ARBAMINCHUNI

VERSI
TY
COLLEGEOFBUSI
NESSANDECONOMI
CS
DEPARTMENTOFACCOUNTI
NGANDFINANCE

Anal
ysi
sOfRent
alTaxLev y
ingAndColl
ect
ingSystem (
CaseSt
udyOf
Ar
siNegel
eTownAdmini
str
ati
onRevenueAut
hori
ty.
)

Pr
epar
edBy
:Yasi
nMohamed

Adv
isor
:Mesf
inBer
i(Msc)

Jul
y,2019

Ar
baMi
nch,
Ethi
opi
a
 St
atementofdecl
arat
ion

Thi
sist
ocer
ti
fyt
hatt
heseni
oressaysubmi
tt
edbyst
udentYasi
nMohamedent
it
ledAnal
ysi
sof
r
ent
alt
axl
evy
ingandcol
l
ect
ingsy
stem (
casest
udyofAr
siNegel
etownadmi
nist
rat
ionr
evenue
aut
hor
it
y.)Andsubmi
tt
edi
npar
ti
alf
ulf
il
lmentoft
her
equi
rementofBAdegr
eei
nAccount
ing
andf
inancecompl
i
eswi
tht
her
egul
ati
onoft
heuni
ver
sit
y.Thi
sPaperi
spr
esent
ati
onofmy
or
igi
nal
resear
chwor
k.Whenev
ert
hecont
ri
but
ionofot
her
sar
einv
olv
ed,
ever
yef
for
tismadet
o
i
ndi
cat
ethi
scl
ear
ly,
wit
hduer
efer
encet
othel
i
ter
atur
e;i
nfor
mat
ionder
ivedf
rom t
hepubl
i
shed
orunpubl
i
shedwor
kofot
her
shasbeenacknowl
edgei
nthet
extandal
i
stofr
efer
encei
sgi
ven.
AndIdecl
aret
hatt
hispaperhasnotbeensubmi
tt
edi
nanyf
ormf
oranot
herdegr
eeatany
uni
ver
sit
yorot
heri
nst
it
uti
onoft
ert
iar
yeducat
ion

Decl
aredby

Name: Yasi
nMohamed

Dat
e--
--
--
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--
-

Si
gnat
ure-
--
--
--
--
-

I
 St
atementofcer
ti
fi
cat
ion
Thi
sist
ocer
ti
fyt
hatt
heseni
oressaysubmi
tt
edbyst
udentYasi
nMohamedent
it
ledAnal
ysi
sof
r
ent
alt
axl
evy
ingandcol
l
ect
ingsy
stem.(
Casest
udyofAr
siNegel
etownadmi
nist
rat
ion
r
evenueaut
hor
it
y.)
Andsubmi
tt
edi
npar
ti
alf
ulf
il
lmentoft
her
equi
rementofBAdegr
eei
n
Account
ingandf
inancecompl
i
eswi
tht
her
egul
ati
onoft
heuni
ver
sit
y.

Adv
isorName-
--
--
--
--
--
--
- Dat
e--
--
--
--
--
--
--
--
- Si
gnat
ure-
--
--
--
-Exami
nerName-
--
--
--
-
-
--
-Dat
e--
--
--
--
--
--
--
--
- Si
gnat
ure-
--
--
--
-………………………………………………

………………………………………………………… …………………………………………………
…… ……………………………

I
I
AKNOWLEDGEMENT
Fi
rst
,myspeci alsthankgoest oAl
might
yALLAH;Iwoul dalsoliketoexpressmy
Advi
sorM (Mcs)hissuggestionandcomment sinpreparat
ionofthisr
esear
chpaper.
Thi
rdl
y,Iwouldli
ketothanksmyf ami
lyf
orthei
rcont
ri
butionformysuccessand,Fi
nal
ly
,
Iwouldli
kethanktoallmyf r
iendswhoarehel
pingi
ngener ali
deasandsuggesti
onfor
mylif
e!!
!

I
II
Tabl
eofCont
ent
s
St
atementofdecl
arat
ion I
St
atementofcer
ti
fi
cat
ion I
I
AKNOWLEDGEMENT I
II
ABSTRACT I
V
CHAPTERONE 1
I
NTERODUCTI
ON 1
1.
1BACKGROUNDOFTHESTUDY 1
1.
2STATEMENTOFTHEPROBLAM 2
1.
3Resear
chquest
ion 3
1.
4Obj
ect
iveoft
hest
udy 3
1.
4.1Gener
alobj
ect
ive 3
1.
4.2Speci
fi
cobj
ect
ive 3
1.
5Si
gni
fi
canceoft
hest
udy 3
1.
6Scopeoft
hest
udy 3
1.
7Li
mit
ati
onoft
hest
udy 4
1.
8Or
gani
zat
ionoft
hepaper 4
CHATPERTWO 5
2.REVI
EW OFRELATEDLI
TERATURE 5
2.
1THEROTI
CALREVI
EW 5
2.
1.1Pr
inci
plesoft
axes 5
2.
1.2Taxst
ruct
ure 7
2.1.
3Ef
fect
ives’
oft
axat
ion 9
2.
1.4Ty
pesoft
axes 10
2.1.
4.1Di
rectt
ax 10
2.
1.5Obj
ect
iveoft
axat
ion 11
2.
1.6Taxr
efor
ms 12
2.
1.7 PROBLEMSOFTAXREFORMS 14
2.
1.8TaxAdmi
nist
rat
ion 15
2.
1.9.
TaxonI
ncomef
rom Rent
alofBui
l
dings(
Schedul
e“B”
) 16
2.
2EMPI
RICALREVI
EW 20

I
V
 2.
3Li
ter
atur
eGap 22
CHAPTERTHREE 23
3.RESEARCHMETHODOLOGY 23
3.
1Resear
chappr
oach 23
3.
2Tar
getpopul
ati
on 23
3.
3Sampl
i
ngTechni
quesandSampl
eSi
ze 23
3.
4Sour
ceofdat
a 23
3.
5Dat
aty
pes 24
3.
6Dat
acol
l
ect
ionmet
hods 24
3.
7.Dat
apr
esent
ati
onandanal
ysi
s 24
CHAPTERFOUR 25
4.DATAPRESENTATI
ONAND ANALYSI
S 25
4.
1Per
sonal
inf
ormat
ionr
espondent
s 25
4.
2Anal
ysi
sofr
esear
chquest
ionnai
res 27
4.
3Summer
yoff
indi
ng 34
CHAPTERFI
VE 36
5.CONCLUSI
ONANDRECOMMENDATI
ON 36
5.
1Concl
usi
on 37
5.
2 Recommendat
ion 37
REFERENCES 40
APENDEX 40

Li
stoft
abl
e

V
Tabl
e4.
1age,
andsexdi
str
ibut
ion 25
Tabl
e4.
2educat
ional
backgr
ound 26
Tabl
e4.
3wor
kexper
ience 26
4.
2Anal
ysi
sofr
esear
chquest
ionnai
res 27
Tabl
e4.
4Maj
orar
ea(
sour
ce)ofr
ent
alt
axi
nAr
siNegel
e 27
Tabl
e4.
5howdoy
oul
evy
ingr
ent
alt
axonpay
ers. 27
Tabl
e4.
6Ar
ethepeopl
eofAr
siNegel
ear
evol
unt
aryt
opayr
ent
alt
ax 28
Tabl
e4.
7taxpay
er’
spay
mentt
hei
rtaxl
i
abi
l
ityont
ime 29
Tabl
e4.
8ist
her
ecomput
eri
zedwayofr
ent
alt
axl
evy
ingandcol
l
ect
ion 30
Tabl
e4.
9thepr
esentr
ent
alt
axl
evy
ingandcol
l
ect
ionsy
stem 30
Table4.
10Doest
heof
fi
cesmakeanyst
ruct
ural
adj
ust
mentt
omaker
ent
alt
axmor
e
eff
ecti
ve 31
Table4.11whoi
sresponsi
blef
ort
heef
fect
ivenessofr
ent
alt
axassessmentand
col
lect
ion 31
Tabl
e4.
12f
act
orst
hataf
fectt
axr
ent
alt
ax 32
Tabl
e4.
13:-
howtheof
ficecontrol
,ev
asi
on,
fraud,
fal
sif
icat
ionofr
ecor
dandunabl
eto
payt
axevasi
onandavoidance 32
Tabl
e4.
14ev
aluat
eoft
heopi
nionofr
ent
alt
axpay
ers 33
Tabl
e4.15:
-theaut
hor
it
y’
spr
evi
oust
hreey
ear
srev
enuecol
l
ect
ionper
for
mance 34

VI
ABSTRACT

Thest udyi sconduct edt oOr omi ar egionAr siZoneAr siNegel et own.Thi si s175km
awayf rom Addi sAbaba.I t'
sf oundont hesout her ndi recti
onofAddi sAbaba.I nthe
towndef erenteconomi cact i
vit
iest akespl ace.Thest udywasf ocusedonanal ysisof
rentaltaxl evyingandcol lect
ionsyst em inAr siNegel et own.Taxi st hemaj orsour ceof
i
ncomecol l
ectedbyt hegover nment .Itisanon- penalbutcompul sor yandunr equited
transferofr esour cesf rom pr i
vat et opubl i
csect or,i tiscol l
ect edont hebasesof
predeter minedcr iteri
a,thecl assicaleconomi cwher evi ewedt hatt heonl yobj ectiveof
thet axationwast or aisegover nmentr evenuebutwi thint hechangei ncircumst ances
andi deologiest heai m oft axhadbeenchanged.Thepaperwasat tempt edt or esearch
quest i
ons,r aisedinst atementoft hepr oblem andobj ectiveoft hest udy.Thus,gener al
objectiveoft hepaperwast oanal ysisr entaltaxl evyingandcol lationinAr siNegel e
townr evenueaut hor it
y.Ther esear cherwasused pr imarysour cesand secondar y
sources, primar ysourcesf r
om t heof ficecol l
ected,anal yzedusi ngj udgment alsampl i
ng
techniqueandi nterpreteddescr ipti
vemet hodt opr esentt hef i
ndi ng,andsecondar y
sourcesf rom def erentdocument sandr eview relateddat ar ecord.Dat acol lectf r
om
primar yandsecondar ysourcesar epr ocessed.Basedont hef inding,concl usionwas
drawnandf i
nal l
yrecommendat ionwasmade.

VI
I
CHAPTERONE

I
NTERODUCTI
ON
1.
1BACKGROUNDOFTHESTUDY
Taxi
sthemaj
orsour
ceofi
ncomecol
l
ect
edbyt
hegov
ernment
.Iti
sanon-
penalbut
compul
sor
yandunr
equi
tedt
ransf
erofr
esour
cesf
rom pr
ivat
etopubl
i
csect
or,i
tis
col
l
ect
edont
hebasesofperdet
ermi
nedcr
it
eri
a,t
hecl
assi
caleconomi
cwher
evi
ewed
t
hatt
heonl
yobj
ect
iveoft
het
axat
ionwast
orai
segov
ernmentr
evenuebutwi
thi
nthe
changei
sci
rcumst
anceandi
deol
ogi
est
heai
m oft
axhadbeenchanged.Theseday
s
apar
tfr
om t
heobj
ect
iveofr
isi
ngt
hepubl
i
crev
enuet
axi
slev
iedt
oaf
fectconsumpt
ion,
pr
oduct
ionanddi
str
ibut
ionwi
thv
iew t
oinsur
esoci
alwel
far
ethr
ought
heeconomi
c
dev
elopmentoft
hecount
ry.Taxat
ioni
scent
ralt
o cur
renteconomi
cdev
elopment
agenda.I
tpr
ovi
desst
abl
efol
l
owofr
evenuet
ofi
nancedev
elopmentpr
ior
it
iessuchas
st
rengt
henphy
sicali
nfr
ast
ruct
urei
ntr
oveswi
thnumer
ousot
herpol
i
cesf
rom good
gov
ernanceandf
ormal
i
zet
hei
nvest
mentt
otakepl
ace(
Dal
ton1998)
.

Rent
ali
ncomet
axar
eoneoft
hegov
ernmentsour
ceofr
evenuei
nbot
hdev
elopi
ngand
dev
elopedcount
ersaccor
dingt
o(Gebr
eW 2006)ev
eryt
axpay
ert
hecount
ryshoul
dbe
t
axedaccor
dingt
ohi
sabi
l
ityt
opayandt
het
imeofpay
ment
,themannerofpay
ment
andquant
it
ytobepai
dmustbecr
eti
nfort
hegov
ernment
.A st
udyconduct
edby
“
Wil
l
iam M”pr
ofessorofeducat
ionandbusi
nessadmi
nist
rat
ionatSt
anf
orduni
ver
sit
y,
r
evel
sthatt
her
ent
alt
axi
mposi
ti
oni
scoul
dnot st
il
lbr
ingt
heunr
epai
redr
esul
tduet
o
anumberofr
easonssuchasl
uckofcl
eanunder
standi
ngaboutt
axsy
stem bypay
ers
andcompl
i
cat
ionoft
axpay
erswi
tht
hei
robl
i
gat
ioni
nbot
hdev
elopi
nganddev
eloped
count
ri
es.Manyst
udi
eshav
ebeenconduct
edwi
thr
espect
edt
orent
alt
axl
eav
ingand
col
l
ect
ioni
nbot
hdev
elopi
nganddev
elopedcount
ri
es.

Thi
spaperwast
ri
ed t
o anal
yzet
her
ent
ali
ncomet
axl
eav
ing and col
l
ect
ionand
pr
obl
emsr
elat
edt
oleav
ingandcol
l
ect
ioni
nAr
siNegel
etownr
evenueaut
hor
it
yand

1
t
hisst
udi
eswasal
sogi
vesomer
ecommendat
ion,i
nvest
igat
ionf
orper
sonwhohav
e
r
esponsi
blef
orl
eav
ingandcol
l
ect
ingsy
stem.

1.
2STATEMENTOFTHEPROBLAM
Taxat
ionenabl
est
hegov
ernmentt
opr
ovi
deadmi
nist
rat
iveandcompl
i
ancecost
,ther
e
f
ort
hengov
ernmentmustgui
det
hel
owst
hatenabl
esi
ttocol
l
ectr
evenueef
fi
cient
ly.
Taxar
e compul
sor
ypay
mentbyev
eryper
son oror
gani
zat
ion t
othe gov
ernment
becauset
hemai
nsour
cer
avenoust
owi
thoutexpect
ati
onofdi
rectr
etune.Taxar
e
bur
den t
hus r
educe t
he economi
c wel
terofi
ndi
vi
dualand busi
ness or
gani
zat
ion,
howev
eri
ndev
elopi
ngcount
erst
axat
ioni
schal
l
engi
ngt
opi
candat
tr
act
edat
tent
ioni
n
l
astt
wodecade.Bi
nmanydev
elopi
ngcount
ersi
tobser
vedt
hatt
her
eisl
owcapaci
tyt
ax
admi
nist
rat
iont
omoni
torcompl
i
anceamongr
ent
alt
axpay
ers(
Tax2000)
.Et
hiopi
ali
ke
ot
herdev
elopi
ng count
ersf
aci
ng di
ff
icul
tyi
nrai
sing t
hel
eav
eoft
her
equi
red f
or
pr
omot
ionofeconomi
cgr
owt
h.Hencet
hecount
ershav
ebeenconsi
stentsur
plusof
expendi
tur
eov
err
evenuef
orsuf
fi
cientl
ongper
iodoft
ime.Toadder
sthi
spr
obl
em t
he
gov
ernmenti
ntr
oducedoft
axdi
rectandi
ndi
rect
)howev
ert
hisi
mposi
ti
onoft
axcoul
d
notst
il
lbr
ingst
her
equi
redr
esul
t.(
Tadl
e,2000)
.

Themai
nreasonf
orconduct
ingt
hisr
esear
chpaperwashowt
otaxl
evyandcol
l
ectt
he
appr
opr
iat
erent
ali
ncomet
axt
hatmat
cht
heest
imat
edr
ent
ali
ncomet
axwi
tht
he
act
ualbycr
eat
ingawar
enessf
ort
her
ent
ali
ncomet
axpay
erandcol
l
ect
ingaut
hor
it
y
aboutamountt
obepai
d,t
imeofpay
ment
,manur
eofpay
ment
,toknowt
her
etaxabl
e
i
ncomebysi
gni
fi
cantamount
,reducehost
il
it
ybet
weenpay
erandof
fi
cial
stocol
l
ectt
he
r
equi
redamountpr
oper
lyandmat
cht
heest
imat
edwi
tht
heact
ual
rent
ali
ncome
I
naddi
ti
ont
othatpeopl
eneedt
opayt
axbasedonr
ati
onal
i
stofv
ert
icalandhor
izont
al
equi
ty,i
snotal
way
sthatt
het
axsy
stem ar
ecompr
ehensi
veandt
ranspar
entspeci
all
y
f
ort
hosewhoar
elessl
i
ter
atei
ndi
vi
dual
s.Consequent
lyt
her
ent
alt
axl
eav
ingand
col
l
ect
ionsubj
ectt
oest
imat
ionasar
esul
toft
hist
her
ent
alt
axpay
ersar
efr
equent
ly
subj
ect
edt
oov
ert
axat
ion.Thei
mpactoft
hisnotwel
lunder
stoodbyt
her
ent
alt
ax

2
col
l
ect
ors.Ther
efor
efort
hisst
udywasconduct
edi
nor
dert
oaddr
esst
hepr
obl
em ar
ise
her
etonar
rowt
hegapbet
weenpay
erandcol
l
ect
ingaut
hor
it
y.

1.
3Resear
chquest
ion
 Whatar
ethef
act
orswhi
char
econsi
der
edi
nlev
yingr
ent
alt
ax?

 Ar
etheempl
oyeeoft
hist
ownar
emot
ivat
edt
ocol
l
ect
edt
her
equi
redamount
?

 Ar
ether
ent
alt
axcol
l
ect
ionsy
stem andpr
ocedur
ear
eef
fect
iveandef
fi
cient
?

 Whatar
emaj
orf
act
ori
est
hataf
fectr
ent
ali
ncomet
axcol
l
ect
ion?

1.
4Obj
ect
iveoft
hest
udy
Thi
sst
udyhast
woobj
ect
ivessuchasgener
alobj
ect
ivesandspeci
fi
cobj
ect
ive

1.
4.1Gener
alobj
ect
ive
Thegener
alobj
ect
iveoft
hest
udywast
oanal
ysi
srent
alt
axl
evy
ingandcol
l
ect
ioni
n
Ar
siNegel
etownadmi
nist
rat
ionr
evenueaut
hor
it
y.

1.
4.2Speci
fi
cobj
ect
ive
 Toi
dent
if
ycr
it
eri
atol
evy
ingr
ent
ali
ncomet
ax.

 Toknowt
hemot
ivat
ionmadet
oempl
oyedt
ocol
l
ectr
ent
ali
ncomet
ax.

 Toi
dent
if
ymaj
orf
act
ort
hatef
fect
srent
ali
ncomet
axcol
l
ect
ion.

 Toi
dent
if
yther
ent
alt
axcol
l
ect
ionsy
stem andpr
ocedur
esar
eef
fect
iveand
ef
fi
cient
.

1.
5Si
gni
fi
canceoft
hest
udy
Topr
ovi
deposi
ti
vecont
ri
but
ioni
nfi
ndi
ngsol
uti
ont
othef
ocusedar
eaandpr
ovi
de
i
nfor
mat
ionf
orempl
oyeeswhoseof
fi
cef
acepr
obl
em r
egar
dingt
her
ent
alt
axl
evy
ing
and col
l
ect
ion sy
stem.I
n addi
ti
on t
othi
s,i
twoul
d be used asbase f
oranot
her
r
esear
cherwhowant
stof
urt
herst
udyont
hear
eaandpr
ovi
deawar
enesst
orent
alt
ax
aut
hor
it
yandt
akecor
rect
ivef
unct
ionf
orpr
obl
em i
dent
if
ying

1.
6Scopeoft
hest
udy
Rent
alt
axi
s one oft
he cr
uci
alsour
ces ofr
evenue f
orgov
ernmentand v
ari
ous
pr
obl
emsf
acedi
nlev
yingandcol
l
ect
ionpr
ocess.I
tcanbest
udy
ingcount
ryl
evelas

3
wel
lasatr
egi
onall
evelbutduet
oti
meandcostconsi
stentt
hisr
esear
chwoul
dbe
f
ocusedi
nanal
ysi
srent
alt
axl
evy
ingandcol
l
ect
ioni
nAr
siNegel
etownadmi
nist
rat
ion
r
evenueaut
hor
it
y.

1.
7Li
mit
ati
onoft
hest
udy
Whenconduct
ingt
hisr
esear
chwor
kther
ewassomel
i
mit
ati
onst
hathi
nder
edt
heef
fect
iveness
oft
hest .Ther
udy ear
esomel
i
mit
ati
ont
oconductt
hest
udy
.Thi
sst
udydoesnotcov
er
al
lrev
enueaut
hor
it
yinEt
hiopi
a.Buti
tli
mit
sonl
yWestAr
sizoneAr
siNegel
etown
r
evenueaut
hor
it
y.

1.
8Or
gani
zat
ionoft
hepaper
Apaperhasf
ivechapt
ers,Chapt
eronedeal
swi
thi
ntr
oduct
orypar
ts,whi
chconsi
stsof
backgr
oundoft
hest
udy
,st
atementoft
hepr
obl
em,obj
ect
ivesoft
hest
udysi
gni
fi
cant
oft
hest
udyandscopeoft
hest
udy
.Thesecondchapt
ercont
ainsl
i
ter
atur
erev
iewand
empi
ri
calr
evi
ew.Thet
hir
dchapt
eri
ncl
udesr
esear
chdesi
gn,sour
ceofdat
a,dat
a
anal
ysi
sandpr
esent
ati
onoft
argetpopul
ati
onandsampl
i
ngmet
hodandr
efer
ence.
Four
thchapt
erdi
scusseddat
apr
esent
ati
onandanal
ysi
sandt
hef
if
thchapt
erwas
di
scussedaboutconcl
usi
onandr
ecommendat
ion.

4
CHATPERTWO

2.REVI
EW OFRELATEDLI
TERATURE
1THEROTI
2. CALREVIEW
Taxat
ioni
sasyst
em ofr
aisi
ngmoneyt
ofi
nancegov
ernmentser
viceandact
ivi
ti
es.
Gov
ernmentatal
llev
ell
ocal
,st
ateandnat
ional
-r
equi
respeopl
esandbusi
nesst
opay
t
het
axes.Taxi
scont
ri
but
iont
ost
ater
evenuel
egal
l
yli
vedonper
sonpr
oper
tyor
busi
ness.

Gov
ernmentcanbef
inancet
hei
ract
ivi
ti
esbybor
rowi
ng,
creat
ingmoneyorbyobt
aini
ng
t
echni
calassi
stancef
rom abr
oadanddonat
ion,butt
hemaj
orser
viceofr
evenuet
o
f
inance publ
i
c expendi
tur
e ar
etaxes.I
tis compul
sor
ycont
ri
but
ion bypeopl
e or
or
gani
zat
iont
othegov
ernment
.Thegener
all
eveloft
axeshasv
ari
edt
hrought
hey
ear
s;
dependont
her
oleofgov
ernment
s.I
nmoder
nti
mes,manygov
ernment
sespeci
all
yin
adv
anced i
ndust
ri
alcount
ri
es hav
erapi
dly expended t
hei
rrol
es and t
ake new
r
esponsi
bil
i
ty.Asar
esul
t,t
hei
rneedf
ort
axr
evenuehasbecomegr
eat
.(Gebr
ieWer
ku,
2006,
p-1)

2.
1.1Pr
inci
plesoft
axes
Thepi
oneereconomi
stsAdam Smi
thwhoar
ear
guesf
or“
Lassi
esf
air
”st
atesf
our
pr
inci
plesoft
axat
ionwhi
chhecal
l
edt
hem as“
canonoft
axat
ion”

5
A.Thecanonofequi
ty

Thecanonofequi
ty,equi
tyorj
ust
icei
sthemosti
mpor
tantcanonoft
axat
ion.Smi
th
expl
ainedi
tthus:“
Thesubj
ectofev
eryst
ateoughtt
ocont
ri
but
etowar
dst
hesuppor
tof
t
hegov
ernmentasnear
lyaspossi
ble,Ipr
opor
ti
ont
othei
rrespect
iveabi
l
ity
,thati
sin
pr
opor
ti
ont
othei
rrev
enuewhi
cht
heyr
espect
ivel
yenj
oyt
hepr
otect
ionoft
hest
ate.“I
t
meanst
hat
,ev
eryper
sonshoul
dpayt
het
axaccor
dingt
othusabi
l
ityandnott
hesame
amountandshoul
dnetpayoft
hesamer
ate,r
atherev
eryper
sonpayt
het
axi
n
pr
opor
ti
ont
ohi
sincome.

B.Thecanonofcer
tai
nty

Accor
dingt
oSmi
th,t
her
eshoul
dbecer
tai
ntyi
ntaxat
ionbecauseuncer
tai
ntybr
eeds
cor
rupt
ion,byt
hecannonofcer
tai
ntyhemeanst
hat“
thet
axwhi
cheachi
ndi
vi
duali
s
boundt
opayoughtt
obecer
tai
n,andnotar
bit
rar
y.Thet
imeofpay
ment
,mannerof
pay
ment
,thequant
it
ytobepai
doughtal
ltobecl
ear
lyandpl
aint
othecont
ri
but
ionand
t
oev
eryot
herper
son.“
Thust
hiscanonr
efer
sther
eshoul
dbenoel
ementofar
bit
rat
ion
i
ntax(
moneybanki
ng)

C.
Thecanonofconv
incecanonl
aydown

Thi
scanonl
aydownt
hatbot
hthet
imeandmannerofpay
mentshoul
dbeconv
eni
entt
o
t
het
axpay
er.I
nthewor
dsofSmi
th,“
ever
ytaxoughtt
obel
evi
edoft
het
ameont
he
manneri
nwhi
chi
tismostl
i
kel
ytobeconv
eni
entf
ort
hecont
ri
but
iont
opay
.The
pay
mentofsal
etaxandexci
sedut
ybyt
heconsumeri
sal
soconv
eni
entbecauset
he
pay
sthesest
axeswhenhebuy
scommodi
ti
esandatat
imewhenhehast
hemeanst
o
buy
.

D.Thecanonoft
heeconomy

Ev
eryt
axshoul
dbesat
isf
yingt
hecanonofeconomyi
ntwoway
s.Fi
rst
,itshoul
dbe
economi
calf
ort
hest
atet
ocol
l
ecti
t.I
fthecostofcol
l
ect
ioni
nthef
orm ofsal
ari
esof
t
axof
fi
cial
sismor
ethanwhatt
het
axbr
ingasr
evenue,sucht
axi
suneconomi
cal
,and
hencei
tshoul
dnotbel
evi
ed.Second,i
tshoul
dbeeconomi
calt
othet
axpay
ers.I
t

6
meanst
hatheshoul
dhav
esuf
fi
cientmoneyl
eftwi
thhi
m af
terpay
ingt
het
ax.

Now aday
,Smi
thcanongetwi
deraccept
anceandsomeot
herphi
l
osopheral
soar
e
addedpr
inci
ples.Todar
otr
iedt
oputf
act
ors,
whi
chdet
ermi
net
het
axpot
ent
iali
ntof
ive
cat
egor
iest
hese,
are;

1.Thel
evel
percapi
tal
income(
PCI
)

2.Thedegr
eeofi
nequal
i
tyi
nthedi
str
ibut
ionoft
hati
ncome

3.Thei
ndust
ri
alst
ruct
ureoft
heeconomyact
ivi
ty(
forexampl
ethei
mpor
tanceof
f
orei
gn t
rade,t
he si
gni
fi
cance oft
he ent
erpr
ises,t
he degr
ee t
o whi
ch t
he
agr
icul
tur
esect
orsi
scommer
cial
i
zedasopposedt
osubsi
stenceor
ient
ed.

4.Thesoci
al,pol
i
ticalandi
nst
it
uti
onalset
ti
ngandt
her
elat
ivepowerofdi
ff
erent
gr
oup’
slandl
ordsasopposedt
omanuf
act
urest
radeuni
on,v
il
lageordi
str
ict
communi
tyor
gani
zat
ion.

5.Theadmi
nist
rat
ivecompet
ences,
honest
yandi
nter
est
ingoft
hegat
her
ingbr
anch
ofgov
ernment
.(
moneybanki
ngt
rendandpubl
i
cfi
nance2006

2.
1.2Taxst
ruct
ure
Taxst
ruct
urei
sanexasper
ati
onoft
her
elat
ivei
nci
dence(
bur
denoft
axsy
stem on
i
ndi
vi
dualatdi
ff
erenteconomi
clev
els.Gener
all
y,t
her
ear
e4t
ypesoft
axst
ruct
uresuch
aspr
ogr
essi
ve,
propor
ti
onal
,regr
essi
veanddi
gressi
ve

1.Pr
ogr
essi
vet
axst
ruct
ure

I
fthet
axsy
stem i
spr
ogr
essi
ve,t
hepr
opor
ti
onofi
ncomet
akeni
ntax(
thet
axr
ate)
r
iseswi
thi
ncomeorspendi
ngpower
.Her
east
hei
ncomeorspendi
ngi
ncr
easest
he
mar
ginalr
ateoft
axf
ort
hei
ncr
easedi
ncomeorspendi
ngal
sor
ises.Onot
herwor
ds,
it
i
staxst
ruct
uret
hatdeal
swi
thpeopl
eathi
ghereconomi
clev
elpay
sgr
eat
erper
cent
age
oft
hei
rincomei
nthef
orm oft
ax.

I
ndev
elopedcount
ri
es,t
heyoweapr
ogr
essi
vei
ncomet
ax,f
orexampl
eUSi
ncomet
ax
i
nthemostpr
ogr
essi
vet
axi
ntheUSA.Pr
ogr
essi
vet
axt
hemostequi
tabl
ethan

7
r
egr
essi
veorpr
opor
ti
onalt
axesi
nthesensest
hatt
heyar
eli
vedaccor
dingt
otheabi
l
ity
t
o pay
.In Et
hiopi
a some oft
he pr
ogr
essi
vet
axes ar
e per
sonali
ncome t
ax of
pr
ocl
amat
ion30/
1992and107/
1994andt
her
ent
ali
ncomet
axofpr
ocl
amat
ionNo
64/
1993.Thei
ncomel
evelwi
l
lbecat
egor
izedi
ndi
ff
erenti
ncomebr
acketandt
axedby
pr
ogr
essi
ver
ate.

2.Pr
opor
ti
onalt
axst
ruct
ure

Asy
stem t
hatt
axesev
ery
oneatsomer
ate,r
egar
dlessofhi
s/heri
ncomebr
acket
,a
pr
opor
ti
onalt
axr
atei
susual
l
yst
art
edasf
latper
cent
ageoft
hebaser
egar
dlessofi
ts
si
zes.Suppor
ter
soff
latt
axar
guet
hati
tgi
vespeopl
eincent
ivet
oear
nmor
e,because
t
heycoul
dnotbe,penal
i
zingbygr
aduat
ingt
ohi
ghert
axbr
acket
.Forexampl
e,t
he
pr
oper
tyt
axusual
l
yoper
ateswi
thpr
opor
ti
onr
ate,
thet
axmi
ghtbeexpr
essedas1%of
t
heassessedpr
oper
tysal
es,andexci
set
axes,pay
rol
ltaxesandmostcust
om dut
ies
ar
eli
vedont
hebasesofpr
opor
ti
onr
ate.Ki
ndoft
axesi
nEt
hiopi
aar
eseeni
nthemi
ning
i
ncomet
axpr
ocl
amat
ionNo23/
1996whi
chst
atest
hatbot
hloseandsmal
lscal
e
mi
nor
sshal
lpay35%oft
hei
rmi
ningi
ncome.

3.Regr
essi
vet
axst
ruct
ure

I
nthi
ski
ndsoft
axt
hemar
ginalr
ateoft
axdecr
eased,ast
hei
ncomeorconsumpt
ion
i
ncr
eases.Thi
staxi
sal
argeshar
eofi
ncomef
rom t
hel
owi
ncomet
axpay
erst
hanf
rom
t
hehi
ghi
ncomet
axpay
er.At
axwhi
chi
stechni
cal
l
ypr
opor
ti
onali
nter
m oft
het
ax
bases,canof
tenbeconsi
der
edr
egr
essi
vei
nter
msoft
axpay
ersi
ncomecommon
exampl
eofsuchr
egr
essi
vei
ncomet
axar
esal
etax,exci
set
axandpr
oper
tyt
ax.For
exampl
e,anexci
set
axorci
gar
ett
eisbasedont
heNoofci
gar
ett
essol
dandt
hisby
def
ini
ti
oni
spr
opor
ti
onalsi
ncet
henumberofci
gar
ett
esconsumedmayr
iseasi
ncome
r
ise,howev
ert
her
ateoft
axdecr
easewi
thi
ncr
easi
ngi
ncomeandt
huscanbecal
l
ed
r
egr
essi
ve.
Mostofi
ndi
rectt
axesar
eregr
essi
ve,f
orexampl
eexci
set
axandsal
etax;
t
hesameamountoft
axi
spai
dperuni
tpur
chases.Thi
stheamountt
axr
epr
esent
s
hi
gherpr
opor
ti
on ofi
ncome t
othe poor
,some peopl
e ar
gue t
hatr
egr
essi
vet
ax
encour
agespeopl
etowor
khar
dert
obeel
evat
edabov
eloweri
ncomegr
oup.

8
Thef
oll
owi
ngexampl
esi
l
lust
rat
ivet
her
elat
ionshi
pbet
weent
axst
ruct
ure(
propor
ti
onal
,
pr
ogr
essi
veandr
egr
essi
ve)t
axr
ate.

Tabl
e2.
1ther
elat
ionshi
pbet
weent
axst
ruct
ures

Taxbase(
inbi
rr
) TaxRat
e

Pr
opor
ti
onal Pr
ogr
essi
ve Regr
essi
ve

1000 10 10 50

2000 10 20 40

3000 10 30 30

4000 10 40 20

5000 10 50 10

Sour Gebei
ce: rewor
ku,
2006

4.Di
gressi
vet
axst
ruct
ure

Thi
staxst
ruct
urei
sanal
ter
nat
ivet
ypeofpr
ogr
essi
vet
axst
ruct
ure,
whi
chi
smar
ked
byast
eadi
l
ydecl
i
ningi
nthei
ncr
easi
ngr
ateofpr
ogr
essi
vet
axes.

2.1.
3Ef
fect
ives’
oft
axat
ion
Economi
stshav
edev
otedconsi
der
abl
eexpor
tto st
udy
ingt
heef
fect
soft
axes.I
n
par
ti
cul
ar,t
heyst
udyhow t
axesaf
fectpeopl
e’
sbehav
ior
,incl
udi
ngt
hei
rchoosi
ngi
n
wor
king,
sav
ingandi
nvest
ing.Tounder
standt
heef
fectofanyt
ax,
onemustdet
ermi
ne
who bear
sthebur
denoft
het
ax.Thewayat
axaf
fect
speopl
eiscal
l
edt
het
ax

9
i
nci
dencest
hest
atuar
yinci
dencesoft
axr
efert
othei
ndi
vi
dualgr
oupwhomustl
egal
payi
ncont
rast
,theeconomi
csofat
axr
efer
stoi
tsact
ual
l
yef
fect
sonpeopl
eincomes.
Theeconomi
csi
nci
dencesofat
axdependsonhowbuy
erandsel
l
eroft
hecommodi
ty
whent
het
axi
simposed.I
thav
eal
sobeenusedt
oreduci
ngt
hei
nequal
i
tyofi
ncome
andweal
thy
.

2.
1.3.
1Eff
ectont
heabi
li
tyt
owork,saveandi
nvest
Taxat
ionrefert
hemoneyi ncomef r
om thepubl
i
ctot
hegov
ernmentandt
hei
rby
r
educi
ngt
hei
rpur
chasi
ngpower
.Ther
educt
ioni
npur
chasi
ngpowerr
educest
hei
r
abi
l
ityt
oobt
ainnecessi
tyl
uxur
iesofl
i
fe.Thus;
thel
evi
esoft
axonpeopl
esr
educet
hei
r
compet
it
ionsofnecessi
ti
esandcomf
ort
s,whi
chl
owert
hest
andar
dofl
i
ving,whent
he
st
andar
dofl
i
vingi
saf
fect
ed.Thi
sef
fecti
sst
rongl
yfel
tbyt
hepoorpeopl
e.Howev
er,
t
heef
fi
ciencyandabi
l
ityofr
ichpeopl
eisnotsomuchaf
f edbyt
ect axat
ion.

2.
1.3.
2Eff
ectsoft
axat
iononwi
ll
ingnesst
owork,
saveandi
nvest
Taxat
ionaff
ectsthedesi
gnofthepeoplet
owor k,
savi
nginvest
.Ift
hewi
l
li
ngnessoft
he
peopl
etowor
k,sav
eandi
nvesti
saf
fect
edbyt
axat
ion,t
hepr
oduct
ionwi
l
laut
omat
ical
l
y
beaf
fect
ed.I
tisuni
ver
sal
recogni
zedt
hatdi
rectt
axeshav
emor
eadv
erseef
fect
sal
lthe
wi
l
li
ngnessoft
hepeopl
etowor
k,sav
eandi
nvest
.Iti
sal
lthegr
oundpsy
chol
ogy
r
eact
ionoft
hepeopl
e.Thati
swhent
hehi
gherpr
ogr
essi
veoft
axat
ioni
slev
ied,t
he
gov
ernmentt
akest
hemaj
orofpr
otect
ionoft
headdi
ti
onal
l
yincomebook.Thi
smany
cr
eat
eat
rendsi
nthemi
ndoft
hepeopl
enott
otaker
iskt
owor
k,har
dtoear
na
manageri
ncome.

Howev
er,f
airandj
ust
icest
axsy
stem maynothav
eanysuchbadef
fect
iveont
he
wi
l
li
ngnesst
othewor
ksav
eandi
nvest
.

2.
1.3.
3Ef
fect
soft
axati
ononthedi
ver
sofeconomi
cresour
ces
Wil
ltheval
ueofproduct
ionoftheencount
erdependuponabi
l
ityandwi
l
li
ngnesst
oa
wor
k,sav
eandi
nvest
,thepat
ter
nsofpr
oduct
iondependsupont
heal
l
ocat
ionof
economi
cresour
cesamountt
hei
ndust
ryandr
egi
onandconsumes.I
fthepr
oduct
cer
tai
nindust
ryar
etaxed,t
hei
rpr
iceswoul
dri
seandt
her
efor
e,t
hedemandsf
ort
hei
r

10
pr
oductwoul
dreduceandt
her
ebat
hepr
ofi
tsal
soI
sreduced,t
hismayr
esul
tint
he
di
ver
sionofr
esour
cesf
rom t
hisi
ndust
ri
est
osomeot
heri
ndust
ri
eswhosepr
oducti
s
subj
ect
edt
onot
axorl
owr
ate.

I
fther
eisor
igi
nali
mbal
ancewi
thi
nthecount
ry,gov
ernmentcanusest
axat
iont
o
r
emov
esuchi
mbal
ancebyt
axexami
nat
ionandt
axconcessi
ont
oinv
est
orswhomade
i
nvest
menti
nunderdev
elopedr
egi
ons.Thedi
ver
sionmaybebenef
ici
aldi
ver
sionor
har
mfuldi
ver
sion.Taxat
ionont
hecommodi
ti
est
hathasi
njur
iest
otheheal
thl
i
ke
ci
gar
ett
esandl
i
qui
dmaydi
scour
aget
hei
rconsumpt
ion,whi
chi
ntur
naf
fect
sthei
r
pr
oduct
ion.Thef
act
orsofpr
oduct
ionengagedi
nthesei
ndust
ri
esmaybedi
ver
ted
someot
heri
ndust
ri
es.Thi
sis“
benef
ici
aldi
ver
sion”
.Thet
axat
ionont
hegoodsof
commonconsumpt
ionwi
l
lincr
easet
hei
rpr
ice.

Hencemaybedi
ver
tedt
othepr
oduct
ionofsomeot
hercommodi
ti
eswhi
chmaybei
n
t
henat
ureofl
uxur
yorhar
mfult
oheal
thy
,iti
sknownas“
har
mfuldi
ver
sion”
(publ
i
c
f
inance7thedi
ti
on)

2.
1.4Ty
pesoft
axes
Per
sonalf
inancedeci
sioni
saf
fect
edbyv
ari
etyoft
axes-
bot
hdi
rectandi
ndi
rectt
ax-
t
hatr
educesf
undsav
ail
abl
eforot
herexpendi
tur
eorsav
ing.Theamountoft
axespai
d
and t
he t
ype oft
axes af
fect
ing i
ndi
vi
dualconsumer
.In gener
al,i
nter
ms oft
he
r
elat
ionshi
pbet
weent
henat
ureoft
axesandt
her
easonf
orpay
ment
,taxescl
assi
fi
ed
asdi
rectandi
ndi
rectt
axes.

2.1.
4.1Di
rectt
ax
Accor
dingt
oDal
ton,di
rectt
axesar
ethose,whi
char
epai
dint
erl
ayerbyt
hatper
sonon
whom t
heyar
eimposed.Di
rectt
axar
ethoset
axes,whi
chcannotbeshi
ft
edot
herl
i
ke
r
ent
ali
ncomet
ax,
per
sonali
ncomet
ax,
busi
nesst
ax,agr
icul
tur
ali
ncomet
ax,t
axon
di
vi
dendandchancewi
ning,
rur
all
anduset
ax,
etc.
.Amongt
hist
her
esear
cherf
ocused
on r
ent
ali
ncomet
ax,i
.e.anyi
ncomear
isi
ng f
rom r
entofbui
l
ding,f
urni
tur
e,and
equi
pment
.

2.1.
4.2I
ndir
ectt
ax
Indi
recttaxisataxi
nwhi
cht
hebur
denmaynotnecessar
il
ybeswal
l
owedbyasses,

11
whi
chmeansi
ndi
rectt
axcanbeshi
ft
ed ont
heot
herper
sons.
Gener
all
y,t
het
ax
i
nci
denceoft
hei
ndi
rectt
axi
sanul
ti
mat
econsumer
;howev
er,somet
imessel
l
ermi
ght
absor
bsuchi
ndi
rectt
axt
obecompet
it
ivei
nthemar
ket
.Thi
sact
ionr
educesi
tspr
ofi
t.
I
ndi
rectt
axesar
e: Exci
set
ax:l
evi
edi
nrespectofgoodspr
oducedl
ocal
l
yand
i
mpor
ted goods.Exci
se t
ax shoul
d be pai
d wi
thi
n 30 day
s,af
tert
he mont
hthe
pr
oduct
ionhasbeenpr
oduced.

I
. Tur
nov
ert
ax(
TOT)t
het
urnov
ert
axwoul
dbepay
abl
eongoodsol
dand
ser
vicesr
ender
edbyper
sonnotr
egi
ster
edf
orv
alueaddedt
ax,
whi
cht
hei
r
annual
taxabl
etr
ansact
ionsar
eundert
het
otal
val
ueof500,
000Bi
rr
.

I
I. Val
ueaddedt
ax(
VAT)i
sat
axont
hev
alueaddedt
ogoodandser
vicesby
ent
erpr
isesateachst
ageofpr
oduct
ionanddi
str
ibut
ionpr
ocess.
(Gebi
re
wor
ku2006)

2.
1.5Obj
ect
iveoft
axat
ion
Taxesar
ethepr
imar
ysour
ceofgov
ernmentr
evenuet
hrought
hepr
opor
ti
onoft
ax
r
evenue v
ari
es among l
evelofgov
ernment
.Taxes maybe r
egul
ator
yin ei
thera
mi
croeconomi
csoramacr
oeconomi
cssense.I
nthemi
croeconomi
ccont
ext
s,t
hey
mayi
nfl
uencet
heconsumpt
ion ofpar
ti
cul
argood ort
heut
il
izat
ion ofpr
oduct
ive
r
esour
ces.I
nthemacr
oeconomi
cs,
fiscalpol
i
cyi
sdi
rect
edt
owar
dachi
evement
soft
he
st
abi
l
izat
iongoodsoft
hesoci
ety
.Inaddi
ti
ont
oSour
ceofr
evenue,t
het
axpol
i
cyof
nat
ion enabl
esgov
ernmentt
o st
abi
l
izeeconomy
,to di
str
ibut
eincome,t
o al
l
ocat
e
r
esour
ceandusedt
ost
imul
atepr
ivat
esect
or.

A.St
abi
li
zat
ionoff
unct
ion

St
abi
l
izat
ionoff
unct
ionoft
axgoeswi
thal
l
ocat
ionandf
iscalpol
i
ciesofgov
ernment
.
Thei
ncr
easeanddecr
easeofi
ncomehasani
mpactonsuppl
yofgoodsandser
vices.
Thi
scanbeseenont
hebasi
ceconomi
cindi
cat
orasi
ncr
ementordecr
ementofan
empl
oyment
,val
ueofgoodsandser
vicesoronsav
ingandi
nvest
ment
.Ingener
al,
col
l
ect
ionofr
evenueandusi
ngi
tfordi
ff
erenteconomi
candsoci
alsect
orsi
sgi
ven
pr
ior
it
yandt
hecount
ryexpendi
tur
eshoul
dcor
respondwi
thi
tsr
evenuet
oreducet
he
r
iskofi
nst
abi
l
ity
.Thegoalofst
abi
l
izat
ioni
ncl
udesi
nor
dercombat
ingt
heundesi
rabl
e

12
condi
ti
onofr
ecessi
onordepr
essi
onst
abi
l
izat
ionmayal
sobeappl
i
edi
nthepur
sui
tof
pr
icest
abi
l
ityi
nor
dert
opr
eventi
nfl
ati
on.I
tmaybedi
rect
edt
owar
dthepr
omot
ionof
economi
cgr
owt
handi
mpl
ementi
nthenat
ion’
sbal
anceofi
nter
nat
ional
pay
ment
.

B.I
ncomer
edi
str
ibut
ion

I
ncomer
edi
str
ibut
ion i
smadeont
hepat
ter
ninwhi
chaggr
egat
esi
ncomeorweal
thi
s
di
vi
dedamongt
hepeopl
essogov
ernmentl
evyt
axnotonl
ytocov
erpubl
i
cexpendi
tur
e
suchaspol
i
cies,
l
awandj
ust
ice,f
orot
herpar
ti
alpubl
i
cser
vicebesucheducat
ionand
heal
thandf
orconst
ruct
ingi
nfr
ast
ruct
uresbutgov
ernmental
sol
evi
est
axf
ori
ncome
r
edi
str
ibut
ion.Thepubl
i
csect
orbudgetpl
aysani
mpor
tantr
olei
nthedi
str
ibut
ionof
i
ncomeoneuni
queappr
oacht
oincomedi
str
ibut
ioni
stov
iewi
taspubl
i
cgood.

C.Resour
ceal
locat
ion

Gov
ernmentcol
l
ect
stax r
evenue and uses i
tto al
l
ocat
ethe l
i
mit
ed pr
oduct
ive
r
esour
cest
obeav
ail
abl
etot
hesoci
ety
.Theunl
i
mit
edofaggr
egat
ehumanwant
sal
ong
wi
thl
i
mit
edr
esour
ces,whi
chpr
oducet
heeconomi
cgoodscapabl
eofsat
isf
yingt
his
want
s,makei
tnecessar
ytocol
l
ectr
esour
ces.

D.St
imul
ati
onofpr
ivetsect
ors

Pr
ivetsect
ori
nvol
vementi
sver
yimpor
tanti
npl
anni
nganddev
elopmentpr
ogr
am i
nfr
ee
mar
keteconomy
.Thi
scanbeachi
evedbyexempt
ion,
deduct
ibl
e,t
ransf
err
ingl
osesand
byal
l
owi
ng,ot
heri
ncent
ives t
oincr
ease t
he par
ti
cipat
ion ofpr
ivetsect
ori
nthe
dev
elopmentpr
ogr
am oft
hecount
ryt
oini
ti
atet
hei
ndi
vi
duali
nvest
ort
hegov
ernment
pr
ovi
det
axexempt
ionandot
heri
ncent
ives.
(I
ncomet
axf
undament
al1stedi
ti
on)

2.
1.6Taxr
efor
ms
Thet
axsy
stem r
efor
m pr
ojectai
mst
ocr
eat
etaxsy
stem t
hati
smor
esuppor
ti
veof
pr
ivetsect
ordev
elopment
,impr
ovi
ng r
evenue col
l
ect
ion and ensur
ing equi
ty and
f
air
nessoft
axsy
stem.Thet
axr
efor
mst
hathav
ebeeni
nit
iat
edwi
l
llayt
hef
oundat
ion
f
ort
hest
rengt
henedr
evenuebase.

Cont
inui
ngef
for
tst
oimpr
ovet
axadmi
nist
rat
ionandcol
l
ect
ioni
ncl
udi
ngst
rengt
heni
ng

13
t
hel
arget
axpay
eruni
t,hav
eresul
tedi
nincr
easedt
axr
evenue.Ref
ormshav
esoughtt
o
st
ream mor
eef
fi
ci
ent
,st
rengt
h,andt
hecol
l
ect
ionofdomest
ici
ndi
rectt
axt
hrough
sel
ect
iver
atei
ncr
easeandbur
dent
het
axbase.Thet
axr
efor
m gr
eat
lybenef
it
edt
he
count
ryi
n;

 For
mul
ati
onsoft
axpol
i
cyandl
egi
slat
ion

 I
ntr
oduct
ionofpr
esumpt
ivet
axat
ionsy
stem

 I
ntr
oduct
ionofv
alueaddedt
ax(
VAT)

 Taxpay
eri
dent
if
icat
ionnumbersy
stem (
TIN)

 Feder
alI
nlandRev
enueAut
hor
it
y(FI
RA)

 Oper
ati
onal
progr
am,
syst
em andpr
ocedur
es

 Cont
inui
ngmeasur
est
ost
abi
l
izet
het
axr
egi
me

Ther
ear
eanumberofpr
obl
emsr
elat
edt
oEt
hiopi
ataxsy
stem t
osol
vet
hispr
obl
em t
ax
r
efor
m ar
enecessar
y.Ther
easonpr
esent
lybei
ng f
orEt
hiopi
ataxr
efor
msi
ncl
udet
hat
t
heexi
sti
ngt
axsy
stem was:

 Ol
dandl
oset
axl
egi
slat
ionbecauseof

 Economi
cst
ruct
urehaschangedandf
iscal
feder
ali
sm

 Notcompr
ehensi
veandhasnost
rongenf
orcementpower

 Weakadmi
nist
rat
ionsuchas;

 Lackofmoder
noper
ati
onsy
stem

 Pr
ovi
dei
nef
fi
cientser
vices

 Opent
ounf
airdeal
i
ngwi
tht
axpay
ers

Becauseoft
heabov
einef
fi
ciencyser
vicewer
egi
vent
otaxpay
erswhodi
scour
age
i
nvest
mentand r
educes t
he cr
edi
bil
i
tyofgov
ernmentbyt
he soci
eti
es.To at
tai
n

14
sust
ainabl
eeconomi
cdev
elopmentr
adi
cal
’
schangei
ndomest
icr
evenueshoul
dbe
made.Thus,
taxr
efor
mswer
etakenpl
acewi
tht
heobj
ect
ivesofi
ncr
easi
ngt
axr
evenue
andt
ohav
est
rongt
axf
iscalpol
i
cyi
nst
rument
stoencour
agecapi
tali
nvest
mentand
economi
cdev
elopment
.Thebr
oadcat
egor
iesoft
het
axr
efor
msar
eov
erhav
ingst
rong
t
het
axsy
stem andi
mpr
ovi
ngt
axadmi
nist
rat
ion.Toi
mpr
ovet
axadmi
nist
rat
iont
hen
f
oll
owi
ngact
ivi
tyt
axat
ion:

1.Pr
esumpt
ivet
axat
ion

 Smal
lbusi
ness(
har
d-t
o-t
ax-
groups)

2.Val
ueaddedt
axi
mpl
ement
ati
on-
repl
acedsal
etax

3.Comput
eri
zedTI
N(t
axpay
eri
dent
if
icat
ionnumber
)sy
stem.

 Needshugecomput
eri
zat
ion

 Laybasi
sformoder
ntaxadmi
nist
rat
ionsy
stem

 Gi
vesi
dent
if
icat
ionnumbert
otaxpay
ers

 Pr
ovi
deef
fi
cientt
axoper
ati
onser
vice

 Hel
ptocont
rol
taxev
asi
on

4.Oper
ati
onpr
ogr
ams,
recogni
ti
onandt
axpay
erseducat
ion

 Reor
gani
zat
ion,
bet
terst
aff
ing,
bet
tersal
aryf
orFI
RAempl
oyees

 Pr
oduct
ionofaudi
tandaccount
ingmanual
s

 Educat
ionf
ort
axpay
er

Thepr
esentt
axr
efor
msar
eai
medatov
erhav
ingt
het
axl
egi
slat
ionandi
mpr
ovi
ngt
he
t
axadmi
nist
rat
ion.Thus,t
henew sy
stem i
mpr
ovest
axr
evenuesandchangescapi
tal
i
nvest
mentbyi
nsur
ingequi
tyandf
air
nessi
ntaxsy
stem

15
2.
1.7 PROBLEMSOFTAXREFORMS
Ther
ear
etwot
ypesofpr
obl
emsoft
axr
efor
ms

2.
1.7.
1TaxEvasion
Tax ev
asion i
s a met
hod of ev
adi
ng t
ax l
i
abi
l
ity di
shonestmeans l
i
ke
suppr
essi
onorf
alsi
fi
cat
ionf
act
swi
thr
egar
dedt
osal
e,i
nfl
ati
onofexpense.I
tis
dubi
ousway
sofat
tempt
ingt
osol
vet
axpr
obl
ems.Hence,t
axev
asi
oni
stobe
condemnednotonl
ythegov
ernmentbutbyt
hecompani
esaswel
l someoft
he
causesoft
axev
asi
onar
e:-
 Hi
ghr
ateoft
axat
ion:-pr
eval
enceoft
axr
atei
sthef
ir
standf
ormostr
easonf
or
t
axev
asi
ons.Thi
smakest
het
axev
asi
onpr
ofi
tabl
eandat
tr
act
ivei
nspi
teoft
he
at
tendantr
isks.
 I
nadequacyofpower
:-t
hef
actr
elat
ingt
oincome,weal
th,expendi
tur
ear
e
knownt
othet
axpay
ersandi
fdoesnotdi
scl
oset
hef
act
stot
heassessi
ng
of
fi
cer
,hemaynot
eabl
etodet
ermi
necor
rect
lyt
hel
i
abi
l
ityoft
het
axpay
ers.
Hencewhat
everpower
sar
ebest
edi
nassessi
ngof
fi
cer
sisnotusedf
reel
ybyan
honestof
fi
cer
,forf
earofcausi
nghar
assmentt
othet
axpay
ers.
 Shor
tage ofexper
ienced per
sonnel
:-i
ncome t
ax depar
tmentshoul
d hav
e
suf
fi
cientnumberofwel
ltr
ained and exper
ienced per
sonnelt
o cope wi
th
assessment and i
nvest
igat
ion wor
k. To make t
he depar
tment ef
fi
cient
,
pr
ocedur
esandor
gani
zat
ionoft
hedepar
tmentshoul
dbei
mpr
oved.
 Mor
al and psy
chol
ogi
cal f
act
ors: - ev
ery per
son shoul
d r
eal
i
ze hi
s
r
esponsi
bil
i
tiesf
orwar
dthegov
ernment
.Unf
ort
unat
ely
,al
lci
ti
zensdonotr
eal
i
ze
t
hei
rdut
iest
othest
ateandnecessi
tyofpay
ingt
hecor
rectamountoft
axand
pay
ingt
hem ont
ime.Onl
yref
ormedmor
alout
lookandt
hedev
elopmentofbet
ter
ci
vi
cconsci
encecani
mpr
ovemat
teri
ntheser
espect
s.
 Cor
ruptbusi
nesspr
act
ices:-busi
nessman i
ndul
gesi
n hoar
ding and sel
l
s
hi
s/hergoodi
nthemar
ketouti
nfl
atedr
ates.Al
lsuchcor
ruptand unf
air
busi
nesspr
act
icel
eadst
othegener
ati
onofbl
ackmoney(
Gupt
a,2001)

2.
1.7.
2Taxavoi
dance
Taxav oi
danceistakent
oref
ert
oar
rangementbywhi
chaper
sonact
ingwi
thi
nthe

16
l
ett
erofl
awr
educest
ruet
axl
i
abi
l
ity
,inf
ri
ngi
ngt
hepr
ocessbot
hspr
itandt
hei
ntent
ion
ofl
aw i
not
herwor
d,t
axav
oidancei
sthear
tofdodgi
ngt
axesaut
hor
it
ieswi
thout
br
eaki
ngt
hel
aw.I
tmeansact
ingwi
thi
nthef
ramewor
kofl
aw oract
ingaspert
he
l
anguageofl
awonl
yinf
orm.Butmur
der
ingt
hev
eryspor
tofl
awandt
husact
ingagai
nst
t
hei
ntent
ionofl
awanddef
eat
ingt
hepur
poseoft
hepar
ti
cul
arl
egal
enact
ment
s.
I
nshor
t,t
her
esear
chesst
atet
hatt
axav
oidancei
staki
ngadv
ant
ageofl
oophol
esi
n
t
axl
aws.But
,taki
ngadv
ant
ageofl
oophol
esi
nlaw onl
ypr
ovi
desashor
trunbenef
it
because,asandwhent
hel
oophol
esi
nthel
awmadepubl
i
clegi
slat
urest
epi
npl
ugt
he
l
oophol
es.SomeSour
cesoft
axav
oidancear
e:-
 An expense as per
missi
ble deduct
ion i
s el
ast
ic:-t
her
eis ov
ergener
ous
pr
ovi
sionsf
ort
her
eli
efofcasesconsequent
ly,t
heymanuf
act
urel
ossesf
ort
ax
pur
poses
 Theconv
ersi
onofpr
oper
tyi
ntot
rust
:-t
oav
oidt
hepay
mentoft
ax,
peopl
e
conv
ertt
hei
rpr
oper
tyi
ntot
rustbecausei
ncomesf
rom t
rust
sar
eei
ther
compl
etel
yexempt
edort
axedl
awr
ate.Secur
ingcont
racti
nthenameoft
hewi
fe
chi
l
desi
sanot
heroft
axav
oidance:
-tocar
ryont
hei
rbusi
nessesandt
oear
n
bl
ackmoneypeopl
eobt
aincont
racti
nthenameofwi
feandchi
l
dwhi
chi
slegal
.

2.
1.8TaxAdmi
nist
rat
ion
Anat
ion’
sabi
l
ityt
ocol
l
ectt
axf
orpubl
i
cexpendi
tur
epr
ogr
ammer
sandt
ouset
het
ax
sy
stem onabasi
sformodi
fyi
ngt
hedi
str
ibut
ionsofper
sonneli
ncomewi
l
lsnotonl
ythe
enact
mentofappr
opr
iat
etaxl
egi
slat
ion.

Thet
axl
awsofUni
tedSt
atesar
eadmi
nist
rat
edbyt
hei
nter
nal
rev
enueser
vice’
s(I
RS)i
n
admi
nist
rat
ingt
het
axl
aw,t
heI
RShasr
esponsi
bil
i
tyf
ordet
ermi
ningassessi
ngand
col
l
ect
ingi
nter
nalr
evenuet
axandenf
orci
ngot
herpr
ovi
sionoft
het
axl
aw.TheI
RSi
sa
di
vi
sionoft
het
reasur
ydepar
tment
,whi
chi
nter
nispar
toft
headmi
nist
rat
ivebr
anchof
t
hef
eder
algov
ernment
.

Theconst
it
uti
onoff
eder
aldemocr
ati
crepubl
i
cofEt
hiopi
a(FDRE)st
atest
hatt
he
f
eder
algov
ernmentandt
hest
atesal
lcol
l
ectt
axesandshal
lshar
erev
enueconsi
der
ing

17
t
he f
eder
alar
rangement
.In exer
cisi
ng t
hei
rtaxi
ng power
,st
ates and f
eder
al
gov
ernmentshal
linsur
ethatanyt
axi
srel
ati
vet
othesour
ceofr
evenuet
axedandt
hat
i
sdet
ermi
nedf
lowi
ngpr
operconsi
der
ati
on.Theyshal
linsur
est
hatt
het
axdoesnot
adv
ersel
yaf
fectt
her
elat
ionshi
pandt
hatt
her
ateandamountoft
axshal
lbecommon
wi
thser
vicest
het
axeshel
pdel
i
vernei
therst
atenorf
eder
algov
ernmentshal
llev
yand
col
l
ectt
axesoneachot
her
’sunl
essi
tispr
ofi
tmaki
ngent
erpr
ise.

Ani
mpor
tantcont
ri
but
ingf
act
ort
oweekt
axadmi
nist
rat
ioni
stheexcessi
vecompl
i
cit
y
oft
axl
awmakes.I
tbot
hmor
edi
ff
icul
tfort
axpay
ert
ocompl
ywi
tht
hel
awi
fthewi
sh
t
ocompl
yandcashi
erf
ort
hem t
oev
adei
fiti
ftheywi
sht
oev
adecompl
ext
axl
awsand
pr
ocedur
esmakei
tdi
ff
icul
ttoassessandcol
l
ectt
axaswel
last
ofol
l
ow upon
compl
i
ancet
hroughaudi
t.

Pur
elydesi
gnedandi
mpl
ement
edadmi
nist
rat
ivepr
ocedur
esandmet
hods,
inadequat
e
managementpr
ocedur
eswhi
chl
eadt
opur
euseofst
affr
esour
cei
nadequat
efaci
l
iti
es
andl
ackofpol
i
ticalsuppor
tcanal
sounder
minet
hef
airenf
orcementoft
het
axcodes
andot
herdi
rect
lypr
oduct
iveact
ivel
y.
(Gebi
rewor
ku,
2006)

2.
1.9.
TaxonI
ncomef
rom Rent
alofBui
ldi
ngs(
Schedul
e“B”
)
Anyi
ncomear
isi
ng f
rom r
ent
alofbui
l
dingsi
staxabl
eunderschedul
e“B”
.Rent
al
i
ncomei
ncl
udesal
lfor
m ofi
ncomef
rom r
entofabui
l
dingandr
entoff
urni
tur
eand
equi
pmenti
fthebui
l
dingi
sful
l
yfur
nished.I
ncomef
rom t
hel
easeofbusi
nessi
ncl
udi
ng
goods,equi
pment
’sandbui
l
dingwhi
char
epar
toft
henor
maloper
ati
onofabusi
ness,
cal
( ledbusi
nessl
ease)ar
etaxabl
eunderanot
herschedul
ethati
sinschedul
e“C”
.

Gr
ossr
ent
ali
ncomeal
soi
ncl
udesanycosti
ncur
redbyt
hel
esseef
ori
mpr
ovementt
o
t
hel
and orbui
l
ding al
lpay
ment
smadebyt
hel
esseeon behal
foft
hel
essori
n
accor
dancewi
tht
hecont
ractl
ease.I
nthel
easecont
ractt
her
ear
etwopar
ti
esi
nvol
ved
i
nrent
ingabui
l
ding,
thel
essorandt
hel
essee.Thepar
tywhogr
ant
srentoft
hebui
l
ding
i
sthel
essor
.Theonewhol
easest
hepr
oper
tyf
orusei
sthel
essee.I
nsomeoccasi
ons
t
hel
essormayal
l
ow t
hel
esseet
osubl
easet
hebui
l
dingf
oranot
herpar
ty.I
nsuch
ci
rcumst
ancest
hef
ir
stl
esseebecomest
hesub-
lessor
.Thesubl
essormustpayt
axon
t
hedi
ff
erencebet
weeni
ncomef
rom t
hesubl
easi
ngandt
her
entpai
dtot
hel
essor
,

18
pr
ovi
dedt
hatt
heamountr
ecei
vedbyt
hesubl
essor
.Theowneroft
hebui
l
dingwho
al
l
owsal
esseet
osub-l
easei
sli
abl
eforpay
mentoft
het
axf
orwhi
cht
hesubl
essori
s
l
i
abl
e,i
ntheev
entt
hesub-
lessorf
ail
stopay
.(Gebi
rewor
k,2006)

Whenabui
l
dingi
sconst
ruct
edf
ort
hepur
poseofgi
vi
ngonl
ease,t
heownerand
cont
ract
orshoul
dinf
orm t
he Kebel
e Admi
nist
rat
ion abouti
ts compl
eti
on and t
he
i
ntent
ionofgi
vi
ngi
tonl
ease.Thi
sisal
soappl
i
cabl
ewhent
hebui
l
dingi
srent
edbef
ore
i
tscompl
eti
on.TheKebel
eAdmi
nist
rat
ionwi
l
lpasst
hei
nfor
mat
iont
othet
axof
fi
cef
or
t
headmi
nist
rat
ionoft
ax.I
tisal
sot
her
esponsi
bil
i
tyofKebel
eadmi
nist
rat
iont
ogat
her
anysuchi
nfor
mat
ionandcommuni
cat
etot
axof
fi
cei
ncasewher
ethepar
ti
esf
ailt
odo
so.(
Feder
ali
ncomet
axpr
ocuml
ati
on/
2016)

2.
1.9.
1Taxabl
eIncome
Grossincomeincl
udesal
lpay
ment
s,ei
theri
ncashorbenef
it
edi
nki
nd,r
ecei
vedbyt
he
l
essorandal
lpay
ment
smadebyt
hel
essoront
hebehal
foft
hel
essee.Thev
alueofany
r
enov
ati
onori
mpr
ovementt
othel
andort
hebui
l
dingi
sal
sopar
toft
axabl
eincome
undert
hisschedul
eifsuchcosti
sbor
nebyt
hel
esseei
naddi
ti
ont
orentpay
abl
e.

A.Deduct
ion

Taxabl
eincomef
rom schedul
eBi
ncomei
sdet
ermi
nedbysubt
ract
ingt
heal
l
owabl
e
deduct
ionsf
rom t
hegr
ossi
ncome.Al
l
owabl
ededuct
ionsi
ncl
udet
hef
oll
owi
ng:

Taxespai
dwi
thr
espectt
othel
andandbui
l
dingsbei
ngl
eased;excepti
ncomet
axes;
and

f
ort
axpay
ersnotmai
ntai
ningbooksofaccount
,onef
if
th(
1/5)oft
hegr
ossi
ncome
r
ecei
vedasr
entf
orbui
l
dingsf
urni
tur
eandequi
pmentasanal
l
owancef
orr
epai
rs,
mai
ntenanceanddepr
eci
ati
onofsuchbui
l
dings,
fur
nit
ureandequi
pment
;

Fort
axpay
ersmai
ntai
ningbooksofaccount
,theexpensesi
ncur
redi
near
ning,
secur
ing,
andmai
ntai
ningr
ent
ali
ncome,t
otheext
entt
hatt
heexpensescanbepr
ovenbyt
he
t
axpay
erand subj
ectt
othe l
i
mit
ati
ons speci
fi
ed byt
his Pr
ocl
amat
ion,deduct
ibl
e
expensesi
ncl
ude(
butar
enotl
i
mit
edt
o)t
hecostofl
ease(
rent
)ofl
and,r
epai
rs,
mai
ntenance,
anddepr
eci
ati
onofbui
l
dings,
fur
nit
ureandequi
pmenti
naccor
dancewi
th

19
Ar
ti
cle23oft
hisPr
ocl
amat
ionaswel
lasi
nter
estonbankl
oans,
insur
ancepr
emi
ums.

B.TaxRat
e

Thet
axpay
abl
eonr
ent
edhousesshal
lbechar
ged,
lev
iedandcol
l
ect
edatt
hef
oll
owi
ng
r
ates:

(
a)Oni
ncomeofbodi
est
hir
typer
cent(
30%)oft
axabl
eincome,

(
b)Oni
ncomeofper
sonsaccor
dingt
otheSchedul
eB(
her
eunder
)Schedul
e–B

Tabl
e2.
2Rent
alt
axr
ate

N Taxabl
eincomef
rom r
ent
al Taxr
ate
o
(
Incomepery
ear
)

OverBi
rr ToBi
rr %

1 0 1,
800

2 1,
801 7,
800 10

3 7,
801 16,
800 15

4 16,
801 28,
200 20

5 28,
201 42,
600 25

6 42,
601 60,
000 30

7 Ov
er60,
000 *
***
* 35
I
tcanbeexpl
ainedas
f
oll
ows

Tabl
e2.
2.1r
ent
alt
axr
ateexpl
anat
ion

Schedul
eB

20
 N Taxabl
eincomef
rom r
ent
alofbui
ldi
ng Taxr
ate Deduct
ioni
n
o bi
rr
(
Incomepery
ear
)

OverBi
rr ToBi
rr % Bi
rr

1 0 1,
800 Exemptt
hreshol
d

2 1,
801 7,
800 10 180

3 7,
801 16,
800 15 570

4 16,
801 28,
200 20 1410

5 28,
201 42,
600 25 2820

6 42,
601 60,
000 30 4950

7 Ov
er60,
000 *
***
* 35 7,
950

2.1.
9.2Comput
ati
onofi
ncometaxoni
ncomef
rom r
ent
alofbui
ldi
ng
Inordertocomputethetaxabl
eincomefr
om rent
alofbui l
dingweuset
hef
oll
owi
ng
appr
oach.

Sour
ces(
income) Amounti
nbi
rr Amounti
nbi
rr

Rent
alI
ncomeRecei
ved xxxxx

Add:
Amountr
ecei
vedont
he

i
)Leaseoff
urni
tur
e xxx

i
i
)Leaseofequi
pment xxxxxxxxxxx

Deduct
Less: ions:

i
)Taxespai
donl
andandbui
l
dings

21
 Leased xxxx

)Fort
i
i hosenotmai
ntai
nbooksof

Account
s

Al
l
owancef
orr
epai
r,mai
ntenance

Anddepr
eci
ati
on(
1/5ofgr
ossi
ncome) xxxx

(
OR)

i
i
i)Fort
hosemai
ntai
nbooksofAccount
s

Expenseson

a)Costofl
easeofl
and xxxx

b)Repai
rs xxxx

c)Mai
ntenance xx

d)Depr
eci
ati
onof bui
l
ding,
fur
nit
ureand

Equi
pment
’s xxx

e)I
nter
estonbankl
oans xxx

f
)Insur
ancepr
emi
ums-
- xxxxxx(
xxxxxx)

Taxabl
eIncomef
rom r
ent
alofBui
ldi
ngs xxxxxx

2.
2EMPI
RICALREVI
EW
Shi
mel
i
s(2000)di
scussedr
ent
alt
axcol
l
ect
ionandadmi
nist
rat
ioni
nEt
hiopi
ancont
ext
.
I
tthendi
scussedEt
hiopi
anr
ent
alt
axst
ruct
ure,t
hepr
obl
em’
sfacedi
ncol
l
ect
ingand
admi
nist
eri
ngr
ent
alt
ax,and i
tgav
epossi
blesol
uti
onst
othepr
obl
emst
heaut
hor
i
dent
if
ied i
n hi
sresear
ch t
he aut
hor
,ident
if
ied r
emov
ing exempt
ion,t
ax ev
asi
on,

22
i
nadequat
eresour
cesf
ort
axadmi
nist
rat
ion,l
oophol
esoft
ax,poorqual
i
tyoft
ax
manager and i
nadequat
e suppor
tfor t
ax admi
nist
rat
ion as chal
l
enges of t
ax
admi
nist
rat
iont
hathav
eweakenedt
heabi
l
ityt
oachi
evet
het
argetr
ent
alt
ax.The
aut
hordi
dnotaddr
essal
loft
hepr
obl
emsi
tsetoutt
oaddr
essi
ndet
ailt
hecausesof
t
hosepr
obl
emsi
nst
ead.Theaut
horpoi
ntsoutt
hepr
obl
ems.Besi
des,t
her
esear
cher
r
ecommendat
ionsf
orsol
vi
ngt
her
ent
alt
axadmi
nist
rat
ionpr
obl
emswer
eadopt
edf
rom
t
heChi
nar
ent
alt
axcol
l
ect
ionandadmi
nist
rat
ionsy
stem.Ther
esear
cherbel
i
evedt
hat
t
heChi
nat
axadmi
nist
rat
ionsy
stem shoul
dnotbet
akenasst
andar
dformeasur
ingt
he
per
for
manceofr
ent
alt
axcol
l
ect
ionandadmi
nist
rat
ionsy
stem.I
naddi
ti
ont
othi
s,t
he
aut
horr
eli
edonsecondar
ysour
ces.

Rat
e(1992)makeast
udyont
her
ent
alt
axcol
l
ect
ioni
nEt
hiopi
afort
heper
iod1992
usi
ngt
hepr
opor
ti
onmet
hodandf
oundt
hatt
het
axsy
stem wasi
nel
ast
icev
ent
hough
t
hecount
ryhadahi
ghl
ypr
opor
ti
onali
ncomet
axatt
hatt
ime.Ther
easonwasduet
oa
def
ect
ivet
axst
ruct
ure,
lackofmoder
noper
ati
onsy
stem,
unf
airdeal
i
ngwi
thpay
ersand
r
ateschedul
ewi
despr
eadt
axev
asi
onandi
ncomedi
str
ibut
ioni
nfav
oroft
he“
non-
i
ncomet
axpay
ersgr
oup “ori
nfav
oroft
hel
awi
ncomebr
acket
swi
thi
nthet
axpay
ing
gr
oup.Theaut
horal
sov
iol
atest
hepr
inci
pal
oft
ax
I
sumel
,
(1999)
tri
edt
oexami
net
hatar
ent
alt
axsy
stem cannev
erwor
kbet
tert
hani
tst
ax
admi
nist
rat
ion.Butev
ent
hebestt
axadmi
nist
rat
ionwoul
dcer
tai
nlyf
ail
tot
urnabadt
ax
sy
stem i
ntoawel
l
-oper
ati
ngone.Ther
esear
cheral
sowar
nedt
hatmanyambi
ti
oust
ax
r
efor
msf
ail
edbecauseoft
hesuf
fi
cientt
axwi
thoutt
heper
manentor
gani
zat
ionoft
he
t
axadmi
nist
rat
ionandal
mostdai
l
yimpr
ovement
sinmet
hodsofi
tsmanagement
,iti
s
I
mpossi
blet
oexpectt
hatt
axr
efor
mscoul
dber
eal
i
zedsuccessf
ull
y,l
evelofpercapi
tal
i
ncome,
degr
eeofi
nequal
i
tyi
ncomeandconcessi
onscansi
mpl
i
fyadmi
nist
rat
ionand
r
educet
axev
asi
on.

Wi
l
li
am;m pr
ofessorofeducat
ionandbusi
nessi
noxf
orduni
ver
sit
y.Tr
iedt
oex
ami
ne
t
her
ent
alt
axat
ioncoul
dnotst
il
lbr
ingt
her
equi
redr
esul
tduenumberofr
easonssuch
asl
ackofcl
earunder
standi
ngaboutr
ent
alt
axbyt
axpay
ers,
compl
i
cat
ionoft
ax
sy
stem hi
sst
udyi
sconduct
edonbot
hdev
elopi
nganddev
elopedcount
ri
es.Hear
gued

23
t
hatr
ent
alt
axat
ionandt
axsy
stem wasusedasat
oolf
orest
abl
i
shi
ngt
hemat
eri
al
basi
sofsoci
ali
sm.Heusedt
heconst
antr
atest
ruct
uremet
hodt
osepar
atet
her
evenue
i
mpactofdi
scr
eti
ont
axmeasur
es.Hi
sresul
tindi
cat
edt
hatt
het
axr
efor
mshav
e
si
gni
fi
cant
lycont
ri
but
edt
oincr
easi
ngt
axr
evenuei
nthecount
ry.

2.
3Li
ter
atur
eGap
Ast
her
esear
cherseeni
nthepr
evi
oust
opi
cfor
eignandl
ocalr
esear
cherar
edonei
n
r
elat
iont
orent
alt
axl
evy
ingandcol
l
ect
ion.Whent
her
esear
cherseent
hel
ocalst
udi
es
conduct
edi
ndef
erentuni
ver
sit
yatr
egi
onalandnat
ionall
evelwhi
char
est
atedi
nthe
abov
enamel
y,Shi
mel
i
s(2000)
,Rat
e(1992)andI
smel(
1999)
,thosepaper
scannot
suf
fi
cient
lyananal
ysi
sEt
hiopi
anr
ent
alt
axl
evy
ingandcol
l
ect
ionandi
tspr
obl
em
becauset
hosepeopl
ear
edonet
hei
rresear
chbey
ondt
hei
rcount
rycont
extt
hati
swhy
t
hispaperwoul
drai
seunsoughtr
ent
alt
axl
evy
ingandcol
l
ect
ionpr
obl
em andt
ryt
o
sol
vet
hosepr
obl
ems.

The ot
hergap i
sti
me,change ofr
ecor
dfr
om manualt
o comput
eri
zed and t
ax
pr
ocedur
esuseddur
ingt
hatt
ime.besi
det
hist
her
esear
cher
swhi
char
est
udyt
hose
paper
sduet
otheabov
efact
orst
imeandt
echnol
ogi
caladv
ancementt
hemanual
account
ingsy
stem changedi
ntoaut
omat
ionaccount
ingsy
stem whent
her
esear
cher
seer
ent
alt
axl
evy
ingandcol
l
ect
ionsy
stem i
tal
sobeadv
ancedf
rom t
imet
oti
mewhen
t
her
eisachangesi
ntaxl
i
ker
evi
sionoft
axpr
ocedur
e,pr
ocl
amat
iont
hischange al
so
br
ingsgap.

When t
he r
esear
chercome t
ofor
eign r
esear
cherWi
l
li
am’
s(1976)
,di
drev
elst
he
f
act
ori
es maket
hebudgetr
ent
al t
axwi
thact
ualunequalbyr
elat
ing t
axsy
stem wi
th
educat
ion(
li
ter
ateandi
l
li
ter
atenewt
her
enor
elat
est
udy i
sconduct
ed.Fi
nal
l
yduet
o
t
heabov
ereasonst
hest
udywoul
dtr
ytof
ulf
il
ltheabov
eli
ter
atur
egapsasmuchas
possi
ble.

24
CHAPTERTHREE

3.RESEARCHMETHODOLOGY
Undert
hischapt
erwer
edi
scussedt
her
esear
chmet
hodol
ogy
,iti
ncl
uder
esear
chdesi
gn,
t
argetpopul
ati
on,sampl
i
ngt
echni
quesandsampl
esi
ze,sour
ceofdat
a,dat
aty
pe,
met
hodofdat
acol
l
ect
ionanddat
apr
esent
ati
onandanal
ysi
s.

3.
1Resear
chappr
oach
Ther
ear
ethr
eet
ypesofr
esear
chappr
oachesnamel
y,quant
it
ati
ve,qual
i
tat
iveand
mi
xed met
hod r
esear
ch appr
oach.Butt
hisst
udywoul
d beused quant
it
ati
veand
qual
i
tat
iver
esear
chappr
oach.Qual
i
tat
iver
esear
chappr
oachwast
her
esear
cherof
ten
makesknowl
edgecl
aimsbasedont
hemul
ti
plemeani
ngsofi
ndi
vi
dualexper
ience,and
soci
all
yand hi
stor
ical
l
yconst
ruct
ed meani
ngs,i
tis a meani
ngs ofexpl
ori
ng and
under
standi
ng t
he meani
ngs i
ndi
vi
dualor gr
oup a scr
ibe t
o human pr
obl
em.
Quant
it
ati
ve appr
oach i
s sy
stemat
ic and sci
ent
if
ici
nvest
igat
ion of quant
it
ati
ve
pr
oper
ti
esandphenomenaandt
hei
rrel
ati
onshi
p.I
tsobj
ect
ivei
stodev
elopandempl
oy
mat
hemat
icalmodel
s,t
heor
iesandhy
pot
hesi
sper
tai
ningt
onat
urephenomena.(
Leady
andor
mrod2005)
.

3.
2Tar
getpopul
ati
on
The t
argetpopul
ati
on oft
he st
udy was concer
ned body ofAr
siNegel
etown
admi
nist
rat
ionr
evenueaut
hor
it
ywhodi
rect
lyi
nvol
vedi
nthel
evy
ingandcol
l
ect
ingof
r
ent
alt
ax.Tot
alnumberofempl
oyeesi
nor
gani
zat
ionwas25i
ncl
udi
ngmanager
.

25
3.
3Sampl
i
ngTechni
quesandSampl
eSi
ze
The st
udywoul
d be used census sampl
i
ng t
echni
que.Because t
otalnumberof
empl
oyeesar
ever
ysmal
lthatmeansonl
ytwent
yfi
ve.
Thet
otalnumberofempl
oyees
i
nor
gani
zat
ionwas25.Thest
udywassel
ect
edal
lempl
oyees.Ther
easonbehi
ndt
he
sel
ect
ionofal
lempl
oyeesar
etogetr
elev
anti
nfor
mat
ionf
rom t
hem

3.
4Sour
ceofdat
a
Secondar
ydat
asour
ce,pr
imar
ydat
awasobt
ainedbydi
str
ibut
ingcl
oseandopenand
quest
ioner
,Inor
dert
ofi
ndsuf
fi
cientandr
elev
anti
nfor
mat
iont
her
esear
cherwoul
dbe
usedbot
hpr
imar
yandf
acet
ofacedi
scussi
onwi
tht
heper
sonwhowassel
ect
edas
sampl
etor
epr
esentt
hepopul
ati
on,
secondar
ydat
asour
cewascol
l
ect
edf
rom di
ff
erent
documentandr
evi
ewi
ngdi
ff
erentr
ecor
dofmanual
oft
heor
gani
zat
ion.

3.
5Dat
aty
pes
Fort
hisst
udybot
hquant
it
ati
veandqual
i
tat
ivedat
aty
peswoul
dbeusedt
ocol
l
ect
i
nfor
mat
ion.Qual
i
tat
ivedat
aincl
udecl
oseandopenendedquest
ionnai
res.Quant
it
ati
ve
dat
aincl
udeper
cent
ageandt
abul
ati
on.

3.
6Dat
acol
lect
ionmet
hods
Thi
sst
udywasusedbot
hpr
imar
yandsecondar
ydat
asour
cet
ocol
l
ectt
hei
nfor
mat
ion.
Pr
imar
ydat
awoul
dcol
l
ect
edusi
ngquest
ionnai
ressuchascl
oseandopenended
quest
ionnai
res.Cl
oseendedquest
ionhel
ptogett
argetanswer
.Openendedquest
ion
woul
dbeusedt
ocol
l
ectdat
amor
ethatexpect
ati
on.Secondar
ysour
cewoul
dbe
col
l
ect
edf
rom Ar
siNegel
etownadmi
nist
rat
ionr
evenueaut
hor
it
yannual
repor
t.

3.
7.Dat
apr
esent
ati
onandanal
ysi
s
Af
terr
equi
red and r
elev
antdat
a wascol
l
ect
ed,pr
ocessed and ar
rangi
ng pr
oper
ly,
anal
ysesshoul
dbeunder
takenwi
thgr
eatcar
etomeetobj
ect
iveoft
hest
udyt
he
r
esear
cherwoul
dempl
oyerdef
erentdat
aanal
ysi
smet
hodwhi
chcont
ains t
heor
eti
cal
,
descr
ipt
iveanal
ysi
sofquant
it
iesandqual
i
tat
ivedat
aand si
mpl
est
ati
sti
calsuchas
t
abl
e,per
centt
oanal
ysest
hedat
a.

26
CHAPTERFOUR

4.DATAPRESENTATI
ONAND ANALYSI
S
I
nthi
schapt
ert
her
esear
cherwoul
dbet
ri
edt
oexpl
aint
hedat
acol
l
ect
edf
rom r
ent
al
t
axcol
l
ect
ors(
empl
oyeesoft
heof
fi
ce)usi
ng quest
ionerbydescr
ibi
ng f
requency
di
str
ibut
ioni
nor
dert
oident
if
yAnal
ysi
sofr
ent
alt
axl
evy
ingandcol
l
ect
ioni
nAr
si
Negel
etownadmi
nist
rat
ionr
evenueaut
hor
it
y.

Ther
esear
cherdi
sbur
se 25quest
ioner
s,f
rom t
hosequest
ioner
s23quest
ioner
sar
e
r
etur
ned.Thi
sshowst
hegr
eat
erachi
evementofr
espondent
spar
ti
cipat
ioni
nret
urni
ng
t
her
equest
ioner
s.Ther
efor
e,t
hischapt
eri
sor
gani
zedi
ntot
hreesect
ions;par
tone
pr
esentanal
ysi
sofper
sonali
nfor
mat
ionofr
espondent
’spar
ttwoanal
ysesofr
esear
ch
quest
ioner
s.Andsecondar
ydat
awoul
dbeanal
yzed;
final
l
ysummar
yoff
indi
ngi
sgi
ven.

4.
1Per
sonali
nfor
mat
ionr
espondent
s
Thi
ssect
iondeal
swi
thanal
ysi
sofr
espondent
sofgener
ali
nfor
mat
ionl
i
ke;
gender
,sex,
ageandeducat
ional
backgr
oundofempl
oyeesasf
oll
ows:
-

Tabl
e4.
1age,
andsexdi
str
ibut
ion
Numberofr
espondent
s Tot
al Per
cent
age
I
tem
Mal
e Femal
e

27
I
tem 1-
sex 14 62% 9 39% 23 100%

I
tem 2-
age

18-
23 5 21% 5 22% 10 43%

24-
29 7 30% 3 13% 8 43%

30-
35 2 9% 1 4% 3 14%

Tot
al 14 9 23 100%

Sour
ce;
sur
veyquest
ionnai
res,
2019

Asment
ionedont
heabov
etabl
e4.
1,f
rom 23r
espondent
s61per
centoft
hem ar
e
mal
es and 39 per
centof r
espondent
s ar
efemal
es.Wher
eas 43% per
centof
r
espondent
sar
eont
heagebet
ween18-
29y
ear
sol
d,whi
l
ether
emai
n14per
centar
e
bet
ween t
heageof30-
35 y
ear
sol
d and no onei
s abov
e36 y
ear
sol
d.So t
he
r
esear
cherbel
i
evedt
hatt
hissexandagear
eimpor
tanti
nor
dert
oper
for
mrout
ine
act
ivi
ti
esef
fect
ivel
y.Becauseempl
oyees,undert
hisagecanbepr
oduct
ivecapaci
tyi
n
anyi
mpr
ovementi
nrent
alt
het
axl
evy
ingandcol
l
ect
ionsy
stem i
nter
msofi
tsef
fi
cient
andef
fect
iveness.

Tabl
e4.
2educat
ionalbackgr
ound
Educat
ionalbackgr
ound Fr
equency Per
cent
age

Di
ploma 3 13%

Degr
ee 18 78%

Mast
ers 2 9%

Tot
al 23 100%

Sour
ce;
sur
veyofquest
ionnai
res,
2019

The abov
etabl
e 4.
2 shows t
hateducat
ionalbackgr
ound ofAr
siNegel
etown
admi
nist
rat
iver
evenue aut
hor
it
y empl
oyees.Accor
dingl
ytot
hat78 per
centof

28
empl
oyeesar
edegr
eehol
der
,13per
centar
edi
plomahol
derand9per
centar
esecond
degr
eehol
der
.Ther
efor
e,t
her
esear
cher
sbel
i
eved t
hatmaj
ori
tyofempl
oyeesar
e
degr
eehol
der
.Thi
seducat
ionalqual
i
ficat
ioncanpl
aysagr
eat
err
olef
orgoodr
ent
alt
ax
l
evy
ingi
ntheaut
hor
it
ytoper
for
m ef
fect
ivel
ythei
rtasks.

Tabl
e4.
3wor
kexper
ience
Wor
kexper
ience Fr
equency Per
cent
age

3-
4 15 65%

5-
6 4 17%

7-
9 2 9%

10andabov
e 2 9%

Tot
al 23 1oo%

Sour
ce;
sur
veyofquest
ionnai
re,
2019

Ont
heabov
etabl
e4.
3fr
om 23r
espondent
sar
ound65per
centoft
hewor
ker
shav
e3up
t
o4y
ear
sofwor
kingexper
iencei
ntheof
fi
ce.Wher
east
he17per
centoft
hem hav
e5t
o
6y
ear
sofwor
kexper
ience,
9per
centoft
hem hav
e7t
o9y
ear
sofwor
kexper
ienceand
t
her
eami
ng9per
centhav
eabov
e10y
ear
swor
kexper
ience,t
hiscanshow t
hatt
he
r
evenueaut
hor
it
yempl
oyeeshav
esuf
fi
cientknowl
edgeaboutr
ent
alt
axt
oper
for
mthei
r
j
obef
fi
cient
lyandef
fect
ivel
y.

4.
2Anal
ysi
sofr
esear
chquest
ionnai
res
Thi
ssect
iondeal
swi
thanal
ysi
sofobj
ect
iver
elat
edquest
ionbasedonr
espondent
’s
r
esponse.Li
ke,sour
ceofr
ent
ali
ncome,t
hewayofl
evy
ing,
val
uat
ingofpeopl
etopay
ont
ime,t
hewaycol
l
ect
ing,t
hel
evy
ingandcol
l
ect
ionpr
ocedur
e,st
ruct
uraladj
ust
ment
,
eff
ect
ivenessandassessmentknowl
edgeoft
axpay
ersaboutt
axandhowt
heof
fi
ce
cont
rol
ther
ent
alt
axr
elat
edpr
obl
em.

Tabl
e4.
4Maj
orar
ea(
sour
ce)ofr
ent
alt
axi
nAr
siNegel
e
Measur
ementmet
hods f
requency Per
cent
age

29
Fr
om gov
ernmentagency 6 26%

Fr
om non-
gov
ernmentagency 2 9%

Fr
om publ
i
cbody 3 13%

Fr
om pr
ivat
eindi
vi
dual
s 12 52%

Tot
al 23 100%

Sour
ce;
sur
veyr
esul
t2019

Theabov
etabl
e4.
4tel
l
sthat52%ofr
espondent
schooset
hatt
hemaj
orsour
ceofr
ent
s
t
axi
nAr
siNegel
etownar
efr
om pr
ivat
eindi
vi
dual
s26%ofr
espondent
schoosef
rom
gov
ernmentagencyand t
her
eami
ng 13% and 9% r
espondent
schoosef
rom non-
gov
ernmentandpubl
i
cbodyr
espect
ivel
y,t
her
efort
her
esear
cherbel
i
evedt
hatt
he
maj
orsour
ceofr
ent
ali
ncomet
axar
efr
om pr
iveti
ndi
vi
dual
s.Becauset
hemaj
orr
ent
al
ar
epr
ivat
eindi
vi
dual
sther
efor52% ofr
ent
ali
ncomecomesf
rom pr
iveti
ndi
vi
dual
s
f
oll
owedbygov
ernmentagency
.

Tabl
e4.
5howdoy
oul
evy
ingr
ent
alt
axonpay
ers.
I
TEMS Fr
equency Per
cent
age

Usi
ngaut
hor
it
yjudgment 20 87%

Ast
het
axpay
erswant
s 0 -
%

Anal
ysi
soff
inanci
alst
atement
s 3 13%

Tot
al 23 100%

Sour
ce;
sur
veyr
esul
t2019

Fr
om t
heabov
etabl
e4.
5ar
ound87%ofr
espondent
ssai
dthatt
heaut
hor
it
ylev
yingt
ax
on pay
ers usi
ng aut
hor
it
yjudgment
,wher
e as 13% ofr
espondent
s sai
dthr
ough
anal
yzi
ng oft
hei
rfi
nanci
alst
atement
s.Ther
eforAr
siNegel
etown admi
nist
rat
ion
l
evy
ing r
ent
ali
ncome t
axon pay
ers based on aut
hor
it
yjudgmentf
oll
owi
ng,r
ule,
pr
inci
plepr
ocedur
esofEt
hiopi
ant
axpr
ocl
amat
ion.

30
 Tabl
e4.
6Ar
ethepeopl
eofAr
siNegel
ear
evol
unt
aryt
opayr
ent
alt
ax
Numberofr
espondent
s&t
hei
rresponse
St
atementoft
hequest
ion
Tot
al Fr
equency per
cent
age
number of
Yes No Yes No
r
espondent
s

Ar
ethe peopl
e of Ar
siNegel
etown ar
e 23% 16 7 70% 30%
v
olunt
aryt
opayr
ent
alt
ax?

I
fyouransweri
sNOwhy
? 7

Lackofawar
enessaboutr
ent
alt
ax 2 29%

Host
il
it
y bet
ween t
he pay and col
l
ect
ing 0 -
aut
hor
it
y

Thepay
erar
enotunder
stand t
hemi
nerof 1 14%
pay
ment

Al
lar
ethepossi
bler
easons 4 57%

Tot
al 7 100%

Sour
ce:
sur
veyr
esul
t2019

Fr
om t
het
abl
e4.
670% ofr
espondent
ssai
dthatmostofr
ent
alt
axpay
mentar
e
v
olunt
aryt
opayt
hei
rtaxl
i
abi
l
ityont
ime,
whi
l
ether
emai
n30%ofr
espondent
ssai
dthe
r
ent
alt
axpay
ersar
enotv
olunt
aryt
opayt
hei
rrent
alt
axwhi
l
eont
hesamet
abl
eoutof
7oft
her
espondent
swhosayno57% oft
hem sai
dthatconf
ormedt
hatbecauseof
awar
enessaboutt
ax,
host
il
it
ybet
weencol
l
ect
ingaut
hor
it
yandpay
erandwi
l
lnotknow
t
hemanur
eofpay
ment
,whi
l
e29% ofr
espondent
sbel
i
evedt
hatl
ackofawar
eness
aboutr
ent
alt
axandt
her
emai
n14% bel
i
evest
hatpay
ersunder
standt
hemanur
eof
pay
mentl
i
kewi
set
het
abl
eshowst
hatt
hepeopl
eofAr
siNegel
ear
evol
unt
aryt
opay
t
hei
rrentl
i
abi
l
ity
.Sobasedont
heseanal
ysi
sther
esear
cherconcl
udest
hatt
hemaj
or

31
f
act
ori
est
hataf
fectpeopl
etobev
olunt
aryar
elawawar
enessofpay
ersaboutr
ent
alt
ax,
host
il
it
ybet
weenempl
oyeesandpay
ers,t
heknowl
edgeofpay
ersaboutt
hemanur
eof
pay
mentsot
heof
fi
cehav
etogi
vet
anni
ngofel
i
minat
ethel
owerawar
enessofpay
ers,
makef
ami
l
iarshopt
oremov
ethedi
sagr
eement(
host
il
it
y)andgi
vesuf
fi
cientt
anni
ng
aboutt
hemanur
e,meani
ngamountt
imeofpay
ment
.

Tabl
e4.
7taxpay
er’
spay
mentt
hei
rtaxl
iabi
li
tyont
ime
Numberofr
espondent
s&t
hei
rresponse
I
tems
Tot
al Fr
equency Per
cent
age
number of
y
es No Yes No
r
espondent
s

1-Pay
mentoft
axl
i
abi
l
ityont
ime? 23 17 6 74% 26%

2-I
ftheansweri
syes,
why
? 17

Becauset
heypaybasedont
hei
rincome 14 82%

Becauset
heygetr
etur
nfr
om t
her
entt
heypay 2 12%

Becauset
hepay
menti
ffai
r 1 6%

Tot
al 17 100%

3i
fyouransweri
snowhy
? 6

Unwi
l
li
ngnessofpay
erst
opayont
ime 0 -

Law awar
eness of pay
ers about t
ime of 66%
pay
ment 4

Pay
ersnotknowaboutt
imeofpay
ment 1 17%

Lackoft
rai
ninggi
vent
opay
ers 1 17%

Al
lar
ereasons -

32
 0

Tot
al 6 100%

Sour
ce;
sur
veyofquest
ionnai
reof2019

Asshowni
ntabl
e4.
7,74%per
centofr
espondent
sconf
ormedt
hatmostoft
axpay
ers
payt
hei
rtaxl
i
abi
l
ityont
ime.Whi
l
e26per
centr
espondent
sconf
ormedt
hatt
het
ax
pay
ersar
enotpayt
axl
i
abi
l
ityont
ime.Ont
hesamet
abl
eoutof17r
espondent
swho
sayy
es,
82per
centoft
hem bel
i
evedt
hatpayt
axont
imebecauset
hepay
menti
sbased
oni
ncome

Whi
l
e12per
centsai
dtheypayont
imebecauset
he getr
etur
nfr
om t
het
axt
heypay
,
Howev
er,t
her
emai
ning6per
centsai
dtheypayoutt
imebecauset
hepay
mentt
hei
s
f
air.
Likewi
se,t
abl
e4.
7showswhyt
axpay
ersdonotpayt
axl
i
abi
l
ityont
ime.Outof6
r
espondent
swhosayno,
66per
centoft
hem r
easonoutt
hatt
her
eisl
awawar
enessof
t
axpay
ersaboutt
ax Whi
l
ether
emai
ning34per
centoft
hem f
orbecausepay
ersnot
knowt
he t
imeofpay
mentand l
ackoft
rai
ninggi
vent
opay
ers.Theev
idenceshows
t
hat
,thet
axpur
poseunder
standi
ngaboutt
axcanbeev
aluat
edbyl
ooki
ngt
hei
rincome
andpur
poseoft
ax.Fi
nal
l
y,t
her
esear
cherconcl
udest
hat
,ther
evenueaut
hor
it
ycan
sol
vet
hosef
act
orsbygi
vi
ngt
rai
naboutunwi
l
li
ngnessofpay
ers,l
ackofi
nfor
mat
ion
aboutt
imeofpay
ment
,penal
i
zet
hel
atepay
ersandmaket
hepay
erst
opayf
air
lybased
ont
hei
rincome..

Tabl
e4.
8ist
her
ecomput
eri
zedwayofr
ent
alt
axl
evy
ingandcol
lect
ion
Numberofr
espondent
s&t
hei
rresponse
I
TEMS(
QUATI
ONS)
number of Frequency Per
cent
age
r
espondent
s yes No Yes No

1.
isther
e any comput
eri
zed way ofr
ent
al 23 3 20 13% 87%
l
evyi
ng

2.I
fyouransweri
sno,
why
? 20

Lackofski
l
ledmanpower 0 -

33
Lackoff
inance 0 -

Lackofequi
pment 0 -

Al
lar
ethepossi
bler
easons 20 100%

Tot
al 20 100%

Sour
cesur
vey
sresul
t2019

Fr
om t
heabov
etabl
e4.
8,87%oft
her
espondent
sst
atedt
hatt
her
eisnocomput
eri
zed
wayofr
ent
alt
axl
evy
ingandcol
l
ect
ioni
ntheof
fi
ce.Wher
east
her
emai
ning13%sai
da
comput
eri
zedwayr
ent
alt
axl
evy
ingandcol
l
ect
ionandi
nthesamet
abl
e100% of
r
espondent
ssai
dthatt
heof
fi
cedoesnothav
ether
equi
redf
inanci
alr
esour
ce,
absence
ofski
l
ledper
sonandl
ackofequi
pment
.Sot
her
esear
chercanconcl
udedt
hatt
her
eis
nocomput
eri
zedwayofr
ent
alt
axl
evy
ingandcol
l
ect
ioni
ntheof
fi
ce

Tabl
e4.
9thepr
esentr
ent
alt
axl
evy
ingandcol
lect
ionsy
stem
I
tems Fr
equency Per
cent
age

Showdi
scr
imi
nat
ion 1 4%

Hav
einef
fi
cientmanpower 2 9%

I
tisef
fi
cient 16 70%

Noor
gani
zed 4 17%

t
otal 23 100%

Sour
cequest
ionnai
res2018

Fr
om t
heabov
e4.
970% ofr
espondent
ssai
dtheper
centt
axi
sef
fi
cientand17% of
r
espondent
ssai
dthepr
esentt
axsy
stem i
snotor
gani
zed.Ther
efort
her
esear
cher
concl
udes t
hatt
he pr
esentr
ent
alt
ax l
evy
ing and col
l
ect
ion i
s ef
fi
cientand t
he
aut
hor
izedmustal
somaker
efor
mtoor
gani
zet
hesy
stem.Thi
sref
ormsi
sdonewhen
t
hisnopar
ti
ci
pat
oryandt
her
eisdi
scr
imi
nat
ionpr
act
ice,
andt
hesy
stem i
snotr
unwi
th
t
hest
atedpr
inci
plesr
ulesandr
egul
ati
on.

34
Tabl
e4.
10Doest
heoff
icesmakeanyst
ruct
uraladj
ust
mentt
omaker
ent
alt
ax
more eff
ect
ive
Numberofr
espondent
s&t
hei
rresponse
Quest
ion
number of Frequency Per
cent
age
r
espondent
s yes No Yes No

Doest
heoff
icehav
eanycontrolst
ruct
uret
o 23 7 16 30% 70%
maker
ent
alt
axmoreef
fect
ive

Tot
al 100%

Sour
ce:
sur
veyr
esul
t2019

Fr
om t
heabov
etabl
e4.
1070%ofr
espondent
ssai
dthatt
heof
fi
cedoesnotmakeany
st
ruct
uraladj
ust
mentt
omaket
her
ent
alt
axmor
eef
fect
ive.Whi
l
ether
eami
ng30%sai
d
t
heof
fi
cemakest
ruct
uraladj
ust
mentt
omaket
her
ent
alt
axef
fi
cientandi
nthesame
t
abl
eabov
ethoser
espondent
swhosayy
esr
easonoutt
hatof
fi
cemakest
ruct
ural
adj
ust
ment
sli
kebywi
thhol
dingt
her
ent
ali
ncomet
axandpay
ingt
otheaut
hor
it
y,
pr
epar
ingt
eachi
ngpr
ogr
am cont
rol
l
ingt
hesy
stem ,
enf
orci
ngandf
oll
owi
ngt
eam and
t
he l
i
ke…t
her
efor
ethe r
esear
cherbel
i
eved t
hatt
he of
fi
ce make t
hose st
ruct
ural
adj
ust
mentl
i
stedabov
etomaket
her
ent
ali
ncomemor
eef
fect
iveandef
fi
cient

Tabl
e4.11whoi sr
esponsi
blef
ort
heef
fect
ivenessofr
ent
alt
axassessment
and col
lect
ion
I
tems Fr
equency Per
cent
age

Thet
axpol
i
cy 0 -

Thet
axpay
er 8 35%

Theof
fi
ce 15 65%

Al
lar
eresponsi
ble 0 -

Tot
al 23 100%

Sour
cesur
veyr
esul
t,2019

35
Accor
dingt
othei
nfor
mat
iongat
her
ingi
ntheabov
etabl
e4.
11,
65%ofr
espondent
ssai
d
t
hatt
het
axof
fi
cei
sresponsi
blef
oref
fect
ivenessofr
ent
alt
ax.
assessmentand
col
l
ect
ion.
whi
l
ether
emai
ning35% sai
dthatt
het
axpay
eri
sresponsi
blebodyf
or
ef
fect
iveness ofr
ent
alt
ax assessmentand col
l
ect
ion.t
her
efor
efr
om t
hist
he
r
esear
cherconcl
udet
hatt
het
axof
fi
cei
sresponsi
blebecauset
he–of
fi
cecanconduct
t
ocr
eat
eper
pet
ualcapaci
tybui
l
dingt
oempl
oysal
socr
eat
eawar
enessaboutwhoi
s
r
esponsi
blef
ort
heassessmentandcol
l
ect
ionandal
soawar
dtheempl
oyeesaboutt
he
t
axpol
i
cy,
thet
axof
fi
cei
sresponsi
ble.

Tabl
e4.
12f
act
orst
hataf
fectt
axr
ent
alt
ax
Rent
alt
axcol
l
ect
ionpr
obl
ems Fr
equency Per
cent
age

Fr
aud 6 26%

Fal
sif
icat
ionr
ecor
d 5 22%

Ev
asi
on 2 9%

Unabl
etopayt
axont
ime 10 43%

Tot
al 23 100%

Sour
ce;
sur
veyofquest
ionnai
re,
2019

Asment
ionedt
heabov
etabl
e4.
12,43per
centoft
her
espondent
sar
esai
d,maj
or
f
act
orst
hataf
fectr
ent
alt
axl
evy
ingandcol
l
ect
ionf
ort
heaut
hor
it
yisunabl
etopayon
t
ime.Wher
eas26%ofr
espondent
s sai
dthatf
raudal
socont
ri
but
epr
obl
em f
orr
ent
al
t
ax.Wher
eas,ev
asi
onandf
alsi
fi
cat
ionar
erecor
din22and9%r
espect
ivel
y.Ther
efor
e
accor
dingt
other
esear
chert
hesepr
obl
emscomef
rom l
ackofknowl
edge,awar
eness
aboutt
ax,unabl
etoknow t
het
axabl
eamountbysi
gni
fi
cantmanur
e,aboutt
axa.
(
Gupt
a),
sinceoneoft
hemosti
mpor
tantsour
ceofr
evenuet
oev
erycount
ryi
staxandi
t
i
s a compul
sor
y cont
ri
but
ion by ev
ery ci
ti
zens oft
he nat
ion i
fal
so enabl
ethe
gov
ernmentt
ocov
eri
t’
sadmi
nist
rat
ionandcompl
i
ancecost.
soal
ti
tudeofpay
eri
s
i
mpor
tantt
oimpr
ovet
hepubl
i
crev
enue.Basedont
hist
her
esear
cherconcl
udest
hat
t
her
ent
alt
axaut
hor
it
yknowst
hesef
act
orst
hataf
fectt
axl
evy
ingcol
l
ect
ion.So,
thet
ax

36
aut
hor
it
yshoul
dbef
oll
owi
nganymeasur
ementt
oreduceandel
i
minat
efr
audand
ev
asi
ons,
fal
sif
icat
ionr
ecor
dandi
ncr
easepay
mentoft
axont
ime.

Table4.
13:
-howtheoff
icecont
rol,
evasi
on,
fraud,
fal
sif
icat
ionofr
ecor
dand
unablet
opaytaxevasi
onandav oi
dance
Measur
ementmechani
sm Fr
equency Per
cent
age

Lev
yingf
inesonpay
ers 2 9%

Pr
epar
ingt
eachi
ngpr
ogr
am 3 13%

Cancel
l
ingt
hei
rli
cense 8 35%

Taki
ngal
loft
heabov
e 12 43%%

Tot
al 23 100%

Sour
ce;
sur
veyr
esul
t,2019

AsI
ndi
cat
edi
ntheabov
etabl
e4.
13,43per
centofr
espondent
sagr
eeont
aki
ngal
lthe
abov
emeasur
ementmechani
sms.whi
l
e35per
centr
espondent
sagr
eedoncancel
l
ing
t
hei
rli
cense,
whi
l
ether
emai
ning13%and9%agr
eeonpr
epar
ingt
eachi
ngpr
ogr
am and
l
evy
ingf
inesont
hosewhoi
sunabl
etopayr
espect
ivel
y.Accor
dingt
o(Mi
srak,
2003)
,to
mi
nimi
zet
hepr
obl
em,l
i
kei
dent
if
icat
ionandr
egi
str
ati
onoft
axpay
ers,t
axpay
ers
educat
ion,
eff
ect
ivecont
rolandt
axl
owandr
egul
ati
on.Fr
om t
hosemet
hodst
axpay
ers
educat
ioni
simpor
tantf
orconci
sei
nfor
mat
iononwhati
staxabl
e,howt
ocal
cul
ateand
pay
ing.Thesear
epr
e-l
ossmeasur
esandpenal
ti
esar
epost
-l
ossmeasur
es..

Basedont
hist
her
esear
cherconcl
udet
hatt
her
evenueaut
hor
it
ytocont
rolt
axev
asi
on
andav
oidance,
thet
axaut
hor
it
yshoul
dbepr
epar
einadv
ancepr
ovi
det
eachi
ngpr
ogr
am
t
otaxassessment
,col
l
ati
onsandi
tspur
posebef
oreusedpostr
eact
ionmeasur
ement
l
i
keaddi
ti
onal
finesandcancel
l
ingl
i
cense.

Tabl
e4.
14ev
aluat
eoft
heopi
nionofr
ent
alt
axpay
ers
Ev
aluat
ionmechani
sm Fr
equency Per
cent
age

37
Excel
l
ent 0 -

Ver
ygood 7 30%

Good 16 70%

Poor 0 -

Tot
al 23 100%

Sour
ce;
sur
veyofquest
ionnai
re,
2019

Asi
ndi
cat
edont
heabov
etabl
e4.
14,
70per
centoft
her
espondent
sconf
ormedt
hatt
he
opi
nionofr
ent
alt
axpay
ersi
sgood,whi
l
ether
emai
ning 30 per
centr
espondent
s
conf
ormedt
hatt
heopi
nionofr
espondent
saboutr
ent
alt
axi
sver
ygood.Ther
efor
e,t
he
r
esear
cherbel
i
evedt
hatAr
siNegel
etownadmi
nist
rat
ionr
evenueaut
hor
it
ytaxpay
ers
hav
egoodopi
nionaboutr
ent
alt
axandt
hispr
ovi
deawel
l
-or
gani
zedser
vice.Sot
his
woul
dpl
ayagr
eatr
oleont
hedev
elopmentoft
het
axaut
hor
it
yper
for
mancet
owar
ds
cust
omerandr
evenuecol
l
ect
ion.

Table4.15:
-theaut
hor
it
y’spr
evi
oust
hreey
ear
srev
enuecol
lect
ion
perf
ormance
Year Col
l
ect
ed I
ncr
eased i
n amount I
ncr
ease i
n
f
rom pr
evi
ousy
ear per
cent
age

2008 70,
8000.
00

2009 900,
000.
00 192000.
00 27.
2%

2010 1200,
000.
00 300000.
00 33.
33%

Tot
al 2808000.
00

Sour
ce;
Arsi
Negel
etownadmi
nist
rat
ionr
evenueaut
hor
it
y,2019

Asi
ndi
cat
edt
heabov
etabl
e3.
12,
int
hel
astt
hreey
ear
sofEt
hiopi
angov
ernmentf
iscal
per
iod,
ArsiNegel
etownadmi
nist
rat
ionr
evenueaut
hor
it
ycol
l
ect
edr
evenuef
rom di
rect
t
ax,i
ndi
rect t
ax,ot
her sour
ces of r
evenue bi
rr 70,
8000.
00 bi
rr
900,
000.
00 and
bi
r1200,
8000.
00f
rom y
ear2008,2009,and2010r
espect
ivel
y.Thi
sinf
ormat
ionshows

38
t
hatt
her
evenueaut
hor
it
yper
for
mancei
ncr
easeby27.
2per
centand33.
33per
centi
n
t
hey
ear2009and2010r
espect
ivel
yandbi
rr192000.
00and300000.
00i
namounti
nthe
y
ear2009 and 2010 r
espect
ivel
y.Based on t
he abov
e ev
idence,t
he r
esear
cher
concl
udest
hatAr
siNegel
etownadmi
nist
rat
ionr
evenueaut
hor
it
yhasgoodpubl
i
c
r
evenuecol
l
ect
ionper
for
mance.But
,ital
soi
ndi
cat
est
hatt
heaut
hor
it
ycani
ncr
ease
publ
i
crev
enuebycr
eat
ionofadequat
etr
aini
ngandawar
enessf
orbot
htaxcol
l
ect
ors
and t
ax pay
ers because t
his ev
idence can be shown t
hat Ar
siNegel
etown
admi
nist
rat
ionr
evenueaut
hor
it
yhashi
gherpubl
i
crev
enuepot
ent
ialt
hancol
l
ect
ed
amountcur
rentper
for
mance.

4.
3Summer
yoff
indi
ng
Based on t
he i
nfor
mat
ion av
ail
abl
efr
om t
he pr
esent
ati
on ofdat
ethe r
esear
cher
i
dent
if
iedt
hef
oll
owi
ngsummar
y.

 MostAr
siNegel
etownadmi
nist
rat
iver
evenueaut
hor
it
iesempl
oyeesar
edegr
ee
hol
der
sandt
heof
fi
cehav
emor
emal
eempl
oyeest
hatar
einageofbet
ween18-
35y
ear
s.

 Mor
ethan65per
centofempl
oyeeshav
ethr
eey
ear
s’wor
kexper
ienceandt
he
r
emai
ning35%hav
eabov
ethr
eey
ear
s’wor
kexper
ience.

 Mostofempl
oyeesst
atedt
hatt
hemaj
orsour
cesofr
ent
alt
axi
nAr
siNegel
ear
e
f
rom pr
ivat
eindi
vi
dual
s.

 Mostofempl
oyeesst
atedt
hatAr
siNegel
etownadmi
nist
rat
ionaut
hor
it
ylev
ying
r
ent
alt
axonpay
ersusi
ngaut
hor
it
yjudgment

 Mostofempl
oyeessai
dthatt
hepeopl
eofAr
siNegel
ear
evol
unt
aryt
opayt
he

39
 r
ent
ali
ncomet
ax

 .
mostofempl
oyeesst
atedt
hatt
her
eisnocomput
eri
zedwayofr
ent
alt
ax
l
evy
ingandcol
l
ect
ionbecausel
ackofequi
pment
,ski
l
ledmanpowerandl
ackof
f
inance

 Mostofempl
oyeesbel
i
vedt
hatr
ent
alt
axpay
erspayont
imebecauset
heypay
basedont
hei
rincome.

 Mostofempl
oyeesbel
i
vedt
hatt
hepr
esentr
ent
alt
axl
evy
ingi
sef
fi
cient
.

 Mostempl
oyeesst
atedt
hatAr
siNegel
etownadmi
nist
rat
ionmakest
ruct
ural
adj
ust
mentt
o make r
ent
alt
ax mor
e ef
fect
ivel
i
ke wi
th hol
ding ,
prepar
ing
t
eachi
ngpr
ogr
am andcont
rol
l
ingt
hesy
stem

 Mostofempl
oyeesst
atedt
hatAr
siNegel
etownadmi
nist
rat
ionr
ent
alt
axof
fi
ce
i
sresponsi
blef
oref
fect
ivenessandassessmentofr
ent
alt
ax.

 Fr
audandunabl
etopayont
imet
her
ent
alt
axar
ethemaj
orf
act
orst
hataf
fect
r
ent
alt
ax.

 Mostempl
oyeesst
atest
hatt
hemeasur
eoft
heof
fi
cet
ocont
rolf
raudand
unabl
etopayar
ecancel
i
ngt
hei
rli
cense.

 Regar
dingt
othi
sfr
om secondar
ydat
ather
evenue aut
hor
it
y annualr
epor
t
t
hatt
heper
for
manceoft
axaut
hor
it
ypubl
i
ccol
l
ect
ioni
sincr
easeby33.
33%and
27.
2%i
nthepr
evi
oust
woy
ear
s.

40
CHAPTERFI
VE

5.CONCLUSI
ONANDRECOMMENDATI
ON
Thi
schapt
erconsi
stst
wosect
ions1stapossi
bleconcl
usi
oni
sdr
awnandl
ast
lybased
ont
hef
indi
ng,
ther
esear
cherhi
ghl
i
ghtsomer
ecommendat
ions.

5.
1Concl
usi
on
I
nthi
ssect
ion,
ther
esear
chert
ri
edt
oconcl
udet
heal
l
-i
mpor
tantpoi
ntsaboutt
hepaper
basedont
her
esear
chobj
ect
ives;
-

 Taxf
raudandunabl
etopayont
imear
ethemaj
orf
act
orst
hataf
fectr
ent
al

41
 t
axcol
l
ect
ionsy
stem i
nAr
siNegel
etownadmi
nist
rat
iver
evenueaut
hor
it
y
of
fi
ce.

 MostAr
siNegel
etownadmi
nist
rat
iver
evenueaut
hor
it
yhaswor
kexper
ience
andmostoft
hem ar
edegr
eehol
der
s.

 Mostr
ent
alt
axpay
ershav
egoodopi
nionaboutr
ent
alt
ax

 Mostr
ent
alt
axpay
ersi
nit
iat
edt
hemsel
vest
ofr
audr
ent
alt
axduet
olackof
mot
ivat
iont
oful
fi
ll
civ
icr
esponsi
bil
i
ty.

 Somer
ent
alt
axpay
ersar
enotpayt
hei
rrent
alt
axl
i
abi
l
ityont
ime.

 Tor
educeandel
i
minat
etaxt
hef
act
ort
hataf
fectr
ent
alt
axr
evenueaut
hor
it
y
t
akes some measur
ement mechani
sms l
i
ke cancel
i
ng t
hei
rli
cense,
coor
dinat
ing empl
oyees,cr
eat
ing awar
eness i
nthe of
fi
ce and r
ender
ing
adequat
etr
aini
ngt
oempl
oyees.

Themaj
orsour
cer
ent
alt
axi
nAr
siNegel
eisf
rom pr
ivat
eindi
vi
dual
s

 Duet
olackofcomput
eri
zedwayofr
ent
alt
axl
evy
ingandcol
l
ect
ionsy
stem
t
hei
r wor
kiscompl
i
cat
ed.

 MostAr
siNegel
etownadmi
nist
rat
ionr
ent
alt
axpay
ersar
evol
unt
ary

 Cur
rent
ly,Ar
siNegel
etownadmi
nist
rat
iver
evenueaut
hor
it
yhasv
erygood
t
axcol
l
ect
ionper
for
mance.

 Theempl
oyeesofAr
siNegel
ear
emot
ivat
edt
ocol
l
ectt
her
equi
redr
ent
alt
ax

5.
2 Recommendat
ion
Forbet
teri
mpr
ovementofr
ent
alt
axl
evy
ingandcol
l
ect
ionsy
stem t
her
esponsi
blebody

42
shoul
dwor
khandi
nhandt
oget
her
.Toenhancet
het
axl
evy
ingandcol
l
ect
ingsy
stem i
n
Ar
siNegel
etownt
her
esear
chermadeanat
temptt
ogi
ver
ecommendat
iont
hathel
pto
hav
eanef
fi
cientandr
ent
alt
axassessmentl
evy
ing andcol
l
ect
ionwi
thpr
eval
enceof
cl
earr
uleandr
egul
ati
onandsol
vepr
obl
em associ
atedwi
tht
axassessmentcol
l
ect
ion
per
for
mance

 Foref
fi
cientt
axsy
stem act
ivepar
ti
cipat
ionoft
axpay
er’
s.Tohav
etheseact
ive
par
ti
cipat
iont
axpay
erneedt
ohav
egoodunder
standi
ngaboutt
axat
ion.
Inor
der
t
ocr
eat
ethi
sunder
standi
ngt
heof
fi
ceshoul
dtr
ainempl
oyeesonr
ent
alt
axand
r
elat
edi
ssuesi
nor
dert
ounder
goempl
oyee’
sknowl
edgegapwi
tht
imechange.
Becausequal
i
fiedmanpoweri
skeyi
ssuet
oper
for
m anyt
askef
fect
ivel
ysot
he
r
evenueaut
hor
it
ybet
tert
ofi
l
lther
ent
alt
axcol
l
ect
ionandf
oll
owupsect
ionwi
th
qual
i
fiedmanpower
.

 Manpowerr
equi
redi
nanor
gani
zat
ionbet
tert
obegi
vemor
eat
tent
ion.
Because
i
fther
eisl
ackofempl
oyeeswi
thr
equi
redqual
i
ficat
ionandexper
iencet
hewor
k
doesnotcompl
eteatt
her
ightt
ime.Ther
efor
e,t
ost
rengt
hther
ecapabi
l
ityand
i
mpr
ovet
heef
fect
ivenessi
nthewor
kpl
ace,t
heof
fi
ceshoul
dpr
ovi
det
rai
ning
f
orempl
oyees,t
heoppor
tuni
tyofeducat
ionf
orempl
oyeesi
nor
dert
oreduce
t
heempl
oyeest
hel
eav
ingt
heof
fi
ce,
i
tisal
sobet
tert
ogi
veawar
enesst
othe
pay
ersaboutr
ent
alt
axandi
tspur
poset
hroughmedi
abecausei
fthepay
ercan
cal
cul
atet
hei
rrent
alt
axl
i
abi
l
ityandhav
egoodknowl
edgeaboutt
axandi
ts
pur
pose.
theycaneasi
l
yur
gencyofi
ncomet
oreducepay
mentdal
l
iance.

 Nowaday
s,useofcomput
eri
sfaci
l
itat
ingmet
hodoft
echnol
ogyi
ncr
easedf
rom
sampl
etocompl
exwor
kar
eat
omaket
hei
rwor
kmor
esampl
eandef
fect
ivet
he
of
fi
ceneedt
omai
ntai
nuseoft
hisaut
omat
ionsy
stem.Sot
heaut
hor
it
yshoul
d
usecomput
eri
zedwayofr
ent
alt
axl
evy
ingandcol
l
ect
ion.

 Themaj
orr
easonoff
raudandunabl
etopayar
elackofawar
enessoft
axpay
er
aboutr
ent
alt
axandl
ackofmot
ivat
iont
oful
fi
llsoci
alr
esponsi
bil
i
ty.Ther
efor
e,
t
osol
vesuchpr
obl
emst
heof
fi
ceneedt
omakecol
l
abor
ati
onwi
tht
het
own
admi
nist
rat
iont
ocont
rolt
hosepr
obl
emst
heof
fi
cegi
vecapaci
tybui
l
dingf
or

43
 t
hoset
axpay
ersi
nor
derpr
ovi
dedi
ff
erentr
emi
nderofpay
ingr
ent
alt
axont
ime
andusef
ort
hesoci
ety
.

 Tocor
rectt
hepol
i
cyf
ail
uresgov
ernmentshoul
dadoptser
iesoft
axr
efor
m
measur
es,
focusi
ngon;

 Br
oadeni
ngt
het
axbase

 I
mpr
ovi
ngandmoder
nizi
ngt
het
axl
evy
ingandcol
l
ect
ingi
nst
it
uti
on

I
naddi
ti
on,
theof
fi
cebet
tert
oest
abl
i
shgoodt
axadmi
nist
rat
ion,
andt
axpay
ersneedt
o
r
ecei
vecl
ear
,conci
seandupt
odat
einf
ormat
iont
hatdescr
ibi
ngwhati
stobet
axabl
e,
how t
ocal
cul
atet
hei
rtaxl
i
abi
l
ity
,for
msandpr
ocedur
esf
orcal
cul
ati
ngpay
ingt
axes
shoul
dbeasal
sosi
mpl
easpossi
ble.i
nli
newi
tht
hist
heof
fi
cehasnosepar
ater
ecor
d
f
oral
lty
pesofi
ncomet
her
efor
etheof
fi
cebet
tert
orear
ranget
hei
rrecor
dtopr
ovi
de
separ
atei
nfor
mat
ion(
li
kebycat
egor
y,t
ypeofbusi
nesset
c…)t
her
esear
chermaygi
ve
soundi
nfor
mat
ionaboutr
ent
alt
axl
evy
ing,
col
l
ect
ionandpr
obl
emsr
elat
edt
orent
alt
ax
asawhol
e.

44
REFERENCES
Alemayehu and Abe be (2003),Taxes and tax reform i
n Et
hiopi
a,
(1990-

2003)
,UNU-
WIDER,
Resear
chpaperNo.
2005/
65.

Allinghan,M,gandsandmoa,(1972)”Incometaxevasion;theoreticalanalysis,
Jour
nal
ofpubl
i
ceconomi
cs9(
7).323-
338

CommercialcodeofEthiopia 1960
Ethiopianchamberofcumbrance,(2005)taxationinEthiopia

Federalnegaritgatheta ofFDRE (2009)income tax proclamation number

2861/
2009.

Gebreworku(2000)taxaccountinginEthiopiacontext,firstedition,alem printing
pr
ess,
AA.

Hervey koul,Roson (200)public finance,seven edition,annealpublication

PVT,
LTD,
Newy
ork.

45
 Incometaxproclamationnumber286/2009

NewEthiopiataxreform,2017

Tadel,G,(2010)taxreform and theirimplication on revenue productivityof

Et
hiopi
ant
axsy
stem ,
resear
chst
udy
.

VogalJ(1974)taxationandpublicopinioninsuede,elevenedition,international
publ
i
shi
ng,
DC

APENDEX

ARBAMI
NCHUNI
VERI
STY

COLLEGEOFBUSI
NESSANDECONOMI
CS

DEPARTMENTOFACCOUNTI
NGANDFI
NANCE

Thi
sQuest
ionnai
rei
spr
epar
ed f
orempl
oyeesofAr
siNegel
etown admi
nist
rat
ion
r
evenueaut
hor
it
y.

I
ntr
oduct
ion

DearRespondent

Thepur
poseoft
hisquest
ionnai
rei
stocol
l
ectpr
imar
ydat
aforconduct
ingast
udyon
t
het
opi
c“Anal
ysi
sofr
ent
alt
axl
evy
ingandcol
l
ect
ingsy
stem -
Acasest
udyofAr
si
Negel
etownadmi
nist
rat
ionr
evenueaut
hor
it
y.”
Aspar
ti
alf
ulf
il
lmentt
othecompl
eti
onof
t
hedegr
eeofAccount
ingandf
inance(
BA)Pr
ogr
am ofAr
baMi
nchUni
ver
sit
y.I
nthi
s

46
r
egar
d,Iki
ndl
yrequesty
out
opr
ovi
demer
eli
abl
einf
ormat
ion.Iwoul
dli
ket
oext
endme
deep-
hear
tthanksi
nadv
ancef
ory
ourcor
por
ati
ont
odev
otey
ourv
aluabl
eti
mei
n
f
eel
i
ngt
hisf
orm.

 Di
rect
ion

 Noneedt
owr
it
eyourname

Ki
ndl
yrequesty
out
oanswerbymaki
nga(
X)makeori
nwr
it
ingwher
eev
erappr
opr
iat
e
PART-
I:PERSONALPROFI
LE

A.Sex Mal
e Femal
e

B.Age 18-
23 24-
29 36andabov
e

C.Educat
ionall
evel

Hi
ghschool
compl
ete Di
ploma

Fi
rstdegr
ee Seconddegr
eeandabov
e

D.Yearofexper
ience

Lesst
han2y
ear
s 2-
4year
s 4y
ear
sandabov
e

PART-
II
:SPECI
FICI
NFORMATI
ON

1Whatar
ethemaj
orsour
ce(
area)r
ent
ali
ncomei
nAr
siNegel
etown?

Fr
om gov
ernmentagency f
rom publ
i
cbody

Fr
om non-
gov
ernmentagency f
rom pr
ivat
eindi
vi
dual
s

2.Ar
ethepeopl
eof Ar
siNegel
ear
evol
unt
aryt
opayr
ent
ali
ncome?Yes
No

I
fyouransweri
sNo,
why
?

47
 Lackofawar
enessaboutt
ax

Host
il
it
ybet
weencol
l
ect
ingaut
hor
it
yandpay
er

Pay
ersnotunder
standt
hemanur
eofpay
ment

Al
l

3.Howdoy
oul
evy
ingt
her
ent
alt
axont
het
axpay
er?

Usi
ngaut
hor
it
y’sj
udgment

Anal
yzi
ngt
hef
inanci
alst
atement

Ast
het
axpay
erswent

4.Dot
het
axpay
erspayt
hei
rtaxl
i
abi
l
ityont
ime?

Yes No

5.I
fyouransweri
nquest
ion4i
sNOwhaty
ousuggest

Unwi
l
li
ngl
yofpay
ert
opayont
ime

Pay
ersnotknowaboutt
imeofpay
ment

Lowawar
enessoft
axpay
ersaboutt
ax

Lackoft
rai
ninggi
vent
opay
ers

Al
lar
ether
eason

6.I
sther
e any comput
eri
zed way oft
ax l
evy
ing and col
l
ect
ing sy
stem i
nthe
or
gani
zat
ion?

Yes No

7.
Ify
ouranswerf
orquest
ion5i
sNO,
whati
sther
eason?

Lackofequi
pment

48
 Lackofski
l
ledmanpower

Lackoff
inance

Al
l

8.Howdoy
ouunder
standt
heper
centt
axl
evy
ingandcol
l
ect
ingsy
stem?

ShowDi
scr
imi
nat
ion I
tisef
fi
cient

Hav
einsuf
fi
ci
entmanpower notor
gani
zed

9.Howdoy
ouev
aluat
etheopi
nionofr
ent
ali
ncomet
axpay
ers?

Excel
l
ent v
erygood

Excel
l
ent Ver
yGood Good

10.Doest
heofhav
eanycont
rol
procedur
etocont
rol
rent
ali
ncomet
ax

Yes No

11.Doest
heof
fi
cemakeanyst
ruct
uraladj
ust
mentt
omaket
hei
rrent
alt
axmor
e
ef
fect
ive?

Yes No

12.I
fyouranswerf
orquest
ionf
orno9i
syes,
whatt
ypeofadj
ust
menti
ttakes?

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

13.Whoi
sresponsi
blef
oref
fect
ivenessofr
ent
alt
axassessmentandcol
l
ect
ion?

Thepol
i
cy t
axpay
er t
axof
fi
ce al
l

49
14.Whatar
ethef
act
ort
hataf
fectr
ent
alt
ax?

Fr
aud f
alsi
fi
cat
ionofr
ecor
d

Ev
asi
on unabl
etopayont
ime

15.Howt
heof
fi
cecont
rol
theabov
efact
ors

Lev
ying f
inesonpay
er’
s

Pr
epar
ing t
eachi
ngpr
ogr
ams

Cancel
l
ingt
hei
rli
cense

Taki
ngal
loft
heabov
e

50
51
52