Factors Affecting Tax Revenue in Ethiopia
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Date
2025-01-05
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Publisher
AAU
Abstract
This study focuses on the key factors influencing tax revenue in Ethiopia from 2013 to 2023. By
adopting a quantitative research approach underpinned by positivist philosophy, the research
aims to uncover how variables such as Gross National Income (GNI), Gross Domestic Product
(GDP), inflation rate, Foreign Direct Investment (FDI) inflows, and unemployment rate affect
the country's tax revenue. The data, primarily sourced from the NBE, were analysed using
multiple linear regression models to quantify these relationships. Comprehensive diagnostic tests
ensure the robustness and validity of the findings. The results highlight significant effects
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between the independent variables and tax revenue, offering critical insights into the economic
forces shaping tax collection in Ethiopia. This study fills a notable gap in the literature
concerning the economic determinants of tax revenue in developing countries, providing
valuable policy implications. The findings suggest that macroeconomic stability and increased
investment are crucial for enhancing tax revenues, offering guidance for policymakers to
formulate strategies for sustainable economic growth. By understanding these dynamics,
policymakers can better design effective fiscal policies that support Ethiopia's economic
development. This research not only contributes to academic knowledge but also serves as a
practical tool for enhancing the efficiency of tax systems in similar contexts.