Factors Affecting Tax Revenue in Ethiopia

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Date

2025-01-05

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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 xi 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.

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