TAX ASSESSMENT AND COLLECTION PRACTICE OF CATEGORY “B” TAXPAYERS / IN THE CASE OF KIRKOS SUB CITY/

Abstract

The purpose of this study is to explore the tax assessment and collection practice of category “B” taxayers in the case of Kirkos Sub city. Its main objective is to asses and single out the core challenges, problems experienced, and opportunities to be exploited by ERCA related to tax assessment and collection. The study also tried to see whether the ERCA’s tax assessment and collection system is fair enough while assessing the tax base, imposing tax amount, calculating penalty and fines, interest, and practicing assessment policy. The study further tried to explore how deep the coverage reached with respect to business income earners. While performing this research paper both primary and secondary data were used. The primary data were collected through mixed type (i.e. both close and open ended) questionnaires and unstructured interviews and the secondary data were collected from other relevant material, including former research papers done, proclamations, manuals and guidelines, declarations and policies, books, encyclopedia, and the internet as well. Low level of awareness of tax payers to VAT and profit tax, resistance against VAT registration, lack of ethics (unwillingness to pay tax, suppression of taxable income, failure to issue invoices during transactions, use of identical invoices, etc), poor audit and enforcement capacity of the tax authority, and other challenges during collecting VAT and profit tax and the appearance of large number of tax payers on the dead lines are the major problems hindering the effective tax assessment and collection practice of the authority. In order to improve these and other identified problems, summary and conclusion together with possible and potential recommendations are given on this study/research paper.