Value Added Tax Refund Practices and Revenue Performance in Ethiopia

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Addis Ababa University


This study examines VAT refund practice and revenue performance in Ethiopia. Specifically the study investigates key problems on VAT refund operations, in respect of the appropriateness of document verification and time to refund pay, type of refund claims and its legal framework, cause for VAT refund, trends of VAT refund and revenue performance in Ethiopia focusing on federal government. The study adopts mixed method approach specifically, the study uses indepth interviews with tax officials and taxpayers and documentary analysis as principal way of acquiring data. With these research methods, the results of the study reveal that VAT refund practice remains infant. Since, it did not get appropriate attention of tax administration and the activities performed targeting specific taxpayers (medium and large taxpayers office) with the absence of developed risk-based refund claim verification and absence of effective IT support in refund processing (the refund process is mainly performed manual based) which results slow VAT refund process and due to enormous document verification the tax officers are tedious even some illegal taxpayers applied duplicated refund claim resulting loss of revenue. Finally, the performance of VAT reduced due to VAT refund fraud, resulting in average 14% cefficiency ratio which is lower when compared to competitor’s country in Africa and in the world. At the end, the study forwards the possible measures to be taken and the necessary emphases should be given mainly on document verification that should be risk based and develop effective use of IT system to perform VAT refund process by the Ethiopian Revenue and Customs Authority to mitigate problems of slow VAT refund practice and low VAT revenue performance.


A thesis Submitted to the Department of Accounting and Finance of Addis Ababa University in Partial Fulfillment of the Requirements for the Degree Master of Science in Accounting and Finance


Administration, Ethiopia, Performanc, VAT