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Title: AN EXAMINATION OF THE LINK BETWEEN TAX ADMINISTRATION AND VALUE ADDED TAX COMPLIANCE IN ETHIOPIA
Authors: BISRAT, ALEMAYEHU
Advisors: DR. PAULOS CHANIE
Copyright: May-2010
Date Added: 13-May-2012
Abstract: Almost unknown in the 1960s, the value added tax (VAT) is now found in more than 145 countries and raise around 20 percent of the world’s tax revenue (Keen and Lockwood, 2007:3). In recent years, developing countries searching for additional revenue and/or pressured by business to modernize their sales tax have enacted value added taxes (Schenk and Oldman, 2001:25). Widely adopted in sub-Saharan Africa, it has been the centerpiece of tax reform in many developing countries. Besides, the IMF played a significant role in the spread of the VAT (Keen and Lockwood, 2007:26). The rise of the VAT has been the most significant development in tax policy and administration of recent decades (Keen and Lockwood, 2007:2). The VAT is simply a multistage sales tax that exempts the purchase of intermediate goods and services from the tax base. The advantage of a VAT over retail sales taxes is that VAT allows business to recoup tax on their inputs (business purchase) so that tax on retail sales does not impose a tax-on-a-tax. Value added is the difference between sales proceeds and purchases of intermediate goods and services over a certain period (Ebrill et al. 2001:3; Keen and Smith 2007:4; Mieszkowski 1999:477; Webley et al. 2002:1). Even though VAT is less vulnerable than other form of taxations, like any other tax, it is vulnerable to evasion and fraud (Keen and Smith, 2007:3). Noncompliance is also a major problem faced by countries that introduced VAT. Although, it is difficult to get an accurate picture, it is clear from the few studies that, VAT evasion is widespread and involves significant revenue losses, though the extent varies considerably across countries (Webley et al. 2002:1). For instance, a study on VAT Compliance in the UK identifies four forms of noncompliance. (a) Engage in taxable transactions without having registered with the tax authority (b) Fail to file their tax return by the statutory filling deadlines (c) Under reporting their tax liability or illicit claim of tax refunds, or (d) Underpay the amount of taxes due (tax arrears).
URI: http://hdl.handle.net/123456789/3036
Appears in:Thesis - Public Adminstration

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