VAT Collection Practices in Addis Ababa: A Case Study in the Eastern Branch of Ethiopian Revenue and Customs Authority

Abstract

Value Added Tax (VAT) has been more successful in the more developed economies in the past years (ITD, 2005), but is more important in developing countries for the purpose of resource mobilization, fair income distribution and economic stabilization in the long run (Bird and Gendron, 2006). But, research studies like Wollela (2008) and Rai (2004) indicated that VAT collection is facing difficulties in developing countries which compromise the benefits of VAT. This paper has tried to investigate the VAT collection practices in the eastern branch of the Ethiopian Revenue and Customs Authority (ERCA) using questionnaires to the employees and tax payers as well as intensive interviews with the tax officials of the authority. The purpose is to elaborate whether the VAT collection practices of the branch are performed as efficient as expected. To summarize and analyze the survey questionnaire responses, SPSS 16.0 has been used. The results demonstrate that there are administrative problems in the branch which compromises the VAT collection efforts. These includes: awareness problems on tax payers and employees, shortage of job specific trainings to employees, nonexistence of well-organized organizational management, manual working procedures etc. Accordingly, specific recommendations are suggested to rectify these problems and improve the VAT collection performance of the authority.