Factors Affecting Tax Compliance of Category ‘ C ‘ Taxpayers, The Case of Akake Kality Sub City
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Date
2021-06
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A.A.U
Abstract
The study has applied econometrics1, descriptive and qualitative analyses to examine the Factors Affecting Tax Compliance of Category „ C „ Tax payers, the case of AkakeKality sub city. All the necessary tests conducted before interpretations of the results2. The category “C”, majority taxpayers, shares only 15.5% of total tax revenue of the sub city. The respondents, 52.6%, on average, put the tax payers as moderate and high compliances of tax payers. Efficient tax collection observed by the Category “C” though significant complains occurred. The short run estimate indicates that the tax elasticity of income is positive and significant, 5(elastic),ie a 10 percent increase in the expenditure (income proxy) causes to increase the tax revenue by 50%. High tax assessment rate, penalty, effective smooth communication/clarity with tax officials, easy tax registration process, fair tax assessments , education/training, high-income tax payers are subject to higher tax rate, tax liabilities are the responsibilities of the citizens, respecting tax law, gender(male) and marital status(married) have significant positive impacts on the compliances of tax payers /income tax.Personal financial constraint,peer non-compliance, Covid19 and family size have significant negative impacts on the compliances of tax payers /income tax. The business sectors (small trading, house renting, transport and advertisement) would have insignificant impacts.Qualitative findings also indicate that poor administrative services (unfair tax assessment (unfair tax shares) , significant corruptions, high tax rate and others) , weak trust on tax offices/officers, no recognition of the small tax payers by the government, and no training and technical supports( focus only tax revenue) mentioned as major problems.Updating tax assessment rate, for short run focus on new tax payers and the higher tax categories for increasing tax revenue, acknowledge the category “C” tax payers, awareness/ trainings on tax laws and others, advisable part of the taxes to be re invested on basic open market (majority tax payers use it) infrastructures, in house (tax office) capacity building, revising the tax assessment manual and control corruptions put as recommendations
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Keywords
Tax Compliance, Elasticity, Econometric Models