A THESIS SUBMITTED TO THE DEPARTMENT OF ACCOUNTING AND FINANCE, COLLEGE OF BUSINESS AND ECONOMICS, SCHOOL OF POST GRADUATE STUDIES, ARBA MINCH UNIVERSITY IN PARTIAL FULFILLMENT OF THE REQUIREMENT FOR THE DEGREE OF MASTER OF SCIENCE IN ACCOUNTING AND FINANCE. PRINCEPAL ADVISOR; TAMRAT GETAWUN (Ph.D. CANDIDATE)

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.