The Analysis of Challenges on Value Added Tax Administration in Ethiopia: Evidence from Wolaita Zone, Sodo City Administration

Abstract

All countries in the world whether developed or developing generate most of their government’s revenues from taxes. Value Added Tax (VAT) is one means of income generation for the government of Ethiopia and its administration is at its infant stage. The study has focused on classifying the key challenges that distressing VAT administration in Soddo city in wolaita zone in Ethiopia. The identified challenges in this study are awareness, tax technology applications, VAT evasion, VAT audit and enforcement, service delivery, tax administration simplicity, and Fairness. Descriptive research method and stratified simple random sampling techniques were employed and Statistical Package for Social Science (SPSS) version 20 soft ware employed to gather data. Respondents who have been participated in the study were mainly VAT registered business firms. The findings of the study show that awareness of the society, tax technology, VAT evasion, tax audit and enforcement, VAT administration simplicity challenges are significantly affected performance of VAT revenue administration in the Sodo City. Finally based on the results, possible solutions were given. These are the authority should conduct a regular awareness creation programs to update the business firms, develop taxpayer identification and registration, decrease VAT evasion activities, and establish effective audit and enforcement mechanisms. The business firms have to obey the current Ethiopian VAT rules and regulations and start to work in cooperation with the authority in fighting against those business firms that violate the rules and regulations of VAT. Keywords: Ethiopia, Challenges, Value added Tax, Descriptive analysis DOI: 10.7176/RJFA/11-9-05 Publication date: May 31 st 2020