Determinants of Tax Compliance Behavior of Large Corporate Taxpayers in Ethiopia
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Date
2016-03
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Addis Ababa University
Abstract
Taxation is one of the important elements in managing national income. However, as most of the
developing countries Ethiopia was highly dependent on external financial resources to finance its
development activities. The tax contribution to GDP remained consistently low and is relatively
shrinking due to low tax compliance. The main objective of this study is to gain insight into the
influence of some possible causes that affect the compliance behavior of large corporate tax
payers in Ethiopia. What factors motivate them to comply or what factors discourage them not to
comply with the income tax reporting requirements. The study allows policy makers to gain a
better understanding of the factors and enable them to implement suitable strategies to minimize
voluntary compliance problems so as to improve tax collections. Moreover, it may also serve as
a basis for those who are interested to conduct further study on related topics. The data required
for this research was collected from both primary and secondary sources. Primary data were
collected directly from tax payers through researcher-administered questionnaire survey method
and focus group (1 to 5) discussion. Secondary data collected from relevant legislation enacted in
connection with the topic, tax journals, as well as published articles. In addition, the researcher
also applied his personal knowledge he gained from working in ERCA.The results revealed that
business size, business age and tax psychological cost consistently influence the likelihood of tax
non-compliance behaviour in the areas of under-reporting income, over-claiming expenses and
overall non-compliance. Nonetheless, business sector, tax complexity, fairness in the tax rate/ tax
system and tax deterrence sanctions have an insignificant relationship with the non-compliance
behaviour of corporate taxpayers. Tax liability, compliance cost and tax rate structure are
significant determinants in at least one type of non-compliance behaviour
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Keywords
Taxpayers in ethiopia