| Abstract: | VAT being one of the indirect taxes is levied on consumption, where the value of goods and
services increases as they change hands in the course of production, distribution and final sales
to consumer is considered to be governments’ main source of revenue in more than 160
countries in the world. Ethiopia has implemented Value Added Tax in January, 2003. VAT in
Ethiopia is applied at a uniform rate of 15% on most consumption of goods and services, except
those are zero rated and exempted by law. Bole Sub City Small Tax Payers’ Branch Office of the
Ethiopian Customs and Revenue Authority (ERCA), who takes the responsibility of
administrating VAT in its territory is facing with substantial challenges. This study has focused
particularly on identifying and assessing these challenges. To achieve this objective, the
researcher used questionnaires, interviews and relevant documents to collect data from the data
sources. Graphs, tables and Percentages were used in analyzing the collected data. The findings
of the study reveal that the main challenges of VAT administration are: misunderstanding of the
public in general and business community in particular regarding the VAT laws, resistance
against registrations for VAT by some traders, administration inefficiency from ERCA (the
branch office) and non-issuance of invoices or issuance of illegal invoices exercised by some
registered business enterprises. Based on these findings, the study recommends that the authority
(the branch office) should familiarize the taxpayers with the VAT laws and its benefits, retain
sufficient and skilled manpower, processing of returns, controlling collections, making refunds
on time, auditing taxpayers on a planned and risk based program, recognizing genuine
taxpayers and levying penalties on those violating the VAT laws. The business communities
should also obey to the VAT laws and start to work in cooperation with ERCA (the branch office)
in fighting against those violating VAT laws. |
