ASSESSMENT OF TAX EVASION CASE OF LIDETA SUB CITY SMALL TAXPAYERS ETHIOPIAN REVENUES AND CUSTOMS AUTHORITY BRANCH OFFICE

Abstract

Tax administration in Ethiopia as in some other developing countries is characterized by low tax compliance level. From an economic point of view, legal considerations apart, tax evasion has negative effects, namely a reduction of revenue yields. The voluntary compliance behavior of the taxpayers is determined by various factors and identifying these factors and treating them accordingly should be the central duty of any tax system in order to maintain voluntary compliance at reasonable level. A number of determinant factors have been identified in the literature to tender explanation for such phenomenon. Therefore, the overall objective of this study is to investigate determinant of tax evasion the case of tax payers with the absolute focus on Lideta Sub City small taxpayer’s revenue and customs branch office of Ethiopian revenue and customs authority. Descriptive statistics and inferential statistics used to identify factors that determining the tax evasion the case of tax payers in the study area. Ten tax evasion Determinants were examined namely age, gender, education, income, attitude and perception, law abidance, sanction /cost/, tax knowledge, opportunities/rewards/ and probability of being caught. From the survey of 186 respondents, the result revealed that among these variables probability of detection and cost of tax evasion are significant to determine tax evasion of tax payers while the other variables considered are insignificant to determine tax evasion in this study. The results of this study can inform the tax authority in what ways the Determinants can affect tax compliance behavior. It also provides an indicator for tax administrators of the relative importance of tax knowledge in assisting with the implementation of tax regulations and rules, simplifying tax systems and developing a wider understanding of taxpayers’ comprehensive behavior.