Determinants of Voluntary Tax Compliance (THE CASE CATEGORY A AND B TAXPAYERS IN DIRE DAWA ADMINISTRATION)

Netsanet Shiferaw

doi:10.7176/rjfa/11-13-05

Abstract

Improved tax compliance boosts the revenues available for supporting public services without increasing the current tax burden on compliant tax payers. The voluntary compliance behavior of the taxpayers is determined by various factors and identifying these factors and treating them accordingly should be the central premises of any tax system in order to maintain voluntary compliance at satisfactory levels. The study investigate the five key determinants of voluntary tax compliance from existing literature and previous studies which include Demographic factors, Economic factors, Institutional factors, Social factors and Individual factors. The main objective of the study is to examine the determinants of voluntary tax compliance behavior of category A and B tax payers in Case of Dire Dawa City Administration. To achieve the objective, the authors use Pragmatics or mixed research approach. To this end, the researchers used both primary and secondary data. The target populations of the study are category “A” and “B” tax payers in Dire Dawa City Administration. A sample of 366 category “A” and “B” tax payers is taken by using multi stage sampling procedure. The findings from the regression analysis indicate that, compliance is significantly affected by nine determinant factors which consist of: Age, Education, Tax knowledge, Financial Constraints, Absence of Fairness, Role of the Tax Authority, complexity of Tax System, Absence of Tax Audits and Government Spending. This study also evidenced that, other variables such as Gender, Sales turn over, Religion, Penalties, Type of organization and Tax Rate were not significant determinants of tax compliance id Dire Dawa City Administration. Keywords: Tax Compliance, Category A&B Tax Payers and order logit regression model DOI: 10.7176/RJFA/11-13-05 Publication date: July 31 st 2020

Highlights

General objective The major objective of this study is to examine the determinants of voluntary tax compliance behavior of category A and B tax payers in Case of Dire Dawa City Administration www.iiste.org
CHAPTER 4 DATA PRESENTATION, INTERPRTATION AND ANALYSIS The major objective of this study is to examine the determinants of voluntary tax compliance behavior of category A and B tax payers in Case of Dire Dawa City Administration
Hypothesis 9: Absence of Fairness/Equity and compliance The results of this study indicate that fairness is the strongest factor determining the level of compliance level.nIn this study as it is shown in the regression table 4.1 above, absence of fairness is one of the predictor variables and which have a coefficient of -.7082671 and the P value of 0.016, which means that, the taxpayers who perceived the tax system as unfair, it is more likely to reduce the motivation and tax compliance of current taxpayers

Summary

Research Hypotheses H1

There is a positive relation between age and tax compliance. H2: Female tax payers are more compliant than male taxpayer. There have been a studies including Manchilot (2018) found no relationship between age and compliance Gender; According to the research made by Hasseldine and Hite (2003) sometimes female taxpayers are male compliant than their male counterparts. Individual factor Tax knowledge; Daba (2017) and Lemessa (2007) stated that there is a positive relation between tax knowledge and compliance, while Manchilot (2018), Tadesse and Goitom (2014), and Kanbiro (2018), found that tax knowledge does not significantly correlated with compliance behavior of tax payer. Secondary data collected through document analysis from published and unpublished sources

Population and Target Population of the Study

14 Perception of Absence of tax

CONCLUSION AND RECOMMENDATION