Factors Influencing Taxpayers' Voluntary Compliance Attitude with Tax System: Evidence from Gedeo Zone of Southern Ethiopia

Kanbiro Orkaido Deyganto

doi:10.13189/ujaf.2018.060302

Abstract

Taxpayers' voluntary compliance attitude with tax system is influenced by demographic, individual, social, institutional and economic factors. Thus, the objective of this study was to examine the factors influencing tax voluntary compliance attitude with tax system the case of Gedeo Zone. To this end, the author used mixed research approach. The target populations of the study were tax authority and taxpayers in Zone. A sample of 323 taxpayers was randomly taken from the 1,678 taxpayers in the Zone but tax officers were judgmentally selected by the researcher in order to collect sufficient and relevant information required to prepare the report of this study. Both primary and secondary data were collected. Primary data were collected through structured questionnaire and interview with officers and taxpayers representatives. The secondary data were also collected by reviewing of related published and unpublished materials. Binary logistic regression model was employed to analysis the data through Stata software application version 12.0 and SPSS version 23.0 were used to present the results of this study. Then, the result of this study showed that out of fourteen explanatory variables incorporated in the model, seven variables such as gender, age, lack of tax knowledge, simplicity of tax system, awareness on penalty, probability of being audit, and perception on tax rate were found to be key factors influencing taxpayers' voluntary compliance attitude with tax system in the study area. Whereas variables such as education level, tax authority efficiency, peer influence, occupation, income level of taxpayers, perception on government speeding, and perception on fairness and equity have no significant influence on tax voluntary compliance attitude. Finally, the findings of the study may inform policy makers about the factors influencing voluntary compliance attitude towards tax system in the Zone and supports to formulate constructive policy in order to achieve the goal of raising required tax revenue to promote the economic development of the country.

Highlights

Tax revenue is powerful resource to funding the public payments of developed, developing and underdeveloped countries in the world
In the current study the researcher recommended that that, even if the current study shows positive relationship between simplicity and tax compliance attitude, it is better if the tax authority again makes tax system simple as much as possible in general, the forms, the law, the filling, appeal system and paying procedure in particular to increase positive tax compliance attitude of taxpayers better than the current state in order enhance positive compliance attitude in one hand and boost tax revenue in general
According to Pearson correlation Matrix result [see Table 3 ] out of fourteen variables incorporated in the model, eight variables such as gender of taxpayers, age, lack of tax knowledge, simplicity of the tax system, awareness on penalty for evading tax, income level, tax audit and perception on tax rate were significantly correlated with tax voluntary compliance attitude

Summary

Introduction

Tax revenue is powerful resource to funding the public payments of developed, developing and underdeveloped countries in the world. Like any other developing countries, faces difficulty in raising revenue to the level required for the promotion of economic growth through making different tax reforms for improving revenue generation, enhancing the efficiency of tax administration and improving equity in the tax system. To this effect, Study done by [9] on determinants of tax revenue from time series of [1992-2013] declared that the trend of tax collection in Ethiopia is inconsistent, changing upward and downward due to different individual taxpayers, institutional, demographic, social and economic related factors that influencing compliance attitude of taxpayers with taxation

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Conclusion