Determinants of Tax Revenue Performance: Ethiopian Federal Government
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Date
2015-06
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Addis Ababa University
Abstract
Most developing countries have been faced problem of increasing tax revenue as they
need to cover expenditure. Since Ethiopian is one part of developing country, pattern
of tax revenues and economic growth across countries has become a significant
concern to it. This study so investigated the determinants of tax revenue performance
in Ethiopian federal government by using time series data from 1992-2013.The
variable used were Foreign direct investment, public debt, openness ,foreign aid
,inflation and gross domestic product. The study has employed both descriptive and
time series regression method as well as Eviews software for analysis purpose. Also
post positivism research approach has been used. The trend of tax collection in
Ethiopia is inconsistent, changing upward and downward depending upon economic
conditions. However, in recent years it shows an incremental in total tax collection
but performance of tax collection is decreasing from year to year. As an example, tax
revenue was increased staring from 2003, because tax base was added as the form of
VAT and also GDP was the main contributor since it has been rapidly increased. The
study made diagnostic tests to assess the fitness of the model. The study reveals that
growth domestic product, public debt foreign direct investment, and openness, have
significant positive relationship with tax revenue performance. But, foreign aid is
negatively related to tax revenue performance. The study also provides
recommendations that will be solve this problem and added tax revenue performance.
Policy implication has been stated in this study for example government should adjust
its fiscal policy and investment area should be selected based on their benefit for
country.
Key words:Tax revenue: Determinants of tax: Time Series analysis: Ethiopia Federal
Government
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Keywords
Tax revenue; determinants of tax:;Time Series Analysis; Ethiopia Federal Government