Abstract
The main purpose of this study is to examine the causes of tax evasion and tax avoidance of tax payers’ reflection from Debre Markos town. Stratified sampling technique was applied to select respondents based on the nature of the tax payers by category A, B and C tax payers. The required sample was determined through proportional random approach from each stratum & a total of 365 taxpayers were taken as a sample. For the accomplishment of this study, the researcher used primary sources of data. Primary data were obtained through distribution of self-administered questionnaires to sampled respondents of 365 tax payers. The collected data has been analyzed through descriptive statistics by statistical package for social science (SPSS) software for the purpose of this study. The implications of these results were low quality of the service in return for taxes, absence of tax morality, non-existence of an equitable & efficient tax system and the existence of high tax rate. Poor relationship of tax payers & the authority, lack of adequate enforcement for default, lack of adequate tax incentives and greed and selfishness are not the major reasons for tax evasion and tax avoidance in the study area. Therefore, I recommended that, the town’s tax authority should promote the quality of public services, transparency and control of the public budget and minimize low tax morale by promoting a tax-paying citizen culture and educating taxpayers. Keywords: Tax Evasion, Tax Avoidance, Taxpayers, Causes, Ethiopia DOI: 10.7176/JESD/12-9-01 Publication date: May 31 st 2021
Highlights
Taxes have very important role in the implementation of development as a source of revenue to finance the necessary expenditures, is not easy to impose taxes on the people because if too high people will be reluctant to pay taxes, on the contrary, if too low, it will be short of funds so that development will not run as expected
Bhatia(2008) conducted that, tax evasion is the willful and deliberate violation of the law in order to escape payment of tax which is unquestionably imposed by law of the tax jurisdiction where as tax avoidance is the active means by which the taxpayer seeks to reduce or remove altogether the tax liability without breaking the law
Age, educational level and other factors are expected to influence the attitude of tax payers in relation to tax evasion and tax avoidance
Summary
Taxes have very important role in the implementation of development as a source of revenue to finance the necessary expenditures, is not easy to impose taxes on the people because if too high people will be reluctant to pay taxes, on the contrary, if too low, it will be short of funds so that development will not run as expected. There is consensus in the literature that tax evasion and tax avoidance are the root cause of the shortage of public finances in developing countries. This caused so much loss of potential tax revenue that could be reduced the burden on the state budget deficit. The evader is a criminal while the avoider is just smart taxpayer who exploits loopholes in the tax laws (and related laws) to reduce tax liability. These “Twin devils” have created a great gulf between actual and potential revenue. This creates, lacking in public service provisions and subverts the efforts to increase people living standard especially in developing countries and slow down the economic growth (Mughal and Akram, 2012)
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