FACTORS AFFECTING TAX COMPLIANCE BEHAVIOUR OF TAXPAYERS: THE CASE OF HARAMAYA TOWN, OROMIA, ETHIOPIA

Abstract

The government need to collect an adequate amount of revenue for various purposes, such as social, economic, and political aspect of the society. One of the most important uses of taxes is to finance public goods and services. This study aims to investigate factors affecting tax compliance in Haramaya town. Tax penality, taxpayers’ awareness, tax office capacity and tax automation were considered factors affecting tax compliance in Haramaya town. The study was conducted through a descriptive and infrencial research design. The study focused on the target population of category A and category B taxpayers of Haramaya town. This is because categories A and B are usually having compliant on tax to be paid. The sample size was 150 respondents selected by simple random sample technique. Data gathered from primary sources. To collect primary data questionnaires were used. The collected data were analyzed using descriptive statistics such as frequencies, percentages, mean and standard deviation through the statistical tool of SPSS version 20. The analyzed data were presented in tables, charts and histograms. In addition, regression analyses was employed to analyze the relationship of variables. The findings indicated that tax penality, taxpayer’s awareness, tax office capacity and tax automation adversely affect tax compliance in Haramaya town which typically results in revenue loss. The results also revealed that, most taxpayers lack sufficient knowledge of tax rules and regulations, lack of awareness creation training and lack of automation system by tax office. Moreover, tax assessment and collection officers are inefficient and insufficient in relation to number of tax payers in the town, tax officers lack adequate skills. This study suggests that the tax authority should provide continuous training for taxpayers and tax office employees, use advanced information technology (IT).