Abstract:
Every government needs revenue to lead the socio-economic activities. In order to finance this
activity, the government raises revenue from different internal sources of financing. As other
government, Ethiopia government needs revenue to finance its activities. But it is not sufficient to
finance. Therefore, the main objective of this study is to identify the determinants tax revenue in
Ethiopia. To achieve study objectives explanatory research design and quantitative approach
was employed by using secondary data. The data was collected over the period 1989/90-2018/19
from national bank of Ethiopia (NBE), ministry of finance (MOF) and central statistical agency
(CSA) by reviewed the annual reports. The study used time series data, which was employed
multiple regression model by using OLS methods. The dependent variable of study was tax
revenue which measured by tax revenue to GDP ratio and the independent variables used in this
particular study ware industrialization share to GDP, exchange rate, inflation rate, economic
growth rate, export of goods and services, GDP per capita income, import of goods and services
and unemployment rate. In order to analyze those data STATA version 14 software is used. The
author made diagnostic tests to assess the fitness of the model. The result revealed that the
industrial share of GDP and import of goods and service positive and significant effect on tax
revenue. The exchange rate and economic growth rate has positive and insignificant effect on tax
revenue to GDP ratio .whereas, the inflation rate, export of goods and services and GDP per
capita income were negative and significant to affect tax revenue for the period selected for this
study in Ethiopia. But unemployment rate has a negative and insignificant effect, on tax revenue
in Ethiopia. Finally, the study recommends that the government should properly manage the
inflationary situation in Ethiopia and continue to increase the number of industrial sectors
(enterprise) to enhance the tax base and also assesses the tax incentives procedures to large industries to reduce the degree of tax evasion.
