FACTORS AFFECTING TAX EVASION BEHAVIOR OF CATEGORY A TAX PAYERS IN SELECTED CITIES OF SNNPRS

Abstract

Tax is pillars of every state. However, devil act such as tax evasion is occurring commonly everywhere around the world people dislike paying tax duty. General objectives of this study are to examine factors affecting of tax evasion behavior. It investigates specific factors affecting tax evasion behavior in study area and launching mechanism to reduce the problem to raise government revenue. The researcher was used explanatory research design and mixed research approach. Category „A‟ taxpayers were target population of the study. This study was used stratified and simple random sampling techniques. The study employed both primary and secondary source data. Structured questionnaire as a data collection instrument has been used and prepared in the form of Likeret-Scale type. The collected data from document and questionnaires has analyzed qualitatively and quantitatively. Qualitative data were analyzed using SPSS 16 and STATA software. The researcher applied ordered logistic regression model to determine factors affecting tax evasion behavior. As finding shows that low accountability and transparency of public institution, high tax rate, low knowledge of tax payer, high penalty rate and low tax moral has positive and significant relationship with tax evasion behavior with (p <0.05) and ineffective tax audit and low level of tax payers income has positive relationship, but statistically insignificant. Finally, this study recommends that government need to make tax rule and regulation clear, simple and transparent to increase tax moral, addressing weak enforcement, create suitable awareness creation program, deliver up-to date information to tax payer, employee skilled and qualified auditors, apply fair punishment, develop fair taxing system, follow up higher income tax group rather than lower income tax group.