WOLLO UNIVIRSITY

COLLEGE OF BUSINESS AND ECONOMICS

DEPARTMENT OF ACCOUNTING & FINANCE

FACTORS AFFECTING TAXPAYER’S COMPLIANCE THE

CASE OF DESSIE CITY ADMINISTRATION

A THESIS SUBMITTED TO WOLLO UNIVERSITY IN

PARTIAL FULFILLMENT OF THE REQUIREMENTS
FOR THE DEGREE OF MASTER OF SCIENCE IN
ACCOUNTING AND FINANCE
BY

ABDU YESUF MUSSA

ADVISOR: ALI MOHAMMED (PHD)

MARCH, 2023

Dessie, Ethiopia

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 WOLLO UNIVERSITY

SCHOOL OF GRADUATE STUIDIES

FACTORS AFFECTING TAXPAYER’S COMPLIANCE

WITH THE TAX SYSTEM IN DESSIE CITY
ADMINISTRATION

A Thesis Submitted To Wollo University in Partial

Fulfillment of the Requirements for the Degree of Master of
Science in Accounting and Finance

BY: ABDU YESUF MUSSA

ID: SGSE/0582/13

APPROVED BY BOARD OF EXAMINERS

Dean, Graduate Studies Signature& Date

Advisor Signature & Date

External Examiner Signature & Date

Internal Examiner Signature & Date

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 ACKNOWLEDGMENT

I would like to extend my first and most gratitude to almighty GOD and His mother Saint Marry,
without whom nothing good is possible.

I would like to extend my heartfelt appreciation and deepest gratitude to my advisor, Dr. Ali
Mohammed for his expert guidance, helpful criticism, valuable suggestions and encouragement
at every stage of this work. I am deeply appreciative of the dedication, encouragement and time
that he has significantly contributed to the completion of my thesis.

I am also very grateful for my brother, Mohammed Yesuf for her continuous support and
encouragement and for giving me better insights when I was facing challenges.

My heartfelt gratitude goes to my lovely friends and my co-workers Mr. Woinishet Assefa and
Tesfaye mammo, I really thank you for your unreserved motivation and support.

My gratitude is also extends to Dessie city administration revenue office staffs for providing me
with the relevant data which was very important for this study. I am also indebted to Dessie city
business taxpayers for their enthusiasm to participate in the survey and plays significant
contribution to the success of this study.

Furthermore I also owe a special recognition to my friends, classmates and staffs who have
contributed in many ways toward the completion of this thesis.

Finally, my heartfelt thanks go to my family, for their unconditional love and support. I am
deeply grateful to my parents who have been motivating and praying for my success.

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Table of Content

s
ACKNOWLEDGMENT...........................................................................................................................ii
LIST OF ABBREVIATIONS..................................................................................................................vi
LIST OF TABLES...................................................................................................................................vi
LIST OF FIGURES................................................................................................................................vii
ABSTRACT.............................................................................................................................................viii
CHAPTER ONE.......................................................................................................................................1
INTRODUCTION.....................................................................................................................................1
1.1 Background of the Study................................................................................................................1
1.2 Statement of the Problem................................................................................................................2
1.3 Objective of the research.................................................................................................................4
1.3.1 General objective of the study..................................................................................................4
1.3.2 The specific objectives of the study.........................................................................................4
1.4 Research Questions.........................................................................................................................5
1.5 Hypotheses......................................................................................................................................5
1.6 Significance of the Study...............................................................................................................6
1.7 Scope of the Study.........................................................................................................................6
1.8 Delimitations of the Study............................................................................................................6
1.9 The structure of the paper.............................................................................................................7
CHAPTER TWO......................................................................................................................................8
LITERATURE REVIEW..........................................................................................................................8
2.1 Definition of Tax...........................................................................................................................8
2.2 Ethiopian Taxation..........................................................................................................................9
2.2.1 Ethiopian Business Categories.................................................................................................9
2.2.2 Declaration of Business income.............................................................................................9
2.3 Tax Compliance................................................................................................................................10
2.3.1. Definition of tax Compliance................................................................................................10
2.3.2. Theoretical Approaches of Tax Compliance.........................................................................10
2.3.2.1 Economic Based Theories................................................................................................11
2.3.2.2 Psychology Theories...........................................................................................................11
2.4. Determinants of tax compliance...................................................................................................12

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 2.4.1 Economic Factors...................................................................................................................13
Tax Audit........................................................................................................................................13
Perceptions of government spending..............................................................................................13
2.4.2 Social Factors.........................................................................................................................13
Perceptions of equity or fairness.....................................................................................................14
Changes to current government policies.........................................................................................14
Referent groups (family and friends)..............................................................................................14
2.4.3 Individual Factors...................................................................................................................15
Personal financial constraints..........................................................................................................15
Awareness of offenses and Penalties..............................................................................................15
Tax knowledge................................................................................................................................15
2.4.4 Demographic factors............................................................................................................16
Gender.............................................................................................................................................16
Age…..............................................................................................................................................16
Income.............................................................................................................................................16
Education.........................................................................................................................................17
2.5 Empirical Studies and Knowledge Gap......................................................................................18
2.5. Conceptual Framework................................................................................................................20
CHAPTER THREE.................................................................................................................................21
RESEARCH METHODOLOGY............................................................................................................21
3.1 Introduction...................................................................................................................................21
3.2 Rationale for Choosing the Research Site....................................................................................21
3.3 Research Approach.......................................................................................................................21
3.4 Source of Data...............................................................................................................................22
3.5 Research Instruments....................................................................................................................22
3.6 Date Collection..............................................................................................................................22
3.7 Target Population..........................................................................................................................22
3.8 Sampling size and Sampling Technique.......................................................................................23
Sample Size.....................................................................................................................................23
3.9 Data analysis.................................................................................................................................25
Model Specification........................................................................................................................25
3.10 Data Management and analysis procedure..................................................................................26
3.11 Dissemination of the results........................................................................................................27

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CHAPTER FOUR...................................................................................................................................28
RESULTS AND DISCUSSION.............................................................................................................28
4.1 Respondents general background..................................................................................................28
4.2 Descriptive Analysis of Tax Compliance.....................................................................................28
Tax Compliance..............................................................................................................................29
4.3 Descriptive Analysis.........................................................................................................................
4.3.1 Demographic Factors.............................................................................................................30
4.3.2 Economic, Social and Individual Factors...............................................................................31
Tax audit..........................................................................................................................................31
Perception of Government Spending..............................................................................................32
Principle of Equity and Fairness.....................................................................................................32
Changes to government policy........................................................................................................32
Referent group.................................................................................................................................32
4.4 Analysis concerning qualitative questions....................................................................................36
4.4.1 Society’s awareness on taxes.................................................................................................36
4.4.2 Tax evading ways among taxpayers......................................................................................37
4.4.3 Factor for poor tax revenue collection...................................................................................37
4.4.4 The level of compliance of taxpayers as employees of the authority....................................38
4.5 Model Fitness................................................................................................................................38
4.5.1 Normality Test with Normal Percent-Percent Plot and Histogram........................................39
4.5.2 Correlation analysis................................................................................................................40
4.5.3 Test for Multicollinearity.......................................................................................................41
4.5.3 Test for durbin-watson...........................................................................................................42
4.5.4 Mean in Likert scale data.......................................................................................................42
4.6 Determinants of tax compliance – Multiple Linear Regression Model Analysis.........................42
4.6.1 Model Summary.....................................................................................................................42
4.6.2 Analysis of Variance (ANOVA)............................................................................................43
4.6.3 Regression Coefficients and Hypothesis Testing...................................................................44
CHAPTER FIVE.....................................................................................................................................47
CONCLUSIONS AND RECOMMENDATION....................................................................................47
5.1 Conclusion....................................................................................................................................47
5.2 Recommendations.......................................................................................................................48
REFERENCES........................................................................................................................................50

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 Appendices 1- Business Taxpayers survey instrument...........................................................................56
Appendices 2- Business Taxpayers survey instrument (Amharic version)..............................................62

LIST OF ABBREVIATIONS

ARB Amhara Revenue Bureau

EC Ethiopian Calendar

ERCA Ethiopia Revenue and Custom Authority

FIRA Federal Inland Revenue Authority

GDP Gross Domestic Product

IMF International Monetary Fund

IRS Internal Revenue Services

NEF New Economic Foundation

PIN Personal Identification Number

OECD Organization for Economic Cooperation and Development

SAS Self-Assessment System

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 LIST OF TABLES
Table 1.1 Annual Revenue Collection Plans & Achievement......................................................................4
Table 2.1 Variables description and expected associations with level of tax compliance..........................17
Table 3.1 Stratified Random Sampling for Taxpayers...............................................................................24
Table 3.2 Tax Payers Category with Sub city............................................................................................24
Table 4.1 Respondents general back ground..............................................................................................28
Table 4.2 Tax Compliance attitude............................................................................................................29
Table 4.3 Non -Compliant attitude............................................................................................................30
Table 4.4 Demographic factor Vs. Tax compliance behavior....................................................................31
Table 4.5 Economic, Social and Individual Factors...................................................................................33
Table 4.6 Descriptive Statistics independent variables..............................................................................35
Table 4.7 Spearman’s Correlation Matrix for dependent, independent variables.......................................40
Table 4.8 VIF Test.....................................................................................................................................41
Table 4.9: Model Summary.......................................................................................................................43
Table 4.10: Analysis of Variance..............................................................................................................43
Table 4.11 Descriptive Statistics of independent variable and dependent variables..................................44
Table 4.12: Relationship between dependent variable...............................................................................45

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 LIST OF FIGURES

Figure 2 .1 Factors affecting compliance behavior....................................................................................20

Figure 4.1 Normal P-P graphs and Histogram result.................................................................................39

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 ABSTRACT

The objective of this study was to examine factors affecting tax payer’s compliance the
case of Dessie city administration. A conceptual framework was adopted based on the
economic, social, individual and demographic factors. The study adopted a quantitative
and qualitative research approach to test the hypotheses and answer research questions.
The data collected from 306 tax payers in Dessie City administration through distributing
self-administered questionnaires. Date was analyzed using SPSS. Two analysis methods
were used, descriptive statistics and multiple linear regression model to examine
significant determinant factors of tax compliance. It also revealed that gender, age, tax
audit, government spending, the influence of referent group, awareness on offences and
penalty rate, and tax knowledge are significant factors of tax compliance. Other factors
considered under this study, education, income level, equity and fairness, government
policy, and personal financial constraint were found to be insignificant. The result founds
that majority of tax payers were not compliant. Finally the study suggests that the
government has to improve public services to enhance tax compliance behavior.
Following this it is mandatory to create awareness about benefits of paying tax,
conducting preventive education to the public and conduct through audit to discourage
noncompliance behavior. In addition it would be helpful if further study is conducted on
influence of referral group on compliance behavior since social norms and ethical values
will create different incentives for tax compliance.

Key Words; Tax, Taxation, Tax Compliance, Tax Administration, Business Taxpaye

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 CHAPTER ONE
INTRODUCTION
1.1 Background of the Study

Taxation in developing countries is a difficult problem that has gotten more attention in recent
decades. Many issues were identified during this time, including inadequate administration,
failure to collect sufficient tax revenues, and a lack of government and economic stability
(Vadde and Gundarapu, 2012). According to Vadde and Gundarapu (2012), Ethiopia, like other
developing countries, has struggled to raise revenue to the level needed to promote economic
progress. Ethiopian government revenue comes from a variety of sources, including taxes, public
borrowing, asset sales, and transfer payments (Asaminew, 2011).

Taxes are essential to the existence of governments since they fund the majority of services
provided by governments, such as education, welfare, public safety, infrastructure, and other
basic public services (Tilahun and Yidersal, 2014). These public funds are intended for public
goods and services that are critical to society's progress and well-being (Asamnew, 2011).
Improved tax compliance increases the amount of money available to support public services
without raising the tax burden on complying taxpayers (Bird, 1998). As a result, tax compliance
has become a major research topic in a number of industrialized and developing countries
(Tilahun and Yidersal, 2014). Because each country has its unique strategy to controlling tax
compliance levels, as well as its own set of tax rules and regulations, the factors influencing tax
compliance behavior appear to differ (Palil, 2010).

Ethiopian Revenues and Customs Authority offices must have the competence to collect taxes
efficiently and in a just and equitable manner in order to avoid aid dependency and poverty. This
necessitates steps to improve internal tax collection as well as to remove barriers that are simply
not fit for their intended goals, such as taxpayer education, tax rule and procedure counseling,
and increased audit coverage (Gebrewahid, 2012).

As a result, the goal of this research is to look into the elements that influence company taxpayer
compliance in Dessie City Administration. The study's findings are expected to provide
policymakers and tax authorities with information as well as a reference for subsequent research.

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1.2 Statement of the Problem

Developing countries are particularly prone to tax noncompliance due to institutional

shortcomings and a lack of experience and resources to monitor the complexities of tax
compliance issues.

Ethiopia is a developing country with several development ambitions, yet its government reports
inadequate tax revenue collection. In terms of tax to GDP ratio, Ethiopia is a low-performing
country. It's at 9.2%, which is lower than the global average for low-income countries (Yesegat
and Fjeldstad, 2016). Taxpayers fail to meet income tax standards, according to Akalu(2016),
and a number of them fear prosecution for failing to pay taxes on time.

In Kenya, empirical data reveals that there has been enmity between taxpayers and tax collectors
on problems connected to tax compliance, as well as outward resistance from taxpayers, as
evidenced by the recent taxpayer protest over the installation of the Electronic Tax Register.
Hostile taxpayer behavior means that if given the opportunity, taxpayers will ignore tax rules
(Lumumba, Migwi and Obara, 2010). Ethiopia, too, is seeing similar protests from taxpaying
citizens in 2016. Various media outlets have reported on the enmity between Ethiopia's Revenue
and Customs Authority and tax payers (ERCA, 2016).

According to ERCA(2016), the authority investigates and prosecutes taxpayers who engage in
tax evasion regularly. According to the preliminary investigation, the suspects were involved in
issuing illegal receipts and manipulating the fiscal memory installed on the sales machines,
resulting in the loss of government funds.

A variety of variables contribute to tax evasion by taxpayers. Kirchler (2007) and Loo (2006)
classify tax compliance determinants into four categories based on an interdisciplinary
perspective that represents a broader view of tax compliance factors than other academics. The
four categories are 1) economic factors (tax rates, tax audits and perceptions of government
spending); 2) institutional factors (the role of the tax authority, simplicity of the tax returns and
administration and probability of detection); 3) social factors (ethics and attitude, perceptions of
equity and fairness, political affiliation and changes on current government policy, referent
groups); and 4) individual factors (personal financial constraints, awareness of offences and of

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penalties). Nicoleta (2011), on the other hand, identifies economic (level of actual income, tax
rate, fines, penalties, tax benefits, and tax audit probabilities) and non-economic (attitude toward
taxes, personal, social, and national norms, and perceived fairness of tax system) factors as
determinants of tax compliance. In addition to moral or ethical issues, Singh (2003) and
Kasipillai, Norhani, and Noor (2003) discovered several aspects that influenced tax compliance
behavior, such as demography, income, c0ompliance cost, and tax agents.

In Ethiopia, empirical studies on the factors that influence tax compliance have been done.
Yesegat and Fjeldstad (2016) used a multiple linear regression model to investigate factors that
influence business people's attitudes toward paying taxes in Ethiopia. They discovered a
statistically significant relationship between tax-compliance attitude and factors like the
perception of audit risk, corruption, satisfaction with the tax administration, peer influence,
gender, and education. Akalu (2016) looked at ten potential determinants of tax compliance
behavior in Ethiopia, including tax compliance cost, business sector, business size, tax liability,
business age, sector, length, and tax attitudinal aspects like tax complexity, tax rate structure, tax
deterrence sanctions, fairness in the tax rate/tax system, and perceived level of psychological
costs. Tadesse and Goitom (2014) in Bahirdar and Tilahun and Yidersal (2014) in Mekelle cities
did additional study on factors impacting tax compliance. Apart from that, their techniques and
conclusions were inconsistent, and they suggested that further research be done in this area. For
example, Tadesse and Goitom (2014) advocated more research at the national level to acquire a
better understanding of the country's compliance factors. Furthermore, according to Yesegat and
Fjeldstad (2016), understanding taxpayer behavior and implementing corrective measures is
critical for improving domestic revenue mobilization and sustaining Ethiopia's recent progress.

According to Asaminew (2010), tax evasion is a problem that puts stress on the tax system in the
Amhara region. The region's tax administration report for the years 2011/12 to 2012/13 revealed
that the tax administration lost taxable income totaling more than Br. 39 million and failed to
collect Br. 11.7 million in tax from just 13 significant (individual and corporate) taxpayers.

When it comes to Dessie city, information from the city revenue office implies that there is low
tax collection performance. According to the Dessie City Administration Revenue Office, on
average 64.67 percent of the target was collected from 2011/12 to 2012/13 E.C. Of the 279.1

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million birr planned to be collected in the first ten months of 2013/14 E.C, only 107.70 million
birr, or 39 percent were composed. See table 1.1

Table 1.1 Annual Revenue Collection Plans & Achievement

Budget
Year Revenue Un collectable Variance
(E.C) Code Revenue Description Plan Achievement Amount Percentage
2011/1
2 1103 Business Tax Revenue 198,163,226.00 133,776,454.69 64,386,771.31 68%
2012/1
3 1103 Business Tax Revenue 253,662,153.00 145,413,511.80 108,248,641.20 57%
2013/1
4 1103 Business Tax Revenue 277,685,063.50 107,701,891.71 169,983,171.79 38.78%
2014/1
5 1103 Business Tax Revenue 1,010,476,478 583,409,088.16 427,067,389.84 57.73%
(Source: Dessie city Administration Revenue office, 2024)

As it is mentioned by Ministry of Finance and Economic Cooperation, contribution of researches

are required on areas which includes but not limited to the functioning of the tax system and
ways of improving the system so as to increase revenue collection and meet budgetary
requirements of the country. As a result of this, more local studies on tax payers compliance and

Understanding the factors that determine the compliance and non-compliance behavior of
taxpayers with tax laws is very much significant to provide the policy makers and the
implementers in the area with relevant information that can help them in designing the
appropriate tax system and collection methods.

So based on the gap in this subject, the researcher is interested in looking into the causes of tax
compliance at the Dessie city administration and helping to reduce noncompliance.

1.3 Objective of the research

1.3.1 General objective of the study
The General objective of this study is to examine factors affecting tax payer’s compliance the
case of Dessie city administration.

1.3.2 The specific objectives of the study

The specific objectives of this study are
1. To examine the effect of economic factors on tax payer’s tax compliance.
2. To examine the effect of social factors on tax payer’s tax compliance.

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3. To examine the effect of individual factors on tax payer’s tax compliance.
4. To examine the effect of demographic factors on tax payer’s tax compliance.

1.4 Research Questions

Specific research questions under this study are to examine;
1. What is the impact of economic factors on tax payer’s tax compliance?
2. What is the impact of social factors on tax payer’s tax compliance?
3. What is the impact of individual factors on tax payer’s tax compliance?
4. What is the impact of demographic factors on tax payer’s tax compliance?

1.5 Hypotheses

Based on the review of literature and the conceptual model, the following twelve hypotheses are
developed to achieve the objectives of the study; factors affecting taxpayer’s compliance the case
of Dessie city administration. The hypotheses are listed as below:

Economic Factors

Hypothesis 1 - Probability of being audited is positively correlated with tax compliance.

Hypothesis 2 - Positive perception of government spending is positively correlated with tax compliance.

Social Factors

Hypothesis 3 - Positive perception of equity in the tax system is positively correlated with tax
compliance.
Hypothesis 4 - Unfavorably perceived changes to current government policies are negatively correlated
with tax compliance.
Hypothesis 5 - The influence of referent group is positively correlated with tax

Individual Factors

Hypothesis 6 - Personal financial constraint is negatively correlated with tax compliance.

Hypothesis 7 - Awareness of penalty is positively correlated with tax compliance.
Hypothesis 8 - Tax knowledge is positively correlated with tax compliance.

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Demographic factors

Hypothesis 9 - Male tax payers are more tax compliant.

Hypothesis 10 - Older tax payers are tax compliant.
Hypothesis 11 - Higher income level is positively associated with better tax compliance.
Hypothesis 12 - Educational level has direct relationship with tax compliance.

1.6 Significance of the Study

The findings of this study will help the government increase tax income by identifying
characteristics that affect tax payer compliance. From the standpoint of policymakers, this data
will aid tax authorities in developing appropriate tactics to reduce tax compliance issues and
increase tax collection. ERCA, policymakers, and tax collectors will have a better knowledge of
the issues that affect tax compliance and will be able to take the required steps to improve
compliance. It will also be utilized as a source of information for individuals who wish to pursue
additional research in the topic.

Finally, it will close the deficit identified in this study by raising tax revenue, which is crucial for
delivering public services and accomplishing the country's growth and development goals.

1.7 Scope of the Study

The study was conducted in Amhara region south wollo zone Dessie city administration to look
at a number of factors that influence tax compliance, but it will only look at twelve of them (tax
audits, government spending, perceptions of equity and fairness, changes in government
spending, referral groups, personal financial constraints, awareness of penalties and offenses, tax
knowledge, age, gender, education, and income level) that have an impact on tax payers'
compliance. Furthermore, the study was more thorough if it included all types of tax payers in
the Dessie city administration. Large-scale research, on the other hand, necessitates a lot of
resources, time, and manpower.

1.8 Delimitations of the Study

There may be limitations to the technique used in this study. To begin with, the determinant
elements of tax compliance were only examined using a narrow scope of the Income Tax Act.
However, if a broader range of tax rules were employed, the outcomes might be different. A

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more comprehensive examination of tax legislation would be impossible to conduct in this study
since doing so would make the questionnaire too long and complex, causing respondents to
dismiss it and lowering the response rate.

Second, the compliance metric is a judgment-based metric that employs hypothetical scenarios.
Respondents may not feel comfortable answering questions without any control since tax evasion
is a sensitive topic. The subjects' actual behavior may differ from their responses. Despite this
limitation, it is regarded that this is the best method for predicting taxpayer compliance behavior,
as direct questioning may cause respondents to answer questions dishonestly and may be
embarrassing for respondents.

1.9 The structure of the paper

The following is how the thesis was structured: The literature on tax definitions, Ethiopian
taxation, tax compliance, and the study's conceptual framework are examined in the second
chapter. The research design and technique are detailed in Chapter three. The sample techniques,
data sources, data collection instruments, and the study model are all covered in depth in this
chapter. Chapter four presents the results of survey subsequently followed by an analysis of the
results of the different methods. Finally, chapter five presented conclusion and
recommendations.

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 CHAPTER TWO
LITERATURE REVIEW
2.1 Definition of Tax

"A tax is a liability imposed up on the tax assessors who may be persons, groups of individuals,
or other legal entities," according to Bhatia (1996). It is a financial obligation to pay a specific
amount because the tax assesses have a certain amount of income from certain tangible or
intangible property, or because they engage in certain economic activities that are subject to
taxation. A tax is described as "a mandatory levy imposed by the government or another tax-
raising agency on income, expenditure, or capital assets in exchange for which the taxpayer
receives no specified benefit" (Lymer and Oats, 2009).

A tax is a mandatory charge, and those who are taxed must pay the amounts regardless of the
government's direct return of services or products. Government need financial resources in order
to function as a government and fulfill the public's expectations (James and Nobes, 2000).

Taxes are essential to the existence of governments since they fund the majority of services
provided by governments, such as education, welfare, public safety, infrastructure, and other
basic public services. Improved tax compliance increases the amount of money available to
support public services without raising the tax burden on complying taxpayers (Bird &
Casanegra, 1992).

The main purpose of levying certain taxes on the general public is to raise funds for government
spending (Singh, 1999; Shanmugam, 2003; Lymer and Oats, 2009). According to Lymer and
Oats (2009), taxes also play a role in lowering disparities by implementing an income and wealth
redistribution plan that narrows the income gap between the rich and the poor. Taxation is
sometimes enacted for societal reasons, such as to discourage certain undesirable activities and to
safeguard the environment. Excise taxes on alcohol and cigarettes, for example, are used to
discourage consumption and encourage a healthy lifestyle (at least in part) (Lymer and Oats,
2009).

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 2.2 Ethiopian Taxation

The Federal Democratic Republic of Ethiopia's (FDRE) Constitution of 1995 divides taxation
powers into three categories: those assigned solely to the federal government, regional states, and
both regional and federal governments. Regional states have the power to levy and collect taxes
from sources designated to them under the constitution. Ethiopian Revenue and Customs
Authority (ERCA) is in charge of administering revenues that are solely owned by the federal
government as well as those that are jointly owned by both. Regional revenue authorities are in
charge of administering taxes that have been allotted to them. 2016 (World Bank Group)

2.2.1 Ethiopian Business Categories

With respect to their legal identity and gross revenue, the legislation divides business income tax
payers into three categories. According to Federal Income tax proclamation No. 976/2016;

Category “A” taxpayer being a company or any other person having an annual gross income of
Birr 1,000,000 or more;
Category “B” taxpayer being a person, other than a Company, having an annual gross income of
Birr 500,000 or more but less than 1,000,000 and;
Category “C” taxpayer being a person other than a Company, having an annual gross income of
less than Birr 500,000.
There are four income schedules under this legislation: employment income (schedule A), rental
income (schedule B), company profit (schedule C), and other income (schedule D) (schedule D).
A closer examination of the income tax under schedule C (business profit tax) reveals that the tax
is levied on profit generated by a business. If the taxpayer is an individual (an unincorporated
entity), it is taxed at rates ranging from 10% to 35%, and 30% on profits produced by a body (an
incorporated entity) (World Bank Group, 2016).

2.2.2 Declaration of Business income

The tax is calculated based on the profit and loss statement prepared in accordance with
International Financial Reporting Standard (IFRS) and subject to the specific procedures set forth

9
in the income tax legislation for categories A and B. (World Bank Group, 2016). Category "A"
tax payers must produce and submit a balance sheet and profit and loss statement within four
months of the end of their tax year, according to income tax proclamation no 979/2016. Within
two months of the end of the tax year for category "B" taxpayers. Within one month of the end of
the tax year for category "C" taxpayers.

2.3 Tax Compliance

2.3.1. Definition of tax Compliance

Tax compliance, according to James and Alley (2002), refers to individuals' readiness to behave
in conformity with both the spirit and the letter of tax legislation and administration without the
use of enforcement action. Tax compliance is described as accurately reporting earnings and
claiming costs in conformity with tax legislation. Corporate tax non-compliance is defined as a
corporation's failure to appropriately declare or pay tax (Noor, Jeyapalan and Uchenna, 2014).

Tax compliance should be described as a taxpayer's ability and willingness to comply with tax
regulations, which is decided by ethics, the legal environment, and other situational
circumstances at a certain time and location (Kirchler, 2007) Simply expressed, tax compliance
is adhering to tax reporting requirements, such as filing all required tax returns on time and
accurately reporting tax liability in line with the tax laws, regulations, and court rulings in effect
at the time the return is submitted (Roth, Scholz and Witte 1989)

2.3.2. Theoretical Approaches of Tax Compliance

According to Devos (2014), the two primary theoretical approaches to tax compliance are the
'economic deterrence' approach and the broader'behavioral' approach, which includes both social
and fiscal psychology methods.Fiscal psychology models and economic deterrence models are
two major techniques that scholars have used to explain evasive behavior (Trivedi and Shehata,
2005). Incentives are the focus of economic theories, whereas attitudes are the focus of
psychological theories (Trivedi and Shehata, 2005). According to James, Hasseldine, Hite, and
Toumi (2001), there are two basic methods to understanding tax compliance issues: economic
and behavioral. The behavioral method is based on notions from psychology and sociology,
whereas the economic approach is based on the concept of economic rationality.

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2.3.2.1 Economic Based Theories

The economic deterrence hypothesis holds that factors such as the tax rate, which determines the
advantages of evasion, and the probability of detection and penalties for fraud, which define the
costs, impact taxpayers' behavior (Sandmo, 1972). In connection to tax compliance, economic
considerations (tax rates, tax audits, and public perceptions of government expenditure) refer to
actions that are associated with the costs and advantages of doing the actions (Loo, 2006).
According to Trivedi and Shehata (2005), economic theories suggest that taxpayers "play the
audit lottery," that is, they calculate the economic consequences of various compliant options,
such as whether or not to evade tax, the probability of detection, and the consequences of
detection, and then choose the option that maximizes their expected after-tax-return/profit
(possibly after adjustment for the desired level of risk).

2.3.2.2 Psychology Theories

The social/fiscal psychological model focuses on psychological variables such as moral ideals
and perceptions of tax system and tax authority fairness (Devos, 2014). The social psychology
model, unlike the economic deterrence model, is concerned with the relationship between tax
compliance and social relationships and conventions, as Yesegat and Fjeldstad (2016) pointed
out. The conduct of an individual's peer groups may influence views and attitudes toward a tax
system, as well as compliance behavior, according to one component of this notion. Peer group
compliance behavior, such as that of friends, neighbors, and family, is likely to influence others'
opinions and compliance decisions. Noncompliance by peer groups, in particular, may diminish
the amount of tax compliance by others.

According to Trivedi and Shehata (2005), tax compliance theories assume that psychological
considerations such as moral and ethical concerns are also significant to tax payers, and that tax
payers may cooperate even when the danger of audit is low. As previously stated, their
psychology studies place a greater emphasis on influencing human attitudes toward the tax
system rather than audits and penalties. Demographic variables also influence compliance. Age

11
groups, urban–rural location, gender, educational levels, occupation, ethnicity, religion, and so
on may all have different perspectives on taxation (Fjeldstad et al. 2012).

Scholars have identified three categories of elements: social, economic, and psychological
factors (Jackson & Millron, 1986; Fischer, Wartick & Mark, 1992; Fischer, 1993; Alm, 1999;
Kirchler, 2007; Devos, 2008). To address concerns of tax non-compliance, understanding the
elements that influence tax compliance is critical in influencing individual taxpayers' decisions to
follow the provisions of the tax laws. The early studies on tax compliance were more focused on
economic issues, with tax rate, penalty, and discovery probability as the primary predictors of tax
payer compliance behavior (Allingham & Sandmo, 1972). Recent research have revealed several
new aspects that have a substantial impact on tax payer decision-making; these new factors
include social and psychological factors, which the following studies have been known to
contain (Jackson & Millron, 1986; Fischer, 1993; Wenzel, 2004; Jabbar, 2009).

2.4. Determinants of tax compliance

From a social standpoint, tax compliance determinants relate to taxpayers' willingness to comply
with tax rules in reaction to other people's conduct and their social surroundings (i.e., the
government, friends, and family members) (Torgler, 2007). Kirchler (2007), on the other hand,
urged that social aspects be examined in a broader meaning than Torgler's, including the
psychology of taxpayers. In a previous review of tax compliance studies, Jackson and Milliron
(1986) identified fourteen key variables of compliance behavior, including age, gender,
education, income level, income source, occupation, peer influence, ethics, fairness, complexity,
contact with the tax authority, sanctions, probability of detection, and tax rates.

Prior research has found that the likelihood of being audited, perceptions of government
spending, perceptions of the tax system's equity and fairness, penalties, financial constraints,
changes in current government policies, and referral group (friends, relatives, etc.) are all
important factors in determining tax compliance behavior (Palil,2010; Troutman,1993; Chan et
al, 2000). Kirchler (2007) and Loo (2006) classify tax compliance determinants into four
categories based on an interdisciplinary perspective that represents a broader view of tax
compliance factors than other academics. The four categories are as follows:

1) Economic factors (tax audits and perceptions of government spending);

12
2) Social factors (perception of equity and fairness, change of government policy and influence
of referent);
3) Individual factors (personal financial constraints, awareness of offence on penalties, and tax
knowledge); and
4) Demographic factors (gender, age, level of income, and education).

2.4.1 Economic Factors

Economic factors in relation to tax compliance refer to actions which are associated with the
costs and benefits of performing the actions (Loo, 2006). Hasseldine (1993), and Song and
Yarbrough (1978) assumed that taxpayers are rational economic evaders who likely would assess
the costs and/or benefits of evasion. The tax compliance determinants associated with economic
factors such as tax rates, tax audits and perceptions of government spending are explored in more
detail.
Tax Audit

Some studies claimed that audits have a positive impact on tax evasions (Jackson and Jaouen,
1989; Shanmugam, 2003; Dubin, 2004). These findings suggest that in self-assessment systems,
tax audits can play an indispensable role and their essential role is to increase voluntary
compliance. Frequencies and meticulousness of audits could encourage taxpayers to be more
prudent in completing their tax returns, reporting all income and claiming the correct deductions
to ascertain their tax liability. In contrast, taxpayers who have never been audited might be
tempted to under report their actual income and claim false deductions.

Perceptions of government spending

Taxpayers, and especially those who pay high amounts of tax, were sensitive to what the
government spends their money on. If the government is wisely spending the national revenue,
for example, for basic facilities like education, health and safety and public transportation, it is
likely that voluntary compliance will increase. In contrast, if taxpayers perceive that the
government is spending too much on something considered unnecessary or unbeneficial to
them, then taxpayers will feel betrayed and attempt to evade.

2.4.2 Social Factors

13
Tax compliance determinants from a social perspective relates to taxpayers’ willingness to
comply with tax laws in response to other people’s behaviour and their social environment (i.e.
the government, friends and family members) (Torgler, 2007). On the other hand, Kirchler
(2007) suggested that social factors should be viewed in a broader sense than Torgler’s
perspective; this includes the psychology of the taxpayers. The factors discussed in this section
are therefore perceptions of equity and fairness, changes to current government policy and
referent groups.

Perceptions of equity or fairness

One of the main principles of the taxation system design is equity or fairness, which can be
perceived via three dimensional views – horizontal equity (people with the same income or
wealth brackets should pay the same amount of taxes), vertical equity (taxes paid increase with
the amount of the tax base) and Exchange Equity (Wallschultzky 1984; Richardson, 2006). The
perceived fairness of the tax system also has an influence on the inclination towards tax evasion
(Jackson and Milliron, 1986; Richardson, 2008).

Changes to current government policies

Political stability and the ruling party in a country might play a significant role in determining
tax evasion behavior. For instance, if an individual favors the ruling party, he might choose to
be compliant because he believes that the government is trusted, efficient and equitable.
Conversely, a taxpayer from the opposition party might be more non-compliant because he
perceives that the government is not on his side. Studies have disclosed that the government
decisions and changes to policies in accordance with the economic and political situation have
a significant impact on compliance. For example, a positive move made by the government such
as an increase in tax rebate (Hasseldine and Hite, 2003) is likely to increase taxpayers’
compliance.

Referent groups (family and friends)

Research in ascertaining the importance of referent groups such as family members and friends
in tax compliance is limited although Ajzen and Fishbein (1980) (in their Theory of Reasoned

14
Action (TRA) and Theory of Planned Behaviour (TPB)) theorised that referent groups play a
significant role in determining people’s intentions and behaviour. Decisions either to evade or
not to evade tax sometimes are influenced by family members or friends (for example,
Allingham and Sandmo (1972)) although the extent of the influence was not clearly stated in
this research. Therefore, the influence of referent groups is seemingly important in making a
decision, particularly involving monetary aspects and the obedience to laws (tax compliance).

2.4.3 Individual Factors

Decisions either to evade or not to evade taxes are heavily reliant on taxpayers’ personal
judgment (Mohani, 2001). Personal circumstantial factors like personal financial constraints and
awareness of penalties and offences are therefore likely to have a significant impact on taxpayer
compliance behavior.

Personal financial constraints

Personal financial constraints are believed to have an impact on tax evasion as financial first as
basic survival needs (foods, clothing, housing etc.) or where immediate demand on limited
income is enforced (for example, perceived threat of action from money lenders etc.) rather than
tax liabilities. People who face personal financial problems are likely to be more prone to evade
tax when compared to people in less financial distress (Mohani and Sheehan, 2004; Mohani,
2001).

Awareness of offenses and Penalties

A theoretical economic model introduced by Allingham and Sandmo (1972) has clearly
indicated that penalties as well as audit probability have an impact on tax compliance. The higher
the penalty and the potential audit probability the greater the discouragement for potential tax
evasion. If the taxpayers are aware of the offences they are committing when evading tax and the
consequences of being non-compliant taxpayers, they might reduce their tendency to evade tax.

Tax knowledge

The influence of tax knowledge on compliance behavior has been described in various

15
researches. The level of education received by taxpayers is an important factor that contributes to
the understanding about taxation especially regarding the laws and regulations of taxation
(Eriksen and Fallan, 1996). Previous studies have evidenced that tax knowledge has a very
close relationship with taxpayers’ ability to understand the laws and regulations of taxation, and
their ability to comply (Singh and Bhupalan, 2001).

2.4.4 Demographic factors

Gender

Some studies found that males are more compliant though other studies revealed contradictory
results or no significant difference at all. As agreements on the findings still maintain, the need to
explore current results is relevant. Hasseldine and Hite (2003) found that female taxpayers were
more compliant than males. However, the study reported that males were more compliant
compared to females when a negatively framed message was used, and females were more
compliant than males when a positively framed message was used. In contrast, Richardson
(2006) suggested that gender has no significant impact on compliance across a study of 45
countries.

Age

Demographic factors like age have long been researched by many researchers and findings are
different along the way. For example Tittle (1980), Warneryd and Walerud (1982) and Wahlund
(1992) posit negative association ― older people are less compliant. In contrast, Dubin, Graetz
and Wilde (1987), Chung and Trivedi (2003) and Beron, Tuachen and Witte (1992) argued that
age was positively related with compliance. However, there have been a significant number of
studies which found no relationship between age and compliance (Spicer and Becker 1980 and
Porcano, 1988). Mohani 2001 also found that older people are more compliant.

Income
Jackson and Milliron (1986) found that income level has a mixed and unclear impact on
compliance, and some later research agrees with that statement (see Christian and Gupta, 1993:
Hite, 1997). Although Jackson and Milliron (1986) did not clearly mention the reason, it is
presumed that endogenous tax regulations among countries might contribute to inconsistent

16
findings. For example, progressive tax rates might encourage the higher income group to evade
rather than the lower income group because their (higher income group) tax rates and taxable
income are high, thus, making the tax liabilities much higher than lower income group. In a
country where income redistribution is not satisfying, the higher income group tends to evade
more (Mohani, 2001) because the high income earner might feel betrayed and unfairly treated.
Loo (2006) found that high income earners in Malaysia are prone to evading tax while Torgler
(2007) reported that lower income earners in Western Germany were less compliant.

Education
Previous literature supports the direct, positive relationship between educational level and
taxpayer compliance (Jackson and Miliron 1986). Chan, Troutman, and O’Bryan (2000) also
postulate that education level is directly linked to a likelihood of compliance. Educated taxpayers
may be aware of non- compliance opportunities, but their potentially better understanding of the
tax system and higher level of moral development promote a more favourable taxpayer attitude
and greater compliance.

17
Table 2.1 Variables description and expected associations with level of tax compliance

Variable Symbols Unit of measurement Expected signs/hypotheses

Dependent Variable

Level of compliance TCP (1-5) likert scale +(high Probability and high frequency, high
compliance)
Independent Variables

Probability of Prob _ Audi (1-5 Likert Scale) Ordinal +(high Probability,

Auditing high compliance)
Perception of Government Spending Gov_Spend (1-5 Likert Scale) Ordinal + (good perception, high compliance)

Perception of Equity and Fairness Equi_Fair (1-5 Likert Scale) Ordinal + (good perception, high compliance)

Referent group Ref (1-5 Likert Scale) Ordinal + (high influence, high compliance)

Changes on current government policy Gov_Policy 1-5 Likert Scale) Ordina - (Changes to government policies, lower
compliance)
Penalty rates and enforcement Penalty 1-5 Likert Scale) Ordina + (High penalty, high compliance)

Personal_financial constraint Fina_Cons 1-5 Likert Scale) Ordina - (Crucial financial problem, low compliance)

Tax knowledge Tax_knowldge 1-5 Likert Scale) Ordina + (High tax knowledge, high compliance)

Gender Gender (1-2) Nominal - ( Male= 1, highercompliance)

Income Level Income (1 – 3) Nominal + ( High income, Higher Compliance)

Age Age (1 – 4) Nominal + ( Older tax payers, higher compliance)

Education level Educ (1 – 5) Nominal + ( Educated tax payers, Higher Compliance)

2.5 Empirical Studies and Knowledge Gap

Fjeldstad et al. (2012) used a survey method to collect data on factors that influence people' tax
compliance behavior in Kenya, Tanzania, Uganda, and South Africa. The finding of this study
indicated that individuals are more likely to show a tax compliance attitude if they believe that
enforcement makes evasion more difficult in South Africa and Kenya. This is in keeping with the
traditional economic theory of deterrence's recommendation. In all four countries, people who
are more satisfied with public service provision are more likely to support the government's
authority to tax, indicating that certain components of the fiscal exchange theory are supported.
The relationship between tax compliance and public service provision, on the other hand, varies
per country and relies on the individual service in question.

18
In Malaysia, Noor sharoja (2014) investigated the factors that influence taxpayer compliance
with business income tax reporting obligations.

For data collecting, a researcher used a questionnaire survey method. The findings of this study
show that the age of the business, the amount of tax due, and the complexity of the tax code all
have an impact on the likelihood of tax non-compliance in the areas of under-reporting income,
over-claiming costs, and total non-compliance. Nonetheless, tax compliance expenses have a
negligible impact on corporate taxpayer noncompliance.

Factors Influencing Taxpayer Compliance with the Tax System in Mekelle City, Ethiopia were
investigated by Taddese and Goitom (2014). The research was conducted using a cross-sectional
survey method. An multiple linear regression was used to investigate the determinants of tax
compliance in Mekelle, Ethiopia, using the dependent variable's scaled ranking information. Tax
compliance was influenced by the likelihood of being audited, budgetary constraints, and
changes in government policy, according to the findings of a survey conducted in Mekelle with
102 respondents. Other characteristics such as perceptions of government expenditure, justice
and fairness, fines, functions of the tax authority, and tax expertise were not shown to be
significantly connected with tax compliance during the time of the study.

Tilahun and Yidersal (2014) researched the determinants of tax compliance behavior in Ethiopia:
this study examined the determinants of tax compliance behavior in Ethiopia, specifically in the
Bahir Dar municipal administration, utilizing one-way ANOVA, two samples, and one sample
T-test. The information was gathered through a standardized questionnaire. Perceptions of
government expenditure, justice and fairness of the tax system, fines, personal financial
constraints, changes in existing government policies, and referral group (friends, relatives, etc.)
were all found to have a substantial impact on tax compliance behavior. Gender and the
likelihood of being audited, on the other hand, have little bearing on tax compliance behavior.

Finally, the data demonstrate that if the tax system is not just and fair, and if government policies
on fuel costs, power, and water rates are not beneficial, older people will cooperate less.

Yesegat and Fjeldstad (2016) investigated the elements that influence Ethiopian business
people's attitudes regarding paying taxes. The study finds a statistically significant relationship
between tax-compliance attitude and factors like the perception of audit probability, corruption,

19
and satisfaction with the tax administration, peer influence, gender, and education, based on data
from a survey of business taxpayers in Addis Ababa. The study underlines the importance of
gaining a better understanding of why taxpayers are unsatisfied with tax administration,
particularly perceptions of corruption.

In Ethiopia, Akalu (2016) performed a survey on the determinants of major company taxpayers'
tax compliance behavior. The information used for this study came from both primary and
secondary sources. Through a researcher-administered questionnaire survey method and focus
group discussion, primary data was acquired directly from tax payers. Secondary data was
gathered from relevant legislation enacted on the subject, tax journals, and published papers.
Furthermore, the researcher used his personal knowledge garnered from his time at ERCA.

The findings demonstrated that in the areas of under-reporting income, over-claiming costs, and
total non-compliance, business size, business age, and tax psychological cost continuously
increase the likelihood of tax non-compliance behavior. Nonetheless, the business sector, tax
complexity, fairness in the tax rate/tax system, and tax deterrence fines have a negligible impact
on corporate taxpayer noncompliance. At least one sort of non-compliance behavior is
influenced by tax liability, compliance costs, and tax rate structure.

Studies on the determinants of tax compliance targeting a specific set of tax payers have been
undertaken in various locations of Ethiopia. However, the models used and the outcomes of
those investigations were inconsistent, resulting in a researcher identifying a gap in the area.
Culture is thought to be a significant contextual component that influences taxpayer compliance.
Varied social norms and ethical ideals will result in different tax compliance incentives (Chau
and Leung, 2009).

Government services; perception of tax rates, penalty, and audit; perception of others/peer
compliance; perception of government treatment of taxpayers (perception of discrimination by
the tax administration); trust in the administration; satisfaction with the tax administration are all
covered in a study by Yesegat and Fjeldstad (2016) on business people's attitudes toward paying
taxes in Ethiopia. However, the focus of this research is on institutional rather than individual
characteristics. Furthermore, as compared to studies in other developing countries, Ethiopian

20
research on the factors of tax compliance is quite low, indicating that further study is needed to
eradicate noncompliance behavior.

2.5. Conceptual Framework

This research is projected to have a direct influence on Dessie City Administration's taxpayers.
The relationship between the dependent and independent variables in the conceptual framework
is demonstrated below based on the literature.

Figure 2 .1 Factors affecting compliance behavior

Source: Kirchler (2007) and Loo (2006)

CHAPTER THREE

RESEARCH METHODOLOGY
3.1 Introduction

This chapter discusses the methodological procedures used in the collection and analyses of data.
The research design, study area, population of the study, sampling procedure and sample size,
data collection, and data analysis methods are thoroughly discussed

3.2 Rationale for Choosing the Research Site

21
Dessie town is characterized by a relatively good for living and run the business for the people.
But, there is no adequate tax revenue is collected by the tax authority of the town. So, I want to
investigate the factors that causes for poor tax revenue collection found in the town. The reason
for selecting this town is firstly because of familiarity with the area. There was an implied
assumption that the exposure to background information about an area, culture and tradition of
the community helped the researcher to work and interact safely within the community.
Therefore, it was taken as a research site for this study purposively.

3.3 Research Approach

A combination of qualitative and quantitative method is often the best way of handling research
questions through triangulation (Russel, 2005 cited in Ahmed, 2005). Hence, endeavors was
made to utilize the advantages of each method. Thus, the study used qualitative as well as
quantitative research approach to explore the factors affecting tax payer compliance in Dessie
town.
The approach helped the study, to explore awareness, and experiences of participants (tax payers
and tax officials). The qualitative approach by its very nature is needed for its advantage of
exploring of rich, detailed, valid process of data on the perception of study participants' about
awareness of the tax payers in the town, corruption in revenue administration, tax system
followed by the government, tax administration procedures.

3.4 Source of Data

The use of a survey instrument was beneficial in representing a large target population,
generating numerical data, and gathering information not available via archival records.
According to Babbie (1990), the survey is the preferred method of data gathering for studies
since it allows researchers to generalize from a sample to a population. Primary data is chosen
since it is unique and relevant to the issue, especially when the researcher is looking for
information on demographics, attitudes, opinions, and interests, as well as awareness,
knowledge, intentions, motivation, and action (Noor Sharoja, 2014). As a result, the data for this

22
study primarily come from primary sources via a self-administered questionnaire.

3.5 Research Instruments

Uses mixed approach, a systematic questionnaire like Likert-type items was used to obtain the
primary data. Face-to-face questionnaires are distributed to voluntary tax payers and interview
questionnaire for tax officers. The questions are adapted from Noor Sharoja's (2014), which has
been validity-tested in prior studies and has been modified to fit this study.

3.6 Date Collection

The researcher-administered questionnaire survey approach was used to collect data for this
investigation. This data collection strategy was used as a measure to generate more reliable
survey replies with the prospect of reaching a greater response rate, thereby increasing the
study's validity. In most cases, questionnaires are handed out individually to determine whether
or not a person is willing to engage in the study. This design also allowed researchers to give a
verbal explanation of the study's significance. When necessary, researchers may cautiously
provide clarifications and/or examples in response to tough, sensitive, or critical queries.
However, in order to avoid bias in this study, the researchers only intervened when respondents
requested clarification.

3.7 Target Population

The target population of the study Category “A”, ‘B’, and ‘C’ tax payers are in Dessie for the
fiscal year 2015 E.C. A population is a large pool of cases of elements from which the researcher
draws a sample and results generalized from the drawn sample (Leedy & Ormrod, 2013).
According to April 2015 E.C record of Dessie City Administration Revenue office Customer
Service department, there are a total of 12,075 tax payers out of which 1,994 under category of
tax payer A, 1,079 under category taxpayer B and 9,002 under category taxpayers C.

3.8 Sampling size and Sampling Technique

Sample Size

The sample size for the study was determined based on the above-mentioned target population.
The researcher used a formula developed by Bartlett, Kotrlik, Hiigins, 2001, and Flowler, 2002,

23
which is defined as follows:
n=z2pq/e2 f N is greater than or equal to 10,000
fn= (n/1+n/N) f N is less than 10,000
Where, N=Target Population p=Estimated characteristics of the target population. n=Desired
Sample Size q=1-p
z=Standard normal variance in the required confidence level (z-cross) d=Level of statically
significant (margin of error)
The proportion of the target population (0.5) (50%) was taken in this study, since there was no
previous research study conducted on the factors affecting taxpayers compliance with the tax
system in Dessie. Based on the above formula the margin of error (e- value ranges from 0.01 to
0.1)
Therefore, the Z-value statically is 1.75 (92%) and the desired accuracy at 0.05 levels and then
the sample size will be determined as follows;
n=z2pq/e2, therefore, n= 1.752 (0.5) (0.5) = 306
0.052
Sampling technique

To identify sample tax payers, a multi-stage sampling technique was employed. Taxpayers were
first divided into three groups based on their categories: category "A," category "B," and
category "C." The sample tax payers from each strata will then be chosen using a proportional
random sampling approach. After the total sample size is determined, respondents would be
determined based on the population size of each stata. They are computed by:

Table 3.1 Stratified Random Sampling for Taxpayers

Taxpayer's under category Number of taxpayers (Ni) Sample size ni=n (Ni/N)
A 1,994 50
B 1,079 26
C 9,002 230

24
 Total 12,075 306
Source: Field Survey, April 2014 E.C
Table 3.2 Tax Payers Category with Sub city

Category A Category B Category C

Number
Sub city Number of Sample Number of Sample
Sample size of
taxpayers size ni=n taxpayers size ni=n
ni=n (Ni/N) taxpayers
(Ni) (Ni/N) (Ni) (Ni/N)
(Ni)
Segno Gebeya - 95 1 1601 41
575
Arada - 15 1832 47
246
Hotie - 7 1850 47
66
Menafesha - 1 1672 43

Buanbwuha - 97 2 2045 52
Memria 1994 50
Total 1994 50 1079 26 9002 230
Where, Ni= the target population of each strata

As shown above, the total sample size of our target population is 306.

In addition to the taxpaying public, 20 tax officials from the Dessie Town Revenue Office were chosen on
the basis of their potential as key informants.

3.9 Data analysis

Respondent questionnaires was counted, collated, coded, and organized in a methodical manner.
In this study, descriptive and inferential tests are performed. Data was described or summarized
using descriptive statistics like cross tabulation, frequencies, and mean, which aid in expressing
the distribution of responses in a meaningful way. To infer population characteristics from a
sample, inferential statistics is utilized.

Model Specification

This research uses the following multiple (Ordinary Least Squares (OLS)) regression model to

25
examine the impact of independent variables on tax compliance. It is basically used to identify
the determinant factors that affect tax payers’ compliance with tax system in the study area.
The Ordinary Least Square (OLS) have the following form:
Y = α + β1X1 + β2X2 +β3X3 + β4X4 + β5X5+ β6X6 +Ɛ
Where;
Y – Tax Compliance α - Constant
Ɛ - Error term
X1,X2….X12Factors of compliance Substituted Coefficients
Tax Comp= α + β1Prob_Audi + β2 Gov_Spend +β3 Equity_Fair + β4 Gov_Policy + β5 Ref
+ β6 Fina_Cons+β7 Penalty + β8 Tax_knowldge +β9 Gender+ β10 Income+ β11 age +
β12Educ+ Ɛ
X1- tax audit, X2- perception of government spending, X3- Perception of Equity and Fairness,
X4- Changes to current government policies, X5- Referent groups (family and friends), X6-
Personal financial constraint, X7- Awareness of offences and penalties, X 8- tax knowledge, X 9
- Gender, X10- level of income, X11- Age, and X 12- Education are Factors of tax compliances
or independent variables.
In addition, the β coefficients for each independent variable generated from the model β1- tax
audit, β2- perception of government spending, β3- Perception of Equity and Fairness, β4-
Changes to current government policies, β5- Referent groups (family and friends), β6- Personal
financial constraint, β 7- Awareness of offences and penalties, β 8- tax knowledge, β 9 - Gender,
β10- level of income, β11- Age, and β 12- Education are Coefficients indicating rate of change
of tax compliances with respect to independent variables.
Torgler (2003) had used the above model to check the direct association between the nine
determinants variables and tax moral in Austria and also Singa Naomi Jepkoech and James
Nganga Muya (2016) used the model to identify the association between taxpayers’ perception
of fairness and tax audit with taxpayer’s compliance. Dinku T. and Alamrew A. (2018) also used
the model to examine the impact of three independent variables on voluntary tax compliance of
taxpayers in Amhara national regional state. Another study by Desta K. (2010) and Yoseph E.
(2018) used the above model to identify the direct association between the six determinant
factors and tax compliance in Mekelle City, Tigray Regional State and to identify the direct
association between the ten determinant factors and tax compliance in west shewa zone, oromia,

26
respectively. Therefore, the researcher has modified the model by adding and deleting variables
in to the model used by those researchers and specifies the above model used to identify the
effect of twelve determinant factors and tax compliance in Dessie, Ethiopia.

3.10 Data Management and analysis procedure

The data were processed using the basic data processing techniques such as, editing, coding,
classification and the researcher used both descriptive and inferential statistics to analyze and
interpret the collected data and data analysis was carried out with the aid of Statistical Package
for Social Scientists (SPSS) version 25.0 and STATA Version 12 for window software.
Statistical significance test technique was used to test the hypotheses. In this study, both
quantitative and qualitative analytical procedures (methods) were employed. Supporting this,
Flick (2002) argues that quantitative and qualitative methods of analysis should be viewed as
complementary rather than mutually exclusive. The data were represented in an interpretable
form, so that relationships of the research problem can be studied and tested. Accordingly,
counting of frequencies under each rating scale has been done first and then the findings were
put in frequencies and then percentages, mean and standard deviation, were used to analyze the
item. The qualitative data from open ended questioners were quoted and described. Finally
subsequent interpretations and descriptions were made.

3.11 Dissemination of the results

This study's findings were presented at Wollo University's College of Business and Economics.
It will also be distributed to the Dessie Revenue Office, the Amahra Revenues Bureau, and other
relevant governmental and non-governmental entities.
The outcome was presented at various seminars or workshops, and it will then be submitted for
publication in a reputable scientific journal.

27
 CHAPTER FOUR
RESULTS AND DISCUSSION
This chapter describes the results of the study starting with respondents’ profile. The remaining
part of this chapter is divided into the two sections: The first section covers descriptive analysis
of determinants factors of tax compliance behavior and the second section presents inferential
statistics analysis of dependent and independent variables.

4.1 Respondents general background

28
Regarding socio- demographic information; majority, 66.1% of the respondents were females,
48.3 % were under 31-40 age category, 52.9 % had degree and 78.1 % had business organization
with estimated annual income under 500,000 ETB. (Table 4.1)

Table 4.1 Respondents general back ground

Variable Category Frequency Percent

Sex F 202 66.1
M 104 33.9
Age 18-30 28 9.2
31-40 148 48.3
41-50 98 32
>50 32 10.5
Educational level Up to primary 5 1.6
secondary 26 8.5
diploma 92 30.1
degree 162 52.9
above degree 21 6.9
Income <500000
239 78.1
500000-
19 6.2
1000000
48 15.7
>1000000
(Source: researcher survey, 2024)

4.2 Descriptive Analysis of Tax Compliance

This section provides descriptive analysis of the variables of this study, namely Economic,
Social, Individual, Demographic factors and Tax compliance.

Tax Compliance

Dependent variable has been measured using indirect and hypothetical questions which were
recommended on previous studies to fetch genuine data in the most confidential information.
In this study, tax compliance behavior was measured by gathering responses from hypothetical
tax scenarios. This scenario was introduced to mitigate the sensitive nature of the questions
involved so that respondents would be more likely to provide truthful responses. As most
corporations would have strong incentives to avoid revealing their non-compliance decisions,

29
any direct measures would invariably suffer from substantial measurement errors (Recker.k,
1988).
With the indirect survey question about tax noncompliance, responses are categorized as ‘very
frequently’, ‘frequently’, ‘not so often’, ‘sometimes’ and ‘never’. Never used as a cut-off point,
and treat it as a measure of compliant attitude; responses indicating the existence of evasion in
different levels of frequency are considered as measures of a noncompliant attitude.
Compliance attitude on the first scenario is composite factor from responses to statements: How
frequently do you think taxpayers evade taxes?’ How frequently do you think taxpayers under
report their income? And how frequently do you think taxpayers over state their deductible
expenses? The questions measure the frequency of tax payer’s tax evasion (embedding
themselves) responses ranging from “very frequently”=5 through “Never”=1.
Table 4.2 describes respondent’s tax compliance attitude based on their response to “How
frequently do you think tax payers evade taxes? Underreport their income? & overstate their
deductible expenses? Only 29.4% of the total respondents never evade taxes while the rest 60.8%
evade taxes either by underreporting income or overstating expenses. This implies that majority
of category tax payers do not comply with the tax law.
Table 4.2 Tax Compliance attitude

Tax compliance attitude Frequency Percent

How frequently do you think Never 90 29.4
taxpayers evade taxes?’ Sometimes 186 60.8
Often 7 2.3
Frequently 23 7.5
Total 306 100.0
(Source: researcher survey, 2024)
On the seconded scenario the respondents were requested to read a scenario about tempt to
under-report income. Compliance level measured using composite factor from responses to
statements “To what extent do you agree with W/ro Seada’s possible action of not reporting that
cash sale of ETB 87,000.00 as his business income? ” and “To what extent do you agree with
W/ro Seada’s possible action if he reports only part of the ETB 87,000.00 as business
income?” .The extent of agreement with the under-reporting of income was measured via a five-
point Likert scale ranging from strongly agree=5 to strongly disagree=1. Higher scores would
indicate likely non-compliance behavior and vice-versa. As shown below 2.0 % of respondents

30
agree with income under reporting while 10.5% and 61.4% were strongly disagree and disagree.
The rest 26.1% remain neutral. Overall result of this scenario indicates majority of tax payers do
not agree with non-compliance attitude. (Table 4.3)

Table 4.3 Non -Compliant attitude

Non Compliance attitude Frequency Percent

3e
/res 0 Do you agree with partial/full Strongly disagree 32 10.5
evasion? Disagree 188 61.4

Neutral 80 26.1

Agree 6 2.0

Total 306 100

(Source: researcher survey, 2024)

4.3.1 Demographic Factors

Demographic factors that previous research has illustrated may affect tax compliance behavior.
These include age, gender, general level of education and income level. These are the most
common variables used in tax compliance research (Devos, 2005).
The results given in Table 4.4 shows that majority of the respondents who had compliance are
females (63) than male (21). In addition, most of the respondents who complain are those in the
age group 31-40 (30) compared to those respondents in the age groups younger than 30 years (0),
]\

yuubetween 41-50 years (22), and older than 50 years (19). The number of respondents with
primary or less, secondary, diploma, degree, and above degree level of education who had
compliance are 0, 4, 30, 29, and 12, respectively. Moreover, business organization with
estimated annual income under 500,000 ETB had more compliant (66) than those organization
with high (21) and middle (8) annual income contraries.

Table 4.4 Demographic factor Vs. Tax compliance behavior

Demographic factor Tax compliance behavior

Compliant Non-compliant Total

31
 M 21 83 104
Sex F 63 139 202
18-30 0 28 34
31-40 30 118 148
Age
41-50 22 76 98
>50 19 13 32
Primary and below 0 5 5
Secondary 4 22 26
Education Diploma 30 62 92
Degree 29 133 162
Above degree 12 9 21
<500000 66 173 239
Income 500000-1000000 8 11 19
>1000000 21 27 48
(Source: researcher survey, 2024)
4.3--*.2 Economic, Social and Individual Factors

Tax audit

Accordingly, most of respondents disagree that the tax authority has limited capacity to
investigate all income reported, to escape from auditing of their under reporting income, and
only 19.6 % agree.

Perception of Government Spending

Majority of tax payers agree (52.36%) and strongly agree 8(2.6) with the government spends a
reasonable amount on welfare, 164(53.6%) agree that there are a number of government services,
facilities and infrastructure for which they are very thankful and 164(53.6) agreed that the
government does not waste too much money.

Principle of Equity and Fairness

32
Perception of fairness is an important factor for compliance and non-compliance behavior of
taxpayers. Majority of respondents 252(82.4%) agreed that the amount of tax obligation should be
fair relative to their business income as higher income earners should pay more taxes than lower
income earners, 253(82.7) agreed that the current tax system is fair and they paid about the same
amount of taxes as others making the same income and 185(60.4%) agreed on paying right amount of
income tax, and believed that other people especially the poor will get the benefit .

Changes to government policy

More than half, 176(57.5%) agreed to comply when they believed Government policy is in favor
of their business in many aspects, 111 (36.3%) disagreed using tax advantage in their business
area and 160(52.3) were neutral to respond on the ruling party has the same focus on taxpayers at
all levels.

Referent group

Influences of referent groups are an important factor for compliance and non-compliance
behavior of taxpayers. Taxpayers may be influenced by their peer groups and relatives to comply
or not to comply with the tax law and it is reflected in an individual’s expectations in relation to
the approval or disapproval of that tax non-compliance behavior. In this study 48 (15.7) strongly
disagree, and 216(70.6) disagree to not to comply as friends don’t comply and they have never
been penalized and 216(70.6) disagree to not to comply as parents and relatives don’t comply
and they have never been penalized. (Table 4.5)

Table 4.5 Economic, Social and Individual Factors

Strongly Disagree Neutral Agree Strongly
disagree agree
N (%) N(%) N(%) N(%) N(%)
Tax audit
I believe the tax authority has limited 85(27.8) 176 (57.5) 21 (6.9) 24(7.8) 0
capacity to investigate all income
reported, to escape from auditing of
my under reporting income

Perception of Government
Spending
The government spends a reasonable 3(1.0) 19(6.2) 116(37.9) 160(52.36 8(2.6)
amount on welfare )

33
 There are a number of government 4(1.3) 19(6.9) 119(38.2) 156(51.0) 8(2.6)
services, facilities and
infrastructure for which I am very
thankful
4(1.3) 21(6.9) 117(38.2) 156(51.0) 4(1.3)
The government does not waste too
much money
Principle of Equity and Fairness
Higher income earners should pay 5(1.6) 36(11.8) 13(4.2) 247(80.8) 8(2.6)
more taxes than lower income earners
I pay about the same amount of taxes 0 29(9.5) 24(7.8) 253(82.7) 0
as others making the
same income
By paying right amount of income 10(3.3) 51(16.7) 60(19.6) 181(59.1) 4(1.3)
tax, I believe that other
people especially the poor will get the
benefit
Changes to government policy
Government policy is in favor of my
14(4.6) 47(15.4) 69(22.5) 176(57.5) 0
business in many aspects
I have tax advantage in my business
17(5.6) 110(35.9) 68(22.2)
area 111(36.3) 0
The ruling party has the same focus
21(6.9) 66(21.6) 160(52.3) 59(19.3) 0
on taxpayers at all levels
Referral group
My friends don’t comply and they
48 (15.7) 216(67.3) 20(6.5) 18 (5.9) 4(1.3)
have never been penalized
My parents and relatives don’t
comply and they have never been 48 (15.7) 216(70.6) 20(6.5) 18 (5.9) 4(1.3)
penalized
(Source: researcher survey, 2024)

The description of variables in this paragraph is based on responses to statements in the survey
that range from ‘strongly disagree’ = 1 to ‘strongly agree’ = 5. As table summarizes respondents
agree (͞x = 1.95, σ = 0.812) that the tax authority has limited capability to investigate all income
reported and they believe they have an opportunity to escape from audit. The result of the survey
is in line with previous literature e.g. Allingham and Sandmo (1972) claimed that taxpayers will
always declare their income correctly if the probability of detection is high.
Respondents agree with the government spends a reasonable amount on welfare (͞x = 3.49) and
very thank full about government services, facilities and infrastructure (͞x = 3.47).However, they
disagree with the government does not waste too much money (͞x = 3.47). Overall result showed
that respondents agree with fairness of government spending (͞x = 3.476).This May be the reason
why most tax payers did not complying with tax system. Studies showed that if taxpayers

34
perceive that the government is spending too much on something considered unnecessary or
unbeneficial to them then taxpayers will feel betrayed and attempt to evade (Roberts, 1994).
With regard to Principle of equity and fairness respondents replied higher income earners should
pay more taxes (͞x = 3.69) and believe they are paying the same taxes as others making similar
income (͞x = 3.73).In addition majority of respondents agreed that paying the right amount of
income tax will benefit other people especially the poor (͞x = 3.39). They also agreed with the
statement government policy is in favor of their business, have tax advantage on their business
area and the ruling party has the same focus on taxpayers at all levels with (͞x = 3.33&2.89,
and2.84) respectively. When we sum up responses on perception of equity fairness, results
indicated that most tax payers agree about equity and fairness of the tax system (͞x (composite) =
3.60).
Survey result on government policy explained by the statement ‘Government policy is in favor of
my business”; “I have tax advantage in my business area” and “I believe that the ruling party has
fair policies for tax payer “and it weighted mean for those questions is 3.02 which implies that
respondents agree with government policy. Hasseldine and Hite’s (2003) study examined two
potential influences on taxpayer attitudes, namely political party affiliation and attribute framing.
Regarding the referent group respondents do not comply because their friends and parents did
not compile and never been penalized (͞x = 2.08) (͞x = 2.07) respectively. In line with previous
literature tax payers agreed that they are influenced by referral group (͞x (composite) = 2.075).
According to the survey result most respondents agreed that their expenditure always exceeds
their income (͞x =2.07), and the price of basic needs keep on increasing (͞x = 3.07).Majority of the
respondents pay their debt & basic needs first rather than tax liabilities (͞x = 3.10). In general tax
payers agreed that personal financial constraint affects their compliance behavior (͞x =2.746).
In respect of the awareness of offences and penalty majority of respondents disagree with the
statement penalty rates are very low and can afford to pay the penalty (͞x = 2.49), The survey
result also show their disagreement with enforcement is very weak (͞x = 2.46) and tax authorities
tolerance towards their offence (͞x = 2.45).Most respondents disagree with the statement I have
no idea about penalty rates and offences (͞x = 2.45).The sum of responses towards awareness on
offences and penalty is inclined to disagreement (͞x (composite)= 2.46) .So majority of them
know about the penalty rates and the result of offence acts.

35
In terms of tax knowledge, tax payers are more inclined towards agree with the statement I know
how to declare actual income received (͞x = 3.62), how to keep records/documents pertaining to
income and expenditure (͞x = 3.60) and understand that they should pay taxes due within the
prescribed period (͞x = 3.63). The sum of results towards tax knowledge is (͞x (composite) = 4.08)
which implies that majority of tax payers has knowledge about tax system.(Table 4.6)

Table 4.6 Descriptive Statistics independent variables

Descriptive Statistics independent variables
N Minimu Maximu Mean Std.
m m Deviation
I believe the tax authority has limited capacity to 306 1.00 4.00 1.95 0.812
investigate all income reported , so I have an
opportunity to escape from auditing of my under
reporting income
Sum of Government spending 3.476
The government spends a reasonable amount on 306 1.00 5.00 3.49 0.698
welfare
There are a number of government services, 306 1.00 5.00 3.47 0.702
facilities and infrastructure for which I am very
thankful
The government does not waste too much money 306 1.00 5.00 3.47 0.720
Sum of Equity and Fairness 3.60
Higher income earners should pay more taxes 306 1.00 5.00 3.69 0.763
than lower income earners
I pay about the same amount of taxes as others 306 2.00 4.00 3.73 0.622
making the same income
By paying right amount of income tax, I believe 306 1.00 5.00 3.39 0.892
that other people especially the poor will get the
benefit
Sum of Government Policy 3.02
Government policy is in favor of my business in 306 1.00 4.00 3.33 0.897
many aspects
I have tax advantage in my business area 306 1.00 4.00 2.89 0.967
The ruling party has the same focus on taxpayers 306 1.00 4.00 2.84 0.812
at all levels
Sum of Referral group 2.075
My friends do not comply and they have never 306 1.00 4.00 2.08 0.726
been penalized
My parents and relatives do not comply and they 306 1.00 5.00 2.07 0.757
Sum of Financial Constrain 2.746
My expenditure always exceeds my income 306 1.00 5.00 2.07 0.757
The price of basic needs is keep on increasing 306 1.00 5.00 3.07 1.019
I will pay my debts and basic needs first rather 306 1.00 5.00 3.10 1.052
Sum of Penalty and Offences 2.46
The penalty rates are very low and I can afford to 306 1.00 5.00 2.49 0.803

36
The enforcement is very weak 306 1.00 5.00 2.46 0.806
I believe that the tax authority is tolerant towards 306 1.00 4.00 2.45 0.724
my offence
I have no idea about penalty rates and offences 306 1.00 5.00 2.45 0.805
Sum of Tax Knowledge 3.6
I know how to declare actual income received 306 1.00 5.00 3.62 0.720
from all sources to the tax authority

I know how to keep records/documents 306 1.00 5.00 3.60 0.722

pertaining
I understand that I should pay taxes due within 306 1.00 5.00 3.63 0.718
the prescribed period
Compliant behave 306 1 3 2.0124 0.54536
Valid N (listwise) 306
(Source: researcher survey, 2024)

4.4 Analysis concerning qualitative questions

Generally, the result of the present study was organized and presented with the following four
themes: (1) society awareness on taxes, (2) ways of taxpayers evading taxes (3) problems for
poor tax revenue collection and its factor, (4) the level of compliance of taxpayers as employees
of the authority.

4.4.1 Society’s awareness on taxes

This was one of the main themes identified to describe participants' awareness of taxes. The
study explored the public's perception of tax awareness. Respondents in this study mentioned
that the majority of the public has a better understanding of taxes. To illustrate these, one of the
customer service officers described the situation as follows.

‘The majority of the tax-paying community has a good understanding of taxes. Taxpayer
does his job based on information, he knows what tax means. He knows that taxes are the
primary source of revenue for the government. Most taxpayers know that, among other

37
 things, this tax revenue is used to improve and maintain public infrastructure, including
roads, and to support public services such as schools, emergency services, and welfare
programs.’

On the other hand, participants also mentioned as:

‘Although not completely, there is a situation where the tax awareness of the majority of
taxpayers has improved over time.’

4.4.2 Tax evading ways among taxpayers

The study also enquired about how the taxpayers evade taxes among individual respondents. It
was described from a different perspective such as participants pointed out that most taxpayers
are not willing to pay their taxes and viewing taxes as a debt even if they have an understanding
of benefits of paying taxes.
One of the participants elucidates the situation as:
‘They want to avoid tax by using loopholes in the tax law, tax evasion by printing invoices, using
fake invoices.’

4.4.3 Factor for poor tax revenue collection

This was one of the major themes identified to describe participants' reasons for poor tax revenue
collection. Among the respondents who were interviewed, it was found that; different reasons
and explanations for details of poor tax revenue collection.
‘Not paying attention to the taxpayers with the best income, the problem of corruption that is
seen occasionally by some professionals, the problem of fairness in terms of making people with
the same income pay the same tax, the increase of illegal receipt publication.’
Again, other participants mentions;
‘Inequitable tax administration system and lack of use of improved and up-to-date technology,
some taxpayers deliberately working without permission, reporting of transactions, non-
declaration of receipts, and data management problems are the main problems.’

4.4.4 The level of compliance of taxpayers as employees of the authority

38
The study also enquired about the level of compliance of taxpayers as employees of the
authority. It was described from a different perspective such as participants pointed out that
although taxpayers' compliance is in good condition, but there are also those who are partially
compliant with the law. Regarding the compliance level of taxpayers one of the participants
described as;
‘Most of the taxpayers act according to the actual situation of our city, so it is better when the
office is strict and works hard on reducing receipts, and at the same time when our monitoring
work is reduced, there is a tendency not to cut receipts due to the fact that there are taxpayers
who move with their feet and efforts to enforce the law.’
Again, another respondent said:
‘Disobeying the law, not cutting off receipts, hiding income and refusing to provide information
to the revenue agency, not reporting the income on time will make the level of compliance
lower.’

4.5 Model Fitness

The objective of the model is to predict the strength and direction of association among
the dependent and independent variables. Thus, in order to maintain the validity and robustness
of the regression result of the research in linear regression model. In fact, if a constant term is
included in the regression equation, this assumption will never be violated. Since, no
intercept parameter without constant term the first assumption will never be go against that
means, there is no potentially severe biases in the slope coefficient estimates in the regression
model. So, the diagnosis taste included normality and multicollinearity.

4.5.1 Normality Test with Normal Percent-Percent Plot and Histogram

Any statistical analysis is enhanced by the inclusion of the observation's proper graphical
verification. "Graphical approaches provide effective diagnostic tools for confirming
assumptions, or, when the assumptions are not met, for suggesting corrective steps," according to
Chambers et al. (1983). Without such instruments, the only option for replacing the confirmation
of preconceptions is hope.

39
 If it appears to be a straight line or has no curve, it contains no outliers and the assumption is
assumed to be true. If it appears to be anything other than a straight line, such as a curve, the
assumption is assumed to be false.

The histogram is the simplest and easiest graphical plot. When the observed values are plotted
against their frequencies, the frequency distribution provides a visual indication of whether the
distribution is bell-shaped or not. While doing so, it also shows where there are data gaps and
outliers. It also provides information on skewness or symmetry. A normal distribution, often
known as being regularly distributed, is a form of ideal, bell-shaped curve that can be used to
represent data, as seen in the first graph. Figure 4.1 show Normal P-P graphs and histogram that
were taken from SPSS result.

Figure 4.1 Normal P-P graphs and Histogram result

(Source: researcher survey, 2024)

4.5.2 Correlation analysis

In statistic, correlation, (often measured as a correlation coefficient), indicates the strength and
direction of a linear relationship between two random variables. In general it refers to the
departure of two variables. A number of different coefficients are used for different situations
as mentioned by Coakes and Steed (2007).

The best known is the Spearman correlation test which is a non-parametric test that is used to

40
 measure the degree of association between two variables. Spearman correlation reflects the
relationship between two variables. It ranges from +1 to-1. A correlation of “+1” means that
there is a perfect positive linear relationship between variables and a correlation of “-1” means
that there is a perfect negative linear relationship between variables. A correlation of “0” means
there is no linear relationship between two variables.
Table 4.7 Spearman’s Correlation Matrix for dependent, independent variables

1 2 3 4 5 6 7 8 8
Tax 1.000
Comp;iance
Tax Audit .812** 1.000
**
Government .610 .747** 1.000
Spending
Equity and 0.007 0.052 0.036 1.000
Fairness
Government .568** .677** .603** 0.042 1.000
Policy
Referent -0.003 0.007 -0.013 0.052 0.020 1.000
Group
Financial 0.018 0.046 -0.068 -0.075 -0.016 .264** 1.000
Constraint
Penality .594** .716** .767** 0.084 .620** 0.035 -0.001 1.000
Rates
Tax -0.043 0.019 -0.011 0.032 -0.002 -0.060 0.049 0.007 1.000
Knowledge

(Source: researcher survey, 2024)

4.5.3 Test for Multicollinearity

Another basic assumption of OLS is that there is no multicollinearity among the explanatory
variables included in the regression model. Multicollinearity indicates the existence of exact
linear association among some or all explanatory variables in the regression model. If correlation
exists between explanatory variables, then we are in the state of multicollinearity problem. In this
case, the regression model will end up with an incorrect result and therefore, invalid conclusion
will be prevailed. According to Gujarati (2004) the effect of multicollinearity is that in regressing
model estimates of the coefficients of the regressor become unstable and the standard errors for
the coefficients can get wildly inflated.
To test the existence or not-existence of multicollinearity problem, variance inflation factor
(VIF) was used. As a rule of thumb, a value of 1 means that the predictor is not correlated with
other variables. VIF value of more than 4 or 5 are regarded as being moderate to high and values

41
of 10 or more being regarded as very high.
The following table shows that the mean value of VIF is 2.02, indicates that there is no problem
of multicollinearity in the regression model.

Table 4.8 VIF Test

Variables VIF 1/VIF
TAX-AUD 3.193 0.31
GOV-SPEN 2.791 0.36
EQUI-FAIR 1.028 0.97
GOV-POLICY 2.041 0.49
REFER 1.153 0.87
FIN-CONS 1.169 0.85
PENAL 3.766 0.26
TAX-KNOWL 1.015 0.99
MEAN VIF 2.02

(Source: researcher survey, 2024)

4.5.3 Test for The Durbin–Watson

Informs us about whether the assumption of independent errors is fulfilled. Field, (2009)
suggested that values less than 1 or greater than 3 should definitely raise alarm bells. Since the
value of Durbin-Watson test for this study is 1.545, the

4.5.4 Mean in Likert scale data

42
A Likert scale is composed of a series of four or more Likert-type items that represent similar
questions combined into a single composite score/variable. Likert scale data can be analyzed as
interval data, i.e. the mean is the best measure of central tendency. Accordingly, counting of
frequencies under each rating scale has been done first and then the findings were put in frequencies and
then percentages, mean and standard deviation, were used to analyze the item.

4.6 Determinants of tax compliance – Multiple Linear Regression Model Analysis

4.6.1 Model Summary

The result on Table below shows that the R-square with a value of 0.756 implies that about 75.6
percent of the changes in tax compliance attitude could only be explained by explanatory
variables namely; that gender of the respondent (tax knowledge (TAX-K), Perception of
Government Spending (GOV-SP), awareness on penalty rate for evading tax (PEN), and
probability of tax audit (TAX-AU). While 24.4 percent of the changes in tax compliance attitude
(TAX-COM) could be explained by other exogenous factors. (Table 4.9)

Table 4.9: Model Summary

Model Summary
Model R R Adjuste Std. Error Durbin
Square dR of the -
Square Estimate Watso
n
a
1 .870 .756 .750 .27275 1.545
a. Predictors: (Constant), Tax knowledge , Personal financial constraint, Referent group , Penalty rates and
enforcement, Changes on current government policy, Tax Audit , Perception of Government Spending ,
Perception on Equity and fairness
b. Dependent Variable: tax compliance behavior
(Source: researcher survey, 2024)

4.6.2 Analysis of Variance (ANOVA)

The ANOVA table below tells us whether the overall model results in a significantly good
degree of the prediction of the outcome variable (Field, 2009). The F-ratios for both task and
contextual performance models confirmed that the overall regression models were a good fit for
the data. The F-ratio is the result of comparing the amount of explained variance to the

43
unexplained variance of the regression model. The larger the F-ratio the more variance in the
dependent variable that is associated with the independent variables.

Table 4.10: Analysis of Variance

ANOVAa
Model Sum of Df Mean F Sig.
Squares Square
1 Regression 68.618 8 8.577 115.295 .000b
Residual 22.095 297 0.074
Total 90.713 305
a. Dependent Variable: tax compliance behavior
b. Predictors: (Constant), Tax knowledge , Personal financial constraint, Referent group , Penalty rates and
enforcement, Changes on current government policy, Tax Audit, Perception of Government Spending ,
Perception on Equity and fairness
(Source: researcher survey, 2024)

4.6.3 Regression Coefficients and Hypothesis Testing

This section presents the result of multiple linear regression analysis through significant test
using SPSS. There were a number of significant correlations between level of tax compliance
behavior and independent variables. Based on this analysis result significant factors affecting tax
compliance were, tax audit, government spending, referral group, awareness of penalty and
offence, tax knowledge, gender and age of respondents. But educational level, income, financial
constraints, perception on equity and fairness and government policy were not significant factors
to determine tax compliance behaviors. (Table 4.11)

44
Table 4.11 Descriptive Statistics of independent variable and dependent variables
Descriptive Statistics of independent variable and dependent variables
Mean Std. Deviation N
Level of compliance 2.0124 .54536 306
GENDER 1.34 .474 306
AGE 2.44 .800 306
EDUC 3.55 .809 306
INCOME 1.38 .742 306
TAX_AUD 1.9477 .81213 306
Government Spending 3.4760 .70153 306
Equity and fairness 3.6024 .45071 306
Government policy 3.0207 .51563 306
Referent group 2.0735 .72563 306
Financial constraint 2.7462 .73169 306
Penalty Rates 2.4616 .60628 306
Tax knowledge 3.6187 .70998 306
(Source: researcher survey, 2024)

The table shows the relationship between dependent variable (tax compliance attitude and
independent variables. The result shows that (gender of the respondent being male negative, age
of the respondent negative, Referent group negative, tax knowledge negative, Perception of
Government Spending negative, awareness on penalty rate for evading tax positive, probability
of tax audit positive, were found to be significantly correlated with tax compliance at (P<0.05).
But level of education, income, perception of equity and fairness and changes on government
policy were not significantly associated with tax compliance at (P<0.05) 95% CI. (Table 4.12)

45
Table 4.12: Relationship between dependent variable
Model Coefficients T Sig. 95.0% Confidence Interval for
B
B Std. Error Lower Bound Upper Bound
1 (Constant) 1.286 .195 6.582 .000 .901 1.670
TAX_AUD .568 .034 16.518 .000 .500 .653
Government Spending -.030 .037 -.804 .0422 -.103 .043
Equity and Fairness -.056 .035 -1.603 .110 -.125 .013
Government Policy .023 .043 .542 .588 -.062 .109
Referent Group .009 .023 .386 .700 -.037 .054
Financial Constraint -.027 .023 -1.179 .240 -.073 .018
Penalty Rates .042 .050 0.848 .397 -.056 .141
Tax knowledge -.053 .022 -2.379 .018 -.096 -.009
(Source: researcher survey, 2024)

The variable being tax audit (ß = 0.568) has positive and very strong significant relationship with
compliance attitude. As a result hypothesis H1 is accepted. This result is consistent with that of
Tadesse and Goitom (2014) and Tilahun and Yidersal, (2014). This finding suggests that more
the probability of being caught by audit, more positive the tax compliance attitude of
respondents. This implies that taxpayers comply with taxation for the reason that they fear may
caught by tax audit.

Perception of Government Spending (ß =-0.030) has negative and significant relationship with
tax compliance behavior. It is not in line with Hypothesis 2 which states (Positive perception of
government spending is positively associated with tax compliance). This may due to taxpayers
perceive that the government is spending too much on something considered unnecessary or
unbeneficial to them, and then taxpayers will feel betrayed and attempt to evade.
Referent group influence (ß = -0.009) has posative and significant relationship with tax
compliance. So in this study the influence of referent groups tends to be inconsistent with result
Hypothesis 5 (the influence of referent group is positively associated with tax compliance).
With regarding the awareness of penalty for evading tax (ß =0.042) has positive and significant
association with compliance attitude. Thus, the hypothesis H7 is accepted. This result is also
consistent with that of Alligngham and Sandmo (1972); (Amina and Saniy (2015). This indicate
that higher the penalty the greater the discouragement for potential tax evasion. If the taxpayers

46
are aware of the offences they are committing when evading tax and the consequences of being
non-compliant taxpayers.
Concerning the impact that tax knowledge, having knowledge on taxation (ß= -0.053) has
negative and significant relationship with compliance behavior of tax payers. So, the hypothesis
H8 is not accepted and it is not supported by previous studies have evidenced that tax knowledge
has a very close relationship with taxpayers’ ability to understand the laws and regulations of
taxation, and their ability to comply (Singh and Bhupalan, 2001).

47
 CHAPTER FIVE
CONCLUSIONS AND RECOMMENDATION

This chapter presents the conclusions and recommendations. The purpose of the chapter is to
review the whole thesis and highlight future research directions. Accordingly, section one
presents overview of the thesis and its major findings while the second section presents the
recommendations with future research directions.

5.1 Conclusion

Based on the presiding analysis the paper finally drawn the following conclusions/findings
 The research measures tax compliance attitude using indirect and hypothetical questions
and the result of descriptive analysis of both scenarios indicated majority of them were
not compliant. This has implications for the government to work on determinant factors
to improve tax revenue. In the second scenario majority of respondents replied they are
compliant, this might be due to the sensitive nature of compliance behavior as discussed
in limitation section of this paper. As a result this scenario was disregarded from further
analysis.
 Tax audit and awareness on penalty and offence were identified as significant factors to
determine compliance behavior of tax payers’. Fines and Audit rates may substitute each
other due to their multiplicative linkages as long as neither of them is set to zero
(Kirchler et al 2007). Higher fines simply make evading taxes more hazardous for
taxpayers and should deter from evasion. Empirically the deterrent effect of fines could
not always be supported. The observed effects were weaker than expected and some
studies even suggest that an increase of penalties can have undesirable effect and result in
more tax avoidance (Kirchler et al, (2007).
 Most taxpayers were conditioned by fairness of government spending and they are keen
to know where their tax contribution will be spent. The analysis also finds evidence that
those who are more satisfied with public service provision are more likely to comply with
tax rule. Those who engage in tax evasion often justify such behavior by suggesting that
the government wastes tax revenue and spends unwisely; such arguments can decrease
voluntary compliance in the long run (Braithwaite et. al. 2009).

48
 Most of the respondents confirmed in both descriptive and linear analysis result that they
are influenced by Family or a friends’ experience of noncompliance act. Allingham and
Sandmo (1972). Clotfelter (1983) also claimed that referent groups play a significant role
in evasion although it was also not clearly discussed which was stronger(family members
or friends)

 In general, the finding of this study indicated that most of the respondents are non-
compliant. This is, however, inconsistent with the performance reported by the revenue
office. The possible explanation for this variation is that it may be due to over ambitious
plan by the office.

5.2 Recommendations

Based on the findings of this study, the researcher came up with the following
recommendations to enhance tax compliance of taxpayers’.
 Regarding economic issues, tax payers may feel tempted to avoid taxes if they think
there is a low chance that their actions will be discovered during an audit. According
to this study, voluntary compliance is expected to rise if the government correctly
allocates its resources, for instance, to essential services like public transit, health and
safety, and education. Taxpayers will feel misled and try to escape taxes if they
believe that the government is spending excessive amounts of money on something
that they believe to be unneeded or unbeneficial. Government officials and policy
makers must therefore consider the thoroughness of audit procedures and the propriety
of government spending in order to prevent inefficient tax collection.
 Regarding social variables, the referent group's influence is crucial because, as many
literatures explains, decisions about whether or not to cheat taxes can sometimes be
influenced by social norms and ethical principles, which will change the incentives for
tax compliance.
 Individual factors are important in deciding how tax payers will behave in terms of
compliance. Knowledge of fines and offenses and Tax literacy are likely to have a big
influence on how well taxpayers comply with the law. Since the level of taxpayers'

49
 knowledge must also be maintained up to date for the revenue office to effectively and
efficiently communicate (such as with regard to recent changes to tax laws) and create
tax policies (for example, Reporting, filing requirements, penalties etc.).
The thesis concludes with a list of possible actions that the government, in general, and the tax
authorities, in particular, could take. Improving audit thoroughness, educating taxpayers, raising
awareness, and offering the general public all essential social services will all increase compliance
level. The goal of raising awareness should go beyond merely educating taxpayers about taxes to
include consultations. The general population should receive more preventative education, and
schoolchildren should be made more aware of their tax obligations. Additionally, more research
and analysis on this subject will help to study important variables from various angles and raise
compliance levels by examining the motivating factors for compliance.

50
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 Appendices 1- Business Taxpayers survey instrument
(English version)
Wollo University
Department of Accounting & Finance

Dear Respondents:

The objective of this questionnaire is to secure the necessary and relevant first- hand information that is
useful to conduct a research project regards “Factors affecting Taxpayers compliance with Tax System:
The Case of Dessie City Administration”. It is prepared by Ato Tesfaye Nigussie who is currently
following his MSc (in accounting and finance) at Wollo University. The information you provide very
valuable for the success of this research. No names or any identification marks are required. Please feel
free to respond honestly. The information you are going to supply will be used for academic purpose only
and will be treated with strict confidentiality. The student who is a researcher appreciates in advance for
your cooperation and spending your valuable time in filling and to participate in the study.

REQUEST FOR THE COMPLETION OF QUESTIONNAIRE

General Instruction

This close ended questionnaire has three parts, part (I) is regarding respondents’ general back ground ,the
second (II) part of the questionnaire contains questions on the degree of tax payers’ compliance towards
the tax law .Finally questions about the factors of tax compliance presented in part III.

PART I: Tax payers’ general information

Kindly tick (√) on the choice you do believe that it is the most appropriate response.

1. Gender
Male Female

2. Age

From 21 – 30 From 41 - 50

From 31 – 40 Above 51

57
 3. Educational Level

Education Level Please tick (√ ) one

Bellow 10
10th /12th complete
Diploma
Degree
MA and above

4. How much was your annual turnover for the year 2021/22 (2014 E.C)?

Less 500,000

500,000 – 1000,000

Above 1000,000

PART II; Tax compliance

Questions on part II are used to examine tax compliance of tax payers.

2.1 Please read the following and kindly indicate your opinion and put a tick mark (√)

Very frequently (VF) = 5, ‘Frequently (F) = 4, Not so often (O) = 3, Sometimes (S) = 2, and

Never (N) = 1.

Ser.N N1 S2 O3 F4 VF5

Statements

1 How frequently do you think taxpayers evade taxes?’

2 How frequently do you think taxpayers under report their

income?

3 How frequently do you think taxpayers over state their

deductible expenses?

58
2.2. Please read the following scenario and kindly indicate your opinion based your experience

Strongly agree (SA) = 5, Agree (A) = 4, Neutral (N) = 3, Disagree (DA) = 2, and Strongly disagree (SD)
= 1.

“W/ro Seada, a self-employed businessman is considering not disclosing a cash sale of ETB 87,000.00 as
business income in his 2014 E.C tax return. Legally, the cash receipts of ETB 87, 000.00 should be
included as a business income. However, he is almost certain that the tax authority will not audit her and
would not know if the amount is not disclosed”.

Ser. Statement SD DA N A SA
No 1 2 3 4 5
1 To what extent do you agree with W/ro Seada’s
possible action of not reporting that cash sale of ETB
87,000.00 as his business income?
2 To what extent do you agree with W/ro Seada possible
action if she reports only part of the ETB 87,000.00 as
business income?

PART III; Factors affecting tax compliance

Questions on part III will be used to assess determinant factors of tax compliance. Please kindly respond
to the following statements to depending on degree of agreement or disagreement to each of the
statements. There are no right and wrong answer. (Please tick (√) from the given 5 scale boxes.

Strongly disagree (SD)= 1. Disagree (DA)= 2, Neutral (N) = 3, Agree (A) = 4, and Strongly agree (SA) =

59
3.1. Tax audit

I wish NOT TO COMPLY with tax laws for the following reasons:

S.N Statement SDA DA N A SA

1 2 3 4 5
1 I believe the tax authority has limited capacity to investigate all
income reported , so I have an opportunity to escape from
auditing of my under reporting income

3.2. Perception of Government Spending

I wish to comply because;

S.N Statement SD DA N A SA
1 2 3 4 5
1 The government spends a reasonable amount on welfare
2 There are a number of government services, facilities and
infrastructure for which I am very thankful
3 The government does not waste too much money

3.3. Principle of Equity and Fairness

I wish to comply because;

S.N Statement SD DA N A SA
1 2 3 4 5
1 Higher income earners should pay more taxes than lower
income earners
2 I pay about the same amount of taxes as others making the
same income
3 By paying right amount of income tax, I believe that other
people especially the poor will get the benefit

60
3.4. Changes to government policy

I wish to comply because;

Ser. Statement SD DA N A SA
No 1 2 3 4 5
1 Government policy is in favor of my business in
many aspects
2 I have tax advantage in my business area

3
The ruling party has the same focus on taxpayers at
all levels

3.5. Referral group (Friends, Relative Etc.)

I wish NOT TO COMPLY with tax laws for the following reasons:

Ser. Statement SD DA N A SA
No 1 2 3 4 5
1 My friends do not comply and they have never
been penalized
2 My parents and relatives do not comply and they
have never been penalized

3.6. Personal financial constraint

I wish NOT TO COMPLY with tax laws for the following reasons

Ser. Statement SD DA N A SA
No 1 2 3 4 5
1 My expenditure always exceeds my income
2 The price of basic needs is keep on increasing
3 I will pay my debts and basic needs first rather
than income tax

61
3.7. Awareness of offences and penalty

I wish NOT TO COMPLY with tax laws for the following reasons:

Ser. Statement SD DA N A SA
No 1 2 3 4 5
1 The penalty rates are very low and I can afford to
pay the penalty
2 The enforcement is very weak
3 If I detected not reporting my exact income, I
believe that the tax authority is tolerant towards my
offence and most probably it will escape without
any punishment.
4 I have no idea about penalty rates and offences

3.8. Tax knowledge

I wish to comply because;

S.N Statement SD DA N A SA
1 2 3 4 5
1 I know how to declare actual income received from
all sources to the tax authority
2 I know how to keep records/documents pertaining to
income and expenditure for a required period of years
after submission of the tax return
3 I understand that I should pay taxes due within the
prescribed period from the date of issue of the Notice
of Assessment or within the stipulated period

Thank you so much for your cooperation!

62
Appendices 2- Business Taxpayers survey instrument (Amharic
version)

ወሎ ዩኒቨርሲቲ የቢዝነስና ኢኮኖሚክስ ኮሌጅ

የአካውንቲንግና ፋይናንስ ድፓርትመንት
የተከበራችሁ የጥናቱ ተሳታፊዎች፡-
የዚህ መጠይቅ ዋና አላማ የንግድ ግብር ከፋዮች ለግብር ህግ ተገዥ እና በንግድ ህግና ደንቡ መሰረት ግብርን
እንድከፍሉና እንዳይከፍሉ የሚያደርጉ ነገሮችን ለማጥናት ጠቃሚ እና ተገቢ የሆነውን የመጀመሪያ ደረጃ
መረጃን ለመሰብሰብ ነው፡፡ይህ ጥናት የሚካሄደው በአቶ ተስፋዬ ንጉሴ ሲሆን በወሎ ዩኒቨርሲቲ
በአካውንቲንግና ፋይናንስ የትምህርት ዘርፍ የሁለተኛ ድግሪ ተማሪ ነው፡፡እርስዎ የሚሰጡት መረጃ ለዚህ
ጥናት መሳካት ከፍተኛ የሆነ ዋጋ ሲኖረው የሚሰጡትን መረጃ የምንጠቀመው ለትምህርታዊ አላማ ብቻ
ሲሆን ሚስጢራዊነቱ በጥብቅ የተጠበቀ ነው፡፡ በመጠይቁ ላይ ስምዎንም ሆነ የእርስዎን ማንነት የሚገልፅ
ማንኛውንም አይነት ምልክት ማስቀመጥ የለብዎትም፡፡ ውድ የሆነ ጊዜዎን ሰውተው ይህን መጠይቅ
ለመሙላት በሚያደርጉት ትብብር አጥኝው በቅድሚያ ታላቅ የሆነ ምስጋና ያቀርባል፡፡

ከስር ለተዘረዘሩት ጥያቄዎች ትክክለኛ መልስ እንዲሰጡ በአክብሮት እጠይቃለሁ፡፡ ለትብብርዎ አመሰግናለሁ፡፡

ክ-ፍል አንድ፤ የግብር ከፋዮች አጠቃላይ መረጃ

1. ጾታ ወንድ ሴት

2. እድሜ
ከ 22 – 30 ከ 41 – 50
ከ 30 – 40 ከ 51 በላይ

3. ትምህርት ደረጃ
ከ 10 ከፍል በታች
ኛ
ድግሪ
10 ኛ/12 ኛ ክፍል ያጠናቀቀ 2 ኛ ዲግሪ
እና ከዚያ በላይ
ዲፕሎማ

4. የድርጅትዎ ሽያጭ በ 2014 ወይም 2021/22 በብር በምን ያህል ይገመታል

63
ከ 500,000 ሺህ በታች [ ]
ከ500,000 – 1,000,000 [ ]
ከ1,000,000 በላይ [ ]

ክፍል ሁለት ግብር ከፋዮች ለግብር ለህጉ ያላቸዉን ተገዢነት የሚገመግም የመጠይቅ ክፍል ነዉ፡፡
2.1. እባክዎ በሚቀጥለዉ ሰንጠረዥ ዉስጥ ላሉት ሃሳቦች በተሰጠዉ መለኪያ መሰረት አስያየተዎን ያስቀምጡ፡፡ በፍፁም (1) ፤
አልፎ አልፎ (2) ፤ ብዙ ጊዜ (3) ፤ በተደጋጋሚ (4)፤ በጣም በተደጋጋሚ (5)

.0 በፍፁም 1 አልፎ አልፎ 2 ብዙ ጊዜ 3 በተደጋጋሚ 4 በጣም በተደጋጋሚ 5

ተ.ቁ ሃሳቦች

1 ግብር ከፋዮች በምን ያህል ድግግሞሽ ግብራቸዉን ይደብቃሉ

2 ግብር ከፋዮች በምን ያህል ድግግሞሽ ገቢያቸዉን ያሳንሳሉ
3 ግብር ከፋዮች በምን ያህል ድግግሞሽ ወጪያቸዉን ያጋንናሉ

2.2. የሚከተለዉን ፅሁፍ ካነበቡ በሁዋላ እባክዎ ቀጥሎ ላሉት ጥያቄዎች ትክክለኛዉን አስተያየት ያስቀመጡ፡፡

በጣም አልስማማም (1)፤ አልስማማም (2)፤ ገለልተኛ ነኝ (3)፤ እስማማለሁ (4)፤ በጣም እስማማለሁ (5)

“ወይዘሮ ሰአዳ በግል ስራ ላይ የተሰማሩ ነጋዴ ናቸዉ:: ወ/ሮ ሰአዳ በ 2014 ዓ.ም የግብር አመት የ 87,000.00 ብር
ሽያጭ ነበራቸዉ ሆኖም ግን ለግብር ሰብሳቢዉ መስሪያ ቤት ላለማሳወቅ ወስነዋል :: በግብር ህጉ መሰረት
የ 87,000.00 ብር እጅ በእጅ ሽያጭ ገቢያቸዉ ሪፖርት መደረግ አለበት:: ነገር ግን ወይዘሮ ሰአዳ ግብር
ሰብሳቢዉ መስሪያ ቤት ኦዲት እንደማያደርጋቸዉ እና ያላሳወቁትን ገቢ እንደማይገኝባቸዉ እርግጠኛ
ናቸዉ::”

በጣም አልስማማም ገለልተኛ እስማማለሁ በጣም እስማማለሁ

አልስማማም 1 2 ነኝ 3 4 5
ተ.ቁ ሃሳቦች
1 ወይዘሮ ሰአዳ የ 87,000.00 እጅ በእጅ ሽያጭአቸዉን
ሙሉ ለሙሉ ላለማሳወቅ ቢወስኑ ምን ያህል
በወይዘሮ ሰአዳ ሃሳብ ይስማማሉ
2 ወይዘሮ ሰአዳ የ 87,000.00 ብር እጅ በእጅ
ሽያጭአቸዉን በከፊል ለማሳወቅ ቢወስኑ ምን
ያህል በወይዘሮ ሰአዳ ሃሳብ ይስማማሉ

ክፍል ሶስት ግብር ከፋዮች ለግብር ህጉ ያላቸዉን ተገዥነት የሚወስኑ ምክንያቶች

እባክዎ በሚቀጥለዉ ሰንጠረዥ ላሉት ሃሳቦች በተሰጠዉ መለኪያ መሰረት አስያየተዎን ያስቀምጡ

64
3.1. የግብር ምርመራ (ኦዲት)

በሚከተሉት ምክንያቶች ለግብር ህግና ደንቡ ተገዥ አለመሆንን እመርጣለሁ

በጣም አልስማማም ገለልተኛ እስማማለሁ በጣም

አልስማማም 1 2 ነኝ 4 እስማማለሁ
ተ.ቁ ሃሳቦች
3 5

1 ግብር ሰብሳቢዉ መስሪያ ቤት ትክክለኛ ገቢየን

መርምሮ የማሳወቅ ብቃቱ ዉስን ስለሆነ የገቢየን
አሳንሶ የማሳወቅ እድል አለኝ

3.2. በመንግስት ወጭዎች ላይ ያለ ምልከታ

በሚከተሉት ምክንያቶች ለግብር ህግና ደንቡ ተገዥ መሆንን እመርጣለሁ

በጣም አልስማማም ገለልተኛ እስማማለሁ በጣም

አልስማማም 1 2 ነኝ 3 4 እስማማለሁ 5
ተ.ቁ ሃሳቦች
1 የመንግስት ወጭዎች ለመሰረታዊ አገልግሎት
የሚዉሉ እና ምክንታዊ ናቸዉ ብየ አምናለሁ
2 መንግስት በተገቢዉ መንገድ የመሰረተ ልማት
አገልግሎቶች ያቀርባል ብየ አምናለሁ
3 መንግስት ያለ አግባብ ገንዘብ አያባክንም ብየ
አምናለሁ

3.3. የግብር ህጉ እኩልነት እና ፍትሃዊነት

65
በሚከተሉት ምክንያቶች ለግብር ህግና ደንቡ ተገዥ መሆንን እመርጣለሁ

በጣም አልስማማም ገለልተኛ እስማማለሁ በጣም

አልስማማም 1 2 ነኝ 4 እስማማለሁ
ተ.ቁ ሃሳቦች
3 5

1 ከፍትኛ ገቢ ያላቸዉ ግብር ከፋዮች አነስተኛ ገቢ

ካላቸዉ የበለጠ ግብር ስለሚከፍሉ
2 እኔ የምከፍለዉ ግብር ተመጣጣኝ ገቢ ካላቸዉ ጋር
ሲነፃፀር እኩል ስለሆነ
3 ተገቢዉን ግብር በመክፈል ደሃዉ ህብረተሰብ
ተጠቃሚ ይሆናል

3.4. የመንግስት ህግ እና ደንብ ለዉጥ

በሚከተሉት ምክንያቶች ለግብር ህግና ደንቡ ተገዥ መሆንን እመርጣለሁ

በጣም አልስማማም ገለልተኛ እስማማለሁ በጣም

አልስማማም 1 2 ነኝ 3 4 እስማማለሁ
ተ.ቁ ሃሳቦች
5

1 በተለያየ መንገድ የመንግስት ህግ እና ደንብ እኔ

ለምሰራዉ ንግድ ጠቃሚ ነዉ
2 የግብር ህጉ እኔ የተሰማራሁበትን የንግድ ዘርፍ
ይደግፋል
3 አሁን በስልጣን ላይ ያለዉ ፓርቲ ለሁሉም ደረጃ
ግብር ከፋዮች እኩል አትኩሮት አለዉ

3.5. የቤተሰብ ተፅእኖ (ወላጅ፤ ዘመድ፤ ጉዋደኛ…ወ.ዘ.ተ.)

በሚከተሉት ምክንያቶች ለግብር ህግና ደንቡ ተገዥ አለመሆንን እመርጣለሁ

66
 በጣም አልስማማም ገለልተኛ እስማማለሁ በጣም

አልስማማም 1 2 ነኝ 4 እስማማለሁ
ተ.ቁ ሃሳቦች
3 5

1 የቅርብ ጓደኞቼ ለግብር ህጉ አይገዙም ነገር ግን

ቅጣት ተጥሎባቸዉ አያዉቅም
2 ወላጆቼ እና ዘመዶቼ ለግብር ህጉ አይገዙም ነገር
ግን ቅጣት ተጥሎባቸዉ አያዉቅም

3.6. የገንዘብ እጥረት

በሚከተሉት ምክንያቶች ለግብር ህግና ደንቡ ተገዥ አለመሆንን እመርጣለሁ

በጣም አልስማማም ገለልተኛ ነኝ እስማማ በጣም

አልስማማም 1 2 3 ለሁ እስማማለሁ
ተ.ቁ ሃሳቦች
4 5

1 ሁልጊዜ ወጭየ ከገቢየ ስለሚበልጥ

2 የእለት ፍጆታ ወጭየ በየጊዜዉ የዋጋ ግሽበት
ስለሚያሳይ
3 የእዳ ክፍያዎቼን እና የእለት ፍጆታየን ከግብር እዳየ
ስለማስቀድም

3.7. ስለቅጣት ያለ ግንዛቤ

67
በሚከተሉት ምክንያቶች ለግብር ህግና ደንቡ ተገዥ አለመሆንን እመርጣለሁ

በጣም አልስማማም ገለልተኛ እስማማለሁ በጣም

አልስማማም 1 2 ነኝ 3 4 እስማማለ 5
ተ.ቁ ሃሳቦች
1 የቅጣት መጠኑ አነስተኛ ስለሆነ መክፈል እችላለሁ
2 የህጉ ተፈፃሚነት አነስተኛ ስለሆነ
3 የታክስ ህጉን ባላከብርም ግብር ሰብሳቢ መስሪያ
ቤቱ አይቶ እንዳላየ ያልፈኛል እና ያለቅጣት
ያልፈኛል
4 ቅጣትን በተመለከተ ምንም አይነት ግንዛቤ የለኝም

3.8. የግብር ህግ እዉቀት

በሚከተሉት ምክንያቶች ለግብር ህግና ደንቡ ተገዥ መሆንን እመርጣለሁ

በጣም አልስማማም ገለልተኛ እስማማለሁ በጣም

አልስማማም 1 2 ነኝ 4 እስማማለሁ
ተ.ቁ ሃሳቦች 3 5

1 ገቢየን እንዴት ለግብር ሰብሳቢዉ መሰሪያቤት

እንደማሳዉቅ በቂ ግንዛቤ አለኝ
2 ወጪ እና ገቢየን እንዴት መመዝገብ እንዳለብኝ
እና ለምን ያህል ጊዜ የሂሳብ ሰነድ ማስቀመጥ
እንዳለብኝ አዉቃለሁ
3 የሚጠበቅብኝን ግብር በተሰጠኝ የጊዜ ገደብ
መክፈል እንዳለብኝ አዉቃለሁ

ስለ ትብብርዎ በጣም አመሰግናለሁ፡

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Semi structured guiding Interview Questions for Tax Officers
1. Do you think that our society is fully aware of about tax?
2. How tax payers evade tax?
3. What problem do you identify in the process of tax administration?
4. What problems do you identify for poor tax revenue collection?
5. What are the sources for those problems?
6. What are the possible solutions to reduce those problems?
7. As you are staff of the authority what is the tax payers’ compliant level looks like.

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