Factors Influence Tax Revenue in Ethiopia

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Date

2016-12

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Addis Ababa University

Abstract

Tax revenue to GDP ratio is very low in Ethiopia as compared to some of Sub-Saharan African countries. In this study an attempt is made to analyze empirically factors influence tax revenue such as broad money supply, exchange rate, urbanization, import, foreign remittances, and mining share in GDP so as to assess the response of tax revenue to changes in its factors in Ethiopia. The study is essential because its results can be used to help policymaker take appropriate measure when raising tax revenue and also used in making appropriate tax reform in an event of budget deficit. The study mainly used secondary data collected over the period 1997-2015 from Ministry of Finance and Economic Cooperation (MoFEC), Central Statistical Agency (CSA), and National Bank of Ethiopia (NBE). For the present study, both descriptive statistics and econometric tools were employed to analyze and present the obtained data. The results obtained suggest that broad money supply, and exchange rate are positively significant in influencing tax effort in Ethiopia. But the results indicate that import in GDP is statistically insignificant factor to influence tax effort in Ethiopia. Finally, it is found that Ethiopia’s tax revenue is very responsive to change in its factors which create more challenge to the government in creating a stable tax system Key words:s factors; tax revenue; time serie

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Keywords

Factors; tax revenue; time serie

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