Factors Affecting Tax Revenue in Ethiopia
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Date
2017-06
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Addis Ababa University
Abstract
The purpose of this paper is to analyze the factors that affect revenues from taxes by the revenue
government. The main objective of this study is to explore the factors affecting tax revenue in
Ethiopia by using a secondary data and multiple variables regression model. Tax revenue may
be affected by various factors such as inflation, unemployment, tax rates, level of actual income
exchange rate and foreign direct investment. A number of studies have been done in Ethiopia as
far as tax revenue is concerned but still not effective to test all factors thus the study was meant
to identify factors affect tax revenue in Ethiopia. The research approaches adopted in this thesis
include collections of series data set that consists of seventeen years. The time period covered
was 1999/00 to 2015/16. Secondary data were collected, coded and entered into Statistical
Package for Social Sciences (SPSS, Version 20.0) for regression analysis. The findings from this
research provide evidence that, inflation rate regression result shows negative significant,
foreign direct investment in billions of birr shows negative significant, disposal income in
billions of birr positive and significant, exchange rate has negative significant, unemployment
rate have negative insignificant impact on tax revenue. The main conclusions drawn from this
study are inflation rate, foreign direct investment; disposal income and exchange rate have
significant impact on tax collection. Unemployment rate is insignificant variables affecting tax
revenue. The study also provides recommendations that the policy makers come with policies to
control the inflation rate in Ethiopia as it negatively affects tax revenue, the government to take
care should be taken when attracting FDI to Ethiopia and it should be directed to more
manufacture sectors of the economy; lobby for higher employee salaries since this will further
contribute to higher tax revenue and Policies makers should undertake reduce unemployment by
improved geographical mobility, stricter benefit requirements, Improve labor and Employment
subsidies.
Key words: The amount Tax collection, factor affecting tax collection, time series
Description
Keywords
The amount tax collection, Factor affecting tax collection, Time series