminars and workshops on a regular
basis to increase awareness. If they are doing timely, absolutely tax authority
performance
will increase and at the same time tax authority’s revenue tax collections will increase
extremely.
 It is suggested that there are many non-VAT taxpayers, there is need to conducting
intensified awareness creations programs and enforcement them into tax stream. VAT
authorities should prepare of Simple Value Added Tax registration procedure for non-tax
payers or non-registrants. In identifying those qualified the registration threshold, it is
better to arrange require to use cash register machines in order to know their annual
turnover.
 The authority branch office has to make collaborations with the nearby educational
institutions such as Arba Minch University’s with department of accounting and finance
or
56
 Department of business management, they can conduct joint programs such as capacity
building and researches or under community development programs, these departments
faculty may provide knowledge or training to non-taxpayers or not-registrants in tax
procedures, laws, proclamations of taxes, preparation and submission of tax returns that
enable solve the problems of the society in general and branch office in particular.
 As we seen in audit report, some VAT payers not declaring the collected tax payments at
the given time due to their carelessness and they are running their business with
government
portion. So that there is a need to continuous follow up and actions have to be taken on
such individuals, who are doing such kind of manipulative things.
The authority of Gamo Gofa Zone tax collection main branch office needs emphasis on
this issue. Tax audit is vital for reducing tax evasion and tax audit has positive effect on
reducing tax fraud and tax evasion Netsanet. B (2014) in other side reduced tax evasion
and fraud, increase the revenue collection performance.
 The tax revenue authority should enforce tax payer to purchase and use cash registration
machine and timely follow- up is required. Further, Supporting and capacitating the lower
level of tax administration structure in terms of material and technical knowledge is more
feasible to enhance the implementation of VAT administration system and improve
revenue
performance.
 Generally Established and in depth creation of awareness, institutional capacity building,
strong follow- up and implication of the declared laws, rules and regulations, design to use
modernized monitoring mechanism, follow networking systems that, SGTA (Standard
Government Tax Administration) & push to tax payers should be use cash registration
machine are major recommendations for this study.
 Apart from the tasks performed by the tax authority, the business communities also should
obey the current VAT rules and regulations, proclamations, develop or familiarise the
culture of taxpaying as a sign of modern thinking, pay attentions towards the
government’s
effort to collect and funding to the government in the form promote payment of taxes.
 Prompt payment should think as tax payment is one of social and economic development
backbone in entering country rather than mandatory contribution, it means directly or
indirectly putting every one’s tax contribution showing the impact on changing the life of
each citizen.
 VAT payers should take responsibility to assign educated and skilled man power in order
to improve audit problems in their organizations as well as they should be ready to use
57
technological devices like IT electronic cash registration machines. Business organization
should also need to be empower their experts by providing relevant train and
information’s
to avoid skills and knowledge gapes.
Finally the researcher suggest for further research.to investigate in Business society view
of tax compliance attitude.
58
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. International journal of Business & Management , 7.

James, K. (2015). The Rise of Value Added Tax. camberge universty: Business&economics.

k.Gordon, R. (1996). Tax law Desin &Drafting. International Monetry Fund, 19,vo. 1.

Kefela, T. (2009). Reforming tax polices & revenue mobilization promotes a fiscal
responsibility:Astudy of east & west African states. Law& conflict Resolution
Vol.1(5),pp.098-106,october,2009 Availab, 5.

Liam Ebrill, M.-P. b. (2001). Modern alue added tax. Washington D.C: International Monetory
Fund. Business & Economics.

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Mamo, H. (2011). Implimantation of Value Added Tax and its Related Problems in Ethipia(The
case
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Introduction-Administration Issues, (pp. ,2 July 2002), available from 2, No.4 Red
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62
Appendix

QUESTIONNAIRE to be answered by VAT Registrant

Dear respondents,

This study is conduct in partial fulfilment of the requirements for the Accounting
&Finance.
I am carrying out a study on the effect of Value Added Tax administration in Gamo Gofa
zone. The purpose of this questionnaire is to obtain your perceptions and views regarding
the existing Value Added Tax (Value Added Tax) administrative activities of main branch
office and its main constraints against effective tax administration. This study will help
the
branch office to identify its problems and improve its VAT administration system. There
for the information you give me will facilitate and critically analyse the subject matter.

I hereby assure you that all information obtained through this questionnaire shall be used
for academic purposes only and will be handled and stored with the highest order of
confidentiality. Please do not write your name anywhere on the questionnaire.

Thank for your cooperation!

Prepared By Amarech Beyene

Part -I Demographic profile

Instruction: - Please, state your opinion for each given proposed items using the tick sing
(√) under your suitable number.

1. Name of woredas/town

A) Sawla B) Arbaminch C) Geze Goffa Woreda

A) Sex category of respondent A. Female B) Male

2. Educational status

A) Alliterated B) Grade 1-12 C) certificate/diploma C) first degree and above

3. Age of respondent A) .20-30 B) .31-40 D) 41-50 E) above 50

Part II question regarding to VAT Administration

Instruction: - Please, state your opinion for each given proposed items using the tick sing
(√) under your suitable number
1) Type of business
63
1. Manufacturing 4 .Agricultural product

2. Construction 5.Trade commodity

3 Electronics 6.Srevice sector

2) Is your organization VAT registered? 1. Yes 2 No

Other means (please specify) --------------------------------------------------------------------

A. Awareness about VAT rules and regulations?

1. Know 2.I don’t know 3.insuffeciant

B. Do you have information about VAT unregistered tax payer in your area?

1. Yes 2.No others means (please specify) -----------------------------

C. Why some business not registered for VAT?

1. Weak administration of authority forces them to registration

2. Lack of awareness for tax payer about VAT registration

3. Business enterprises want to monopolize the market with least price

4. Fear VAT for losing their customer

D. Have you believe that the threshold of VAT 500000 and above?

1. Yes 2.No 3.Noidea If any, please specify it? ----------------------------------

E. Number of VAT unregistered business in your area?

1. High in number 2.midum in number 3 Few

F. Why they not willing to pay?

1. Poor VAT administration system 2. due to problems from their suppliers

3. Fear of competition with unregistered 4. No potentials for VAT register

If any, please specify it? -----------------------------------

G. Do you believe being VAT registered has an advantage? 1. Yes 2.No

If any, please specify it? -----------------------------------

H.If your answer for Q, 13 is yes what is the reason?

1. Low awareness and lack of information 2. Selfishness

64
3. Poor capacity of the government officers

I. How do you settle VAT during payment? 1. Cash register machine 2. Invoice
3.none If any, please specify it? -----------------------------------
J. Is cash registration machine facilitates the VAT collection process in your work?

1. Yes 2.No 3. I didn’t

K. How you evaluate the level of customer when using cash register machine?
1. Increased 2. Decreased 3.No change 4.I didn’t evaluate
L. Have the branch office made trainings to improve awareness on VAT activity?

1, Yes 2.No 3.Insufficent

M. If yes explain that has been for?

1. Always 2.sometimes 3.monthly 4.qurterly

N. Are there problems in the VAT administration that needs to be improved?

1. Yes 2.No If any, please specify it? -----------------------------------
O. Do you get advice and others services regarding the procedures of tax payment
book, recordkeeping &filing?
1. Yes 2.No 3.Insufficient
P. Do you think that your organization has audited before? 1. Yes 2.No

If any, please specify it? -----------------------------------

Q. How do you evaluate the value of VAT audit on revenue performance?

1. Excellent 2.midume 3.Weak 4.I can’t evaluate

R. How do you evaluate frequency of VAT audit in your organization?

1. Audit one year 2. Every quarter 3.monthly

S. How do you evaluate the performance of tax audit in reducing illegal tread and tax
evasion?
1. High 2.midum 3.weak 4fair

65
2 APPENDIX: INTERVIEW QUESTION TO T AX OFFICIALS

PART I

Back Ground Information of officials

Please provide your response in detail from you work experience

1. Sex A. Male B. Female

2. Age______

3. Occupation ________________________

PART II

Interview questions

1. As the officials what promotion measures taken by your office to progress Value
Added Tax (VAT) revenue performance?

------------------------------------------------------------------------------------------------------------

2. What challenges you faced to achieve a good performance in Value Added Tax
(VAT) collection and administration?-----------------------------------------
-----------
3. Dose the awareness level of the society’s raise up well Value Added Tax (VAT)
paid for improvement of socio economic development?
4. How do you evaluate your customer and tax payer awareness level?------------------
5. What measures taken by gov’t bodies for raising public awareness about Value
Added Tax (VAT) benefit to contribute social interest?
6. How auditing process contribute for a good achievement of Value Added Tax
(VAT) revenue performance? -------------------------------------------------------
7. Can you mention that the schedule of auditors the clients file to audit file to audit
within a year?

------------------------------------------------------------------------------------------------------------
8. Do you have suggestion convenient feature of VAT administration in Gamo Goffa
zone?

66
APPENDIX-2

3. APPENDIX QUESTIONNAIRE TO BE ANSWERED BY T AX EXPERT / EMPLOYEES /

Dear respondents,

This study is conduct in partial fulfilment of the requirements for the Accounting
&Finance.
I am carrying out a study on the effect of Value Added Tax administration in Gamo Gofa
zone. The purpose of this questionnaire is to obtain your perceptions and views regarding
the existing Value Added Tax (Value Added Tax) administrative activities of the branch
office and its main constraints against effective tax administration. This study will help
the
branch office to identify its problems and improve its VAT administration system.

The information you give me will facilitate and critically analyse the subject matter.
There
is no right or wrong answer. But the correct response is what you done and observed.
Therefore, please answer all questions accordingly.

I hereby assure you that all information obtained through this questionnaire shall be used
for academic purposes only and will be handled and stored with the highest order of
confidentiality. Please do not write your name anywhere on the questionnaire.

Thank for your cooperation!

Part I Background information

Dear respondent put () in the box of your correct choice

Back Ground Information of officials

Please provide your response in detail from you work experience

1. Sex A. Male B. Female

2. Age---------------------------------

. Service year: --------------------------------------------

1. What is your level of educational qualification?

Certificate Diploma Degree Above degree

2. What is your status or position in the organization?

67
A) Auditor B) Assessor C) Collector D) Follow-up and reporter
E) Other, specify _____________________________________________________

3. How long have you been working in the institute?

A) Less than five years C) Five to ten years

B) Ten to fifteen years D) More than fifteen years

4. Field of study

A) Accounting C) Economics

B) Finance D) Management

E) Others please specify ------------------------------------------------------------------------------

--------- --------------------------------------------------------------------------------------------

I Question Related With VAT Registration

1. In registering unregistered taxpayers for VAT, what system do you follow?

A) Door to door inspection B) Checking purchase invoices of registered taxpayers

If any other, mention it here,-------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------

2. Are there tax payers that are voluntarily required to register VAT?

A) Yes B) No If No, please explain why this is happening? -----

------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------

3. What do you consider in taxpayers identification and registration process for

VAT?

------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------

4. What are the problems that hinder smooth administration of VAT?

A) VAT tax payers are less competitive in the market

B) Consumers are not willing to buy with VAT

68
C) Poor tax enforcement capacity of the authority

D) Use of fraudulent invoices and non-issuance of invoices

Other, please specify----------------------------------------------------------------------------------

5. What are the alternative solutions to aggravate the identified problems?

6. What are the reasons for some traders not to maintain records of their business
operations
in accordance with the laws and regulations of VAT?

Question Related With Audit Practice To Tax Auditor.

1. Is there any Audit manual to perform tax audit Activities?

A), Yes B), No C), sum amount but not sufficient

2. Did you have any audit experience before you joined the revenue branch office?

A), Yes B), No

3. If your answer in question 2 is yes, how long did you work as an auditor?

A) Less than 2 ages C) 4-6 years B) 2-4years D), 6-10years

What is the primary purpose of tax audit performed in the (multiple answers are
possible)?

A) To check the evasion of tax

B) To ensure compliance in accordance with tax law

C) For assessment and collection of additional tax revenue

D) To educate taxpayers E)Others,

pleasespecify________________________________________________________
69
 6. What are the criteria used by the authority for selection of tax payers for audit and
audit procedure? ------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------

6. What types of Audit are usually performed?

A) Desk Audit D) Comprehensive audit

B) Issue audit E) Registration Audit

C) Refund Audit F) Fraud investigation

7. How often tax audit is supported by intelligence input?

A) Always B) Sometimes

C) Rarely D) Never

8. How tax auditors and investigators can get the required information?

A. By reviewing the previous case histories of taxpayers

B. Using information from third parties such as financial institutions

C. Using business sector profile Others, please specify-----------------------------------

----------------------------------------------------- ----------------------------------------------

I. Question Related With Cash Registration Machine

1. The use of cash register machine reduces tax evasion or fraud.

A) Yes B) No C) I didn’t evaluate

2. Using cash register machine facilitates the VAT collection process.

A) Yes B), No C, I don’t know

3. VAT registered organizations VAT payment increases after they started uses cash
register machine.

A) Yes B) No C) I don’t know

4. Tax Evasion and avoidance is as a result of poor administration in the state?

A)Yes B),No C),No Idea
70
5. Do you think that tax Administration in is very effective and efficiently managed?

A) Yes B) No C) No Idea

6. Do you believe using VAT registration machine increases revenue?

A) Yes B. No C) If any
III Question Related With Awareness

1. What are the approaches that the branch office follows to increasing the awareness
of tax payers about the VAT registration process? List at list your ideas that need
action;

2. Have the branch office made trainings to improve awareness of the taxpayers?

A) Yes B) No C) I don’t know

3. If your answer for question 26, yes Explain that has been for:-
A, Weekly B, monthly C, quarterly D, some times

4. Haw to evaluate awareness of taxpayers towards VAT:

A) High C) Low

B) Average D) Very low

5. In your evaluation awareness of tax payer efficient in _________Branch?

A) Very good D) Poor

B) Good E) Very Poor

C) Average

If you have other specification Explain:

6. Is that required to improve VAT administration and maximize revenue of the

branch?

List at list your ideas that need action; --------------------------------------------------------------

Thank you for your cooperation!

71
4. APPENDIX V

አርባምንጭዩንቨርስቲየብዝነስናኢኮኖሚክስኮለጅድህረ-
ምርቃበአካዉንትናፋይናንስይህንመጠይቅበመሙላትለምታደርጉልኝትብብርበቅድሚያአመሰግናለሁ !
የዚህመጠይቅዋናዓላማበቫትአስተዳደርጉድለትምክንያትበገቢአፈፃፀሙላይየምያሳድሩተግዳሮቶችንበተመለከተበጋሞ
ጎፋዞንዉስጥባሉከተማአስተዳደሮችናወረዳዎችበሚገኙየገቢዎችቅርንጫፍጽ /ቤቶችላይጥናታዊጽሁፍለማድረግእናየ
መፍትሄሃሳብለማቅረብበመሆኑግልፅአሳማኝእናከምንምተፅዕኖነፃሆናችዉምላሽእንዲትሰጡእየገለፅኩምላሹንበማረም
// እንዲትመልሱከአክብሮትጋርእጠይቃለሁ፡፡

ስለምላሹአመሰግናለዉ!!!!!

በግብርከፋዩ የምመለስ መጠይቅ፡-

አማረችበየነ

ክፍል 1. ጥሬሀቆች

1. ወረዳሀ)አርባምንጭከተማ ለ) ሳዎላከተማ ሐ)ገዜጎፋወረዳ

2.ፃታ ሀ)ወንድ ለ) ሴት

3.የትምህርትደረጃ
ሀ) መፃፍናማንበብአልችልም ለ)ማንብቢናመፃፍ 1-10/12
ሐ) ሰረተፍኬትናድፕሎማ መ) የመጀመሪያድግርናበላይ
4.ዕድሜሀ) ከ20-30ዓ/ም ለ) ከ31-40ዓ/ም ሐ)ከ41-50በላይዓ/ም መ)ከ50 በላይ
5.የሥራዘርፎምንድንነዉ?

ሀ)አምራች ለ) ግንባታዘርፍ ሐ) የእርሻዉጤቶችአቅራብ

መ)ኤለክትሮንክስ ሠ)ሸቀጣሸቀጥንግድ ረ)አገልግሎትዘርፍ

ክፍል 2 ቫትምዝገባንበተመለከተ፤

1.ድርግቶቫትተመዝጋብነዉ? ሀ)አዎ ለ)አይደለም

2.የቫትመመሪያዎችናደንቦችንጠንቅቀዉያዉቃሉ?

ሀ)አዉቃልዉ ለ)አላዉቂም ሐ)በቂአይደለም

3. መልሶለተ.ቁ 3 አላዊቂምከሆነምክንያት? ብያብራሩ---------------------------------------------------------

-----------------------------------------------------------------------------------------------

4. እርሶበምሰሩበትዘርፍካፒታልያላቸዉግንቫትያልተመዘገቡአሉ? ሀ)አዎ ለ)አላዉቂም

72
5. ነጋዴዎቸበፍቃዳቸዉቫትየማይመዘገቡበትምክንያትምንድነዉ?

ሀ)የአስተዳደርሰርዓትልልነትናበአግባቡያለማስተማር

ለ)በግብርከፋዩበኩልየግንዛንቤዕጥረት

ሐ)ግብርከፋዩከመንግስትቁጥጥርዉጪገቢያዉንለመቆጣጠር

መ)ደንበኛይሸሻልብሎመፍራት ሌላምካለብያብራሩ----------------------------------------------------
------------------------------------------------------------------------------------------------------------

6. ቫትለመመዝገብመነሻካፒታሉ 500,000ናከዛበላይመሆኑምዛናዊነዉ?

ሀ)አዎ ለ)አይደለም ሐ)ሀሳብየለኝም

7.ለተ.ቁ.6 መላሶ አይደለም ከሆነ እንዴት ብሆን ይሻላል ብለህያስባልህ? ---------------------------------------

-----------------------------------------------------------------------------------

7.በአከባብዉላይቫትያልተመዘገቡምንያህልይሆናሉ ?

ሀ)ብዙ ለ)አነስተኛ ሐ)ጥቅት መ)የለም

8. ለጥያቄ 7 መልሶብዙ፤ከሆነለምንድነዉታክስከፋዩፍቃድኛየማይሆነዉ ?

ሀ) የአስተዳድረስርዓቱደካማስለሆነነዉ ለ) ደንበኛይሸሻልብሎመፍራት

ሐ) ቫትካልተመዘገቡትጋርገብያዉድድርፍራት መመ) ቫትለመመዝገብአቅምያለዉነጋዴበአከባብዉያለመኖር

9. ቫትመመዝገብጥቅምአለዉብሎያስባሉ ?

ሀ)ጥቅምአለዉ ለ)ጥቀምየለዉም ሐ) ጥቅምየለምጉዳቱይበዛል

10. ለጥያቄተራቁ.9 ጥቅምአለዉከሆነነጋዴዉለመመዝገብፍቃደኛየማይነዉምንድነዉምክንያቱብገለጽ ?

ሀ) የግንዛቤጉድለትናየመርጃእጥረት ለ) ግላዊነት

ሐ) ስለቫትግንዛቤለመስጠትየተቐሙአቅምዉስንነት

ሌላምካለብገልጹ--------------------------------------------------------------------------------------------

2.ከገንዘብመመዝገብያማሽንጋርየተያያዘመጠይቅ፤

1. ድርጅቶገንዘብበምንይሰበስባል?

ሀ) በሽያጭመመዝገብያመሣሪያ

ለ) በደረሰኝ ሐ) በእጅ
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2. ድርጅቶሽያጭመመዝገብያመሣሪያመጠቀምመቼጀመሩ --------ዓ/ም?

3. ሽያጭመመዝገብያመሣሪያመጠቀምስራዎንያቀጣፋልብሎያስባሉ ?

ሀ) አዎ ለ) አያቀላጥፍም ሐ)ጊዜይጨርሳል

4. ታክስቅ/ፍጽ/ቤትስለሽያጭመመዝገብያመሣሪያተከታታይስልጠናሰተዉያዉቃሉ?

ሀ) ዘወተር ለ) አንዳዴ ሐ) በአጋጣሚዎች መ) ብዙጊዜ

5. ድርጅቶሽያጭመመዝገብመሣሪያመጠቀምያከጀመሩደንበኞቹንእንዴትያያሉ ?

ሀ) ጨምሯል ለ) ቀንሳል ሐ) መካከለገኛ

3. ግንዛቤንበተመለከተየቀረበመጠይቅ፤

1. ቅርንጫፍጽ/ቤትየግንዛቤክፍተትለመሙላትሥልጠናይሰጣል?

ሀ)አዎ ለ) አይ ሐ) አላዉቂም

2. ለጥያቄተ.ቁ 1 መልስአዎከሆነለምንያህልጊዜ?

ሀ) በየሳምንቱ ለ) በየወሩ ሐ) በየሩብዓመቱ መ)አንዳድጊዜ

3. በቫትአስተዳደርዙሪያመሻሻልያለበትነገርአለብለዉያስባሉ?

ሀ)አለ ለ) የለም ሐ) አላዉቂም

4. ለጥያቄቁ.3 መልሶአለከሆነእንደግለሰብየእርሶአስታዬትምንድነዉ?-------------------------------
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5. ስለክፍያስርዓት፤መዝገብአያያዝ፤ስለምዝገባስርዓት፤ስለሰራዎምክርአግኝቶያዉቃሉ ?
ሀ)አዎ ለ) አግኝቸአላዉቅም

3.ከኦድትጋርየተያያዘመጠይቅ፤

1. ድርጅቶከዝህበፍትኦዲትተደርጎያዉቃልዎይ ?

ሀ)ያዉቃል ለ)አያዉቅም

2.የዞኑገብዎችዋናቅርጫፍጽ/ቤትየኦዲትስራትምንይመስላል?

ሀ)በጣምጥሩነዉ ለ) መካከለኛ ሐ)ደካማ መ)አላዉቅም

3.በምንያህልጊዜድረጅቶኦድትተድረጎያዉቃል?

ሀ) በዓመትአንድጊዜ ለ) በየሩብዓመቱ ሐ)በየወሩ

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4.የቫትአስተዳደርስርዓቱላይበኦድትዙሪያእንዲሻሻልየማትሰጠዉአስታዬትይኖሮታል ? ----------------------------
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5.የታክስኦዲትምንገቢስወራንይከላከላልብለህታስባለህ ?

ሀ) ከፍተኛ ለ) መካከለኝ ሐ) ዝቅተኛ መ)አጥጋብ

አመሰግናለዉ!!!!!

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