PROBLEM OF VAT ADMINISTRATION: THE CASE OF ARADA SUB- CITY SMALL TAX PAYERS” BRANCH OFFICE OF ERCA

Abstract

The study investigates and analyzes the Problems of VAT administration at the Arada Sub-City Small Taxpayers Branch Office of the ERCA. To achieve the objective of study, the researcher adopts descriptive method of research approach. The sample of VAT Registrants taxpayers and Tax officials of the Authority were selected using simple random method and judgmental sampling method respectively. The study used both quantitative and qualitative data. For the quantitative data, the questionnaire for taxpayers and tax officials and for qualitative data an in-depth interview with Process owner used. The collected data were analyzed using descriptive statistics .The result of this study showed that in the Arada Sub-city revenue authority the application of tax principle was not fair, the VAT payers at the sub-city didn’t fully comply with the basis of the current VAT laws, lack of awareness, weak culture of taxpayers, tax evasion, unwillingness of consumers to buy goods and services with VAT, lack of good governance and poor tax enforcement. All these problem and weakness hinder the VAT administration at the Sub-City. The thesis suggests a series of measures which could be taken by the tax authority, to address the various problems identified in the study. These measures include establishing a media and transmit the tax related laws on a consistent basis, giving recognition to the honest traders and taking a legal action for non-compliant taxpayers, giving training and education , creating a continuous assessment mechanism by conducting continuous discussions about issues of VAT and self-assessment, preparing standard for each activities according to their office and then penalizing those tax officials who did not do according the standards set by the authority