Abstract:
This study examines tax compliance and its determinants in Gamo Zone category ‘A’
business income tax payers in southern Ethiopia. To do this, data was collected with the
aid of structured questionnaires, administered to 311 respondents using proportionate
simple random sampling procedure. Quantitative research approach was applied. The
data was examined with the use of descriptive statistics and econometric model
particularly ordered logit model. The result of ordered logistic regression showed that,
among different variables tested, tax compliance was positively affected by tax audits,
fine and penalties, simplicity of the tax system, strength of the tax authority, tax
knowledge, educational level and perception of government spending but tax rates, tax
compliance cost and perceptions fairness of tax system have a negative effect on
taxpayers’ compliance. It was therefore recommended that tax authority should
improving tax audit quality and endeavor to frequent businesses for their records to be
audited, Reasonable level of fines and penalty to be implemented and also need to
work on tax incentives and recognition awards for those who pay their tax liabilities
voluntarily on time. The tax authority ought to conduct effective and sustainable
awareness creation programmers and tax education for the public in general and to tax
payers. The tax authority should also simplify the tax system and tax laws become easily
and clearly understandable to tax payers. Efficient service delivery to taxpayers is a key
factor against which the strength of the authority and needs to strengthen itself by
educating and training its employees. The government shall maintain accountability
and transparency on how to the revenue collected from taxation and being disbursed
to provide social services efficiently and effectively to the society, so that tax payers will
have trust and positive attitude towards the tax that they pay and the tax system.
