Behaviour of business class tax payers on tax compliance in Ethiopian revenue administration

Abstract

Tax compliance issue is a major problem in revenue generation by the federal government in African countries. In Ethiopia, tax mobilization was also the lowest among sub-Saharan African countries and main purpose of the research is to identify the factors influencing the behavior of tax payer’s on tax compliance in Dessie town revenue authority. The target population of the study was Business Class people which denotes as category “A” tax payers of Dessie town and a Sample of 330 business was taken using stratified sampling followed by random sampling from each stratum from the total population of 1898. The taxpayers were stratified into trade (retailer and wholesaler), service sector and manufacturing (process) according to their field of work or business. The primary source of data was used to collect five point Likert scale data through questionnaire and partake 92.12% (304) as response rate from the sample size. The results exhibited that factors like tax knowledge, perception of tax payer’s fairness in tax system and equity, the influence of referral groups (friends, relatives) and probability of revenue authority audit and government spending on tax collection were influenced the tax payer’s behavior on voluntarily tax compliance. Finally, the revenue office has to ensure understanding of tax knowledge by the tax payer, maintain the transparency of the tax system and equity, collected tax has to be spend wisely by the Ministry of Finance and Economic Development for the welfare of the society and infrastructural development of the country.