UNI

TYUNIVERSITYI
NSTI
TUTEOFSOCIALSCI
ENCE,
BUSI
NESSANDECONOMI CS;DEPARTMENTOF
ACCOUNTINGANDFINANCE

FACTORSAFFECTI
NGTAXREVENUECOLLECTI
ONOFBOLE
SUBCITYSMALLTAXPAYERS
GROUPMEMBERSNAME&I
DN

1.NATNAELDEREJE UU85594

2.HANATSGAY UU86430

3.HANADESTAW UU86511

4.HANADEREBE UU86422

5.HANADEREJE UU86225

6.HAYMANOTGI
RM UU86531

7.FASI
KASEYI
FU UU86675

8.REDETAYELE UU86605

9.BEZAWI
TGEREMEW UU85383

10.ABRAHAM FESEHA UU86385 PROPOSALSUBMI

TTEDTO:
JEMAl
.

NOVEMBER2023

ADDI
SABABA,
ETHI
OPI
A
Tabl
eofCont
ent
s

ABSTRACT.
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II

ACKNOWLEDGEMENT.
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.I
II

1.
1. Backgr
oundoft
hest
udy 1
1.
2. Backgr
oundoft
heOr
gani
zat
ion 1
1.
3. St
atementoft
hepr
obl
em 1
1.
4. Obj
ect
iveOfTheSt
udy 2
1.
4.1. Gener
alobj
ect
ive 2
1.
4.2. Speci
fi
cobj
ect
ive 2
1.
5. Resear
chquest
ion 3
1.
6. Resear
chhy
pot
hesi
s 3
1.
7. Del
i
mit
ati
onoft
hest
udy 3
1.
8. Resear
chmet
hodol
ogy(
desi
gn) 3
1.
9. Si
gni
fi
cantoft
hest
udy 5
2. REVI
EW OFRELATEDLI
TERATURE 5
2.
1. Meani
ngOfTaxAndTaxAdmi
nist
rat
ion 5
2.
2. TaxCol
lect
ionSt
ruct
ureI
nEt
hiopi
a 6
2.
3. Maj
orTy
pesofTaxesi
nEt
hiopi
a 6
2.
4. Chal
lengesi
nTaxAdmi
nist
rat
ioni
nEt
hiopi
a 9
2.
4. TaxEv
asi
on 10
2.
5. Def
ini
ti
oni
fusedt
ermsandusedt
ermi
nol
ogi
es 10
2.
6. CostbudgetandTi
mepl
anofst
udy 12
2.
7. Cost
/Budgetschedul
e 13
2.
8. Resear
chet
hics 13
Bi
bli
ogr
aphy .
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.16

I
 Abst
ract
:
At
axi
sacompul
sor
yfi
nanci
alchar
georsomeot
hert
ypeofl
evyi
mposedona
t
axpayer(
ani
ndi
vi
dualorl
egalent
it
y)byagover
nment
alor
gani
zat
ioni
nor
dert
o
f
undgover
nmentspendi
ngandvar
iouspubl
i
cexpendi
tur
esr
egi
onal
,local
,or
nat
ional
.Mostoft
her
espondentagr
eedt
hat
,taxpayer
sdi
dn’
tunder
standt
he
r
uleandr
egul
ati
onoft
axadmi
nist
rat
ion.Ther
eisal
sol
ackofawar
enessabout
t
hepayi
ngsyst
emsandpayt
hei
rtaxi
mpr
oper
ly,t
heydi
dn’
tpayt
hei
rtaxont
ime
aspert
heobl
i
gat
ion,Accor
dingt
otheopi
nionoft
her
espondent
s,cust
omer
handl
i
ngsyst
emsofBol
esubci
tysmal
ltaxpayer
’sof
fi
cei
spoor
,obj
ect
ive
achi
evement
,mostoft
her
espondent
srepl
ayed as“
disagr
ee”and “
str
ongl
y
di
sagr
ee”andi
tindi
cat
esBol
esubci
tysmal
ltaxpayer
sbr
anchhavemany
const
rai
ntsi
n achi
evi
ng t
hei
r obj
ect
ive,The r
elat
ionshi
p among t
he t
op
managementandot
herempl
oyeesi
snotgoodandt
her
eispoorcommuni
cat
ion
channel
,The i
mpl
ement
ati
on syst
em oft
he Br
anch does notsuccessf
ull
y
achi
evet
heobj
ect
ivesoft
axadmi
nist
rat
ion.Fur
ther
mor
e,t
axof
fi
cer
sar
enon-
mot
ivat
ed,l
ackadequat
eski
l
ls,l
ackofaudi
tfl
owupandpr
omptdeci
sion.Duet
o
t
hisandot
herr
easonsi
dent
if
iedi
nthi
sst
udy,non-
compl
i
ance,evasi
onsand
cor
rupt
ionar
eincr
easi
ngi
ntax

I
 ACKNOWLEDGEMENT
Fi
rstwewoul
dli
ket
othankGodandhol
ymot
herSt
.Mar
rywewoul
dli
ket
o
acknowl
edge and expr
ess Tax and f
inance consul
tantTsegay Assefand
i
nst
ruct
orJemal
.

And f
ort
hei
rwi
l
li
ngness t
o shar
einf
ormat
ion and ki
nd ser
vice on t
hei
r
or
gani
zat
ionf
orbol
esubci
tysmal
ltaxpay
ersbr
anchof
fi
cet
axwor
ksmanager
Bi
rhanDemi
ssi
e.

Andf
ort
axpay
er`
seducat
ion&suppor
t,t
axcompl
i
ance&r
iskmanagement
pr
ocessownercoor
dinat
orHi
bretHar
egewoi
nwewoul
dgi
vet
hem t
hanks

I
I
1.1.Backgr oundoft hestudy
Taxesar eapor ti
onofpr i
vateweal t
h,exactedf r
om i ndividual
sbyt he
Statef orthepur poseofmeet ingtheexpendit
ureessent ialt
ocar ryi
ngout
thef unctionsofgov ernment .Itbecomest heprincipalmeansofr aisi
ng
revenuef orpublicpurposes.At axisacompulsorycont ri
butionofpersons
towar dt heneedsofgov ernment .Taxesarel evied forthebenef i
tof
gover nmentasawhol e,notf ort headvantageofi ndivi
dualsorofa
parti
cul arclass.

The Et
hiopi
an Rev
enues and Cust
oms Aut
hor
it
y(ERCA)i
sthe body
r
esponsi
blef
orcol
l
ect
ingr
evenuef
rom Cust
omsdut
iesandDomest
ic
t
axes.I
naddi
ti
ont
orai
singr
evenue,
iti
sresponsi
blet
opr
otectt
hesoci
ety
f
rom adv
erseef
fect
sofsmuggl
i
ngandcont
raband.I
tsei
zesandt
akes
l
egalact
ionont
hepeopl
eandv
ehi
clesi
nvol
vedi
ntheactofsmuggl
i
ng,
anyt
axev
asi
onandav
oidancewhi
l
eitf
aci
l
itat
est
hel
egi
ti
mat
emov
ement
ofgoodsandpeopl
eacr
osst
hebor
der
.

1.
2.Backgr
oundoft
heOr ganizat
ion
ThePr
ofi
leofSt
udyArea:Bolesubcitysmal
ltaxpay
erbr
anchi
slocat
ed
i
nAddi
sAbabaci
ty,Bol
esubci
tyBol
esubci
tysmal
ltaxpay
erbr
anchi
s
oneoft
hef
eder
alr
evenuebr
anchbywhi
chi
thas11wor
edami
crot
ax
pay
ersof
fi
cet
hatcol
l
ect
staxf
rom cat
egor
yCt
axpay
ers.Thebr
anchhas
38,
000t
axpay
ers.I
nthi
sbr
ancht
axwasnotcol
l
ect
edasexpect
ed.I
tis
wi
thl
owcompl
i
ancewi
thhar
dtaskofensur
ingef
fi
cientandef
fect
ivet
ax
col
l
ect
ionBasedont
hisgener
alf
act
,ther
esear
cher
smot
ivat
edt
ost
udy
t
heFact
orsaf
fect
ingt
axr
evenuecol
l
ect
iononBol
esubci
tysmal
ltax
pay
er.

1
1.3.St atementoft hepr oblem
Ast hemai nsour ceofEt hiopi
agov ernmentt ostandf inancial
l
ybyi tselfis
tax,we know ev ery
one i nt he country who i sl egally eli
gible has
responsibil
it
iest opayt ax,butnowaday st hetaxcol lecti
onsy stem hasa
problem from est i
mat ionupt ot hecol l
ectionpr ocessf r
om smal lr etai
l
mer chandiseupt ot hebi ggest i nvestorev eryonet rytobr i
bet het ax
paymentt hisr esearch mai nl
ymadet opr ov ethef actorsthataf fectt his
coll
ectionpr ocessandwi l
lgi v easol uti
ont oav oidofel i
minat et hose
problemsi nthisstudyi ntendedt ocov erthebasi cquest ionstobeanswer
l
ike

1.Whatist
hemai
npr
obl
em ofbol
esub-
cit
ytaxr
evenuecol
l
ect
ionbr
anch
off
ice?

2.Whatki
ndoft
reat
mentdot
heyuset
oov
ercomet
hosepr
obl
ems?

3.Whati
stheef
fectnotbyi
mpr
ovi
ngt
hecol
l
ect
ionsy
stem?

1.
4.Obj
ect
iveOfTheSt
udy

1.
4.1.
Gener
alobj
ect
ive

Toshow(rev
eal)f
actor
sthataff
ectt
axcol
lecti
onsyst
em onbol
e
small
taxpayerbr
anchoff
iceandtobri
ngsolut
iononhowtoavoi
d
them.

1.
4.2.Speci
fi
cobj
ect
ive

1.Toexami
net
heef
fect
ivenessoft
heor
gani
zat
ion.

2.Howi
stheef
fect
ivenessoft
heor
gani
zat
iongoi
ng.

3.Addressandident
if
ymaj
orpr
obl
emst
hathi
ghl
yaf
fectt
het
axr
evenue
col
lect
ionsyst
em.

2
4.Toshowway
stot
heor
gani
zat
iont
opr
ovi
dei
tsser
viceef
fect
ivel
yand

ef
fi
ciency
.

1.
5.Resear
chquest
ion

Toi
dent
it
ythef
act
orst
hataf
fect
sthecol
l
ect
ionoft
ax.Thest
udywi
l
l
t
argetonbol
esub-
cit
ysmal
ltaxpay
er.I
nor
dert
oreacht
hei
ntended
obj
ect
iveoft
hest
udyand t
o pr
oper
lyaddr
esst
her
esear
ch pr
obl
em
quest
ionswi
l
lbeused.

I
n whatway
s and how st
rong wi
l
lbe t
he f
act
ors af
fect
ing t
he t
ax
col
l
ect
ion.

Whatwi
l
lbet
hechal
l
enget
ocol
l
ectt
ax?

Whatwi
l
lbet
hemechani
smsofcol
l
ect
ingt
ax?

1.
6.Resear
chhy
pothesi
s
Ho:Ther
eisnof
act
oraffect
ingt
axr
evenuescol
l
ect
ion.

H1:
Ther
eisf
act
oraf
fect
ingt
axcol
l
ect
ion.

1.
7.Del
imi
tat
ionoft
hestudy
Thescopeofthi
sstudyisli
mit
ed,weWi
l
lbeassoci
atedt
hef
inanci
al
ser
vicesi
ncauseofBol
esmal
ltaxpay
ersBr
anchof
fi
cet
hisst
udywi
l
l
onl
yfocusont
hecompanypr
obl
em whi
l
ecol
l
ect
ingt
axf
ori
ndi
vi
dual
speci
fi
c on t
he Accountr
ecor
ding Sy
stem f
ort
he t
ime l
i
mit
ed f
or
2015_
2016.

1.
8.Resear
chmet
hodol
ogy(
desi
gn)

1.
8.1.
TypeResear
chdesi
gn

3
Ast
hisst
udyar
efact
orsaf
fect
ingt
hecauseandef
fectbet
weenv
ari
abl
es.
wehav
emul
ti
plei
ndependentv
ari
abl
es(
taxav
oidance,t
axcompl
i
ance
.
..
etc)andonesi
ngl
edependentv
ari
abl
e(t
axr
evenuecol
l
ect
ion)because
oft
hist
hebet
tert
ypeofr
esear
chdesi
gni
sfact
orsaf
fect
ing.

1.
8.2.Popul
ati
onofi
nter
est

Thet
argetpopul
ati
onoft
hisst
udywi
l
lbeBol
esubci
tysmal
ltaxpay
er
br
anch.
Sincet
her
ear
e473empl
oyeesi
nor
gani
zat
iont
her
esear
cheronl
y
f
ocusesont
he account
antwhoar
eresponsi
blewi
tht
hist
opi
c,ont
ax
pay
ers educat
ion and suppor
ttax compl
i
ance and r
isk management
pr
ocessst
aff
.Thest
affhas37empl
oyeeswewi
l
lincl
udeal
lthest
aff
member
sbecauseofsmal
lsi
zeofpopul
ati
onwear
egoi
ngt
otakesense
st
udy
.

1.
8.3.Dat
asour
ceanddat
acol
lect
iont
echni
que

Ast
hisst
udyt
her
esear
cher
swi
l
lusebot
hpr
imar
yandsecondar
ydat
aon
bot
hqual
i
tat
iveandquant
it
ati
vedat
awhi
l
ecol
l
ect
ingt
hosedat
a.The
pr
imar
ydat
aoft
hest
udywi
l
lbecol
l
ect
ingofdat
ausi
ngquest
ionnai
res
t
hatmai
nlyf
ocusonpr
ofessi
onal
swhoar
eint
het
axpay
er’
seducat
ion
and suppor
ttax compl
i
ance and r
isk management pr
ocess st
aff
empl
oyees.suchast
hoseconduct
edusi
ngt
heat
ti
tudeandopi
nions
quest
ionnai
re and t
he or
gani
zat
ion pr
act
ice quest
ionnai
re.Thi
s can
i
dent
if
yandexpl
aint
hev
ari
abi
l
ityofdi
ff
erentphenomenaandi
nter
viewi
ng
t
he cust
omerwi
l
lbe t
he ot
hersour
ce ofi
nfor
mat
ion sour
ce usi
ng
st
ruct
uredi
nter
viewsandbey
ondt
hatper
sonal
obser
vat
ionoft
he

4
companyper
for
manceandwor
kingabi
l
ity
.

The secondar
ydat
a can be col
l
ect
ed f
rom or
gani
zat
ion r
ecor
ds l
i
ke
f
inanci
al,r
epor
ts,j
our
nal
,ledger
s and ot
her f
inanci
al document
s.
Resear
chesmadebyt
het
opi
cand ot
herbooksand websi
teswhi
ch
descr
ibeaboutt
het
axcol
l
ect
ionsy
stem.

1.
8.4.Met
hodsofdat
aanal
ysi
s

Col
l
ect
eddat
aar
eedi
tedandgr
oupedi
ntospeci
fi
cquant
it
iesar
egr
ouped
usi
ngst
ati
sti
calt
ool
sandt
hequal
i
tat
ivedat
aar
eal
soi
nter
pret
edusi
ng
quot
ati
onsanddi
scussi
ons

1.
9.Si
gni
fi
cantoft
hest
udy

Thi
sst
udywi
l
lshow t
hei
ndi
vi
dualf
act
ort
hatAf
fect
sat
axcol
l
ect
ion
sy
stem gi
vesol
uti
ononwho'
ssol
vet
hosei
ndi
vi
dual
sandt
hishel
pthe
or
gani
zat
iont
ofocusspeci
fi
cal
l
yont
hosef
act
or&t
hatPr
ocessMakef
or
t
hef
act
orwor
ktobeEasymor
eef
fect
iveasanaser
vicegi
vi
ngcent
eri
t
can pr
ovi
de a v
ery we'
l
leducat
ed exper
ienced er
rorf
ree ser
vice t
o
cust
omer
.Addi
ti
onal
l
ythi
sresear
ch Wi
l
lgi
ve good suppor
tfort
he
manger
steam t
o know i
dent
if
y& speci
fi
cal
l
yfocuson pr
obl
em and
cor
recti
t

5
2.REVI
EW OFRELATEDLI
TERATURE

2.
1.Meani
ngOfTaxAndTaxAdmi
nist
rat
ion

Taxadmi ni
str
ati
onref
er stot hesyst
ematicor
gani
zati
onandarrangement
ofelementsfortaxcoll
ectionandot hersimi
l
artasksoract
ivi
ti
esbyt he
taxauthori
ti
esofthefederalgov er
nmentandstategover
nments.Agood
andeffi
cientt
axadministr
ationhas:

-
Managementsy
stem t
hroughwhi
chi
tcar
ri
esouti
tsact
ivi
ti
es;

-
Taxl
owsorcodest
hatgui
dest
hemanagementsy
stem;
and

-
Knowl
edgeabl
eadmi
nist
rat
ion.

I
nordert
obesuccessf
ulandeff
ect
ivei
ntaxadmi
nist
rat
ion,
thef
oll
owi
ng
f
act
orsareconsi
der
edessent
ial
:

Anexpl
i
citandsust
ainedpol
i
tical
commi
tment
;

Rel
evanttr
aini
ngf
orst
aff(
whoengagesi
nassessmentand
est
imati
on);

Addi
ti
onal
resour
cesf
ort
het
axadmi
nist
rat
ion;

Chant
sini
ncent
ivesf
orbot
htaxadmi
nist
rat
ors;

Si
mpl
i
ficat
ionoft
hepr
ocedur
es;

Decent
ral
i
zat
ionoft
axadmi
nist
rat
ion;

Dev
elopmentofagoodaccount
ingsy
stem;
etc

Oneoft heobj
ecti
vesoftaxati
oniscol
lect
ingsuf
fi
cientamountofpubli
c
revenuetomeetpubli
cexpenditur
es.I
nordertoatt
ainthi
sobject
ive,
a
closerel
ati
onshi
pbetweent axstr
uct
ureandtaxadminist
rat
ionandan

6
or
gani
zedt
axcol
l
ect
ionst
ruct
ureshoul
dbemai
ntai
ned.

2.
2.TaxCol
lect
ionSt
ruct
ureI
nEt
hiopi
a

I
nor
dert
otaket
her
esponsi
bil
i
tyofconduct
ingt
her
evenuesect
or,t
he
mi
nist
erofr
evenue(
MOR)i
sest
abl
i
shedwi
thpr
ocl
amat
ionNo256/
2001.
To at
tai
nit
sresponsi
bil
i
ty,t
he mi
nist
erl
eads and super
vises t
hree
af
fi
li
atedi
nst
it
uti
ons.Thesear
etheI
nlandRev
enueaut
hor
it
y(f
eder
aland
r
egi
onal
),t
he Et
hiopi
an cust
oms aut
hor
it
yand t
he Et
hiopi
an nat
ional
l
ott
eryadmi
nist
rat
ion.

2.
3.Maj
orTy
pesofTaxesi
nEt
hiopi
a

Di
rectandi
ndi
rectt
axesar
ethemostcommont
ypesoft
axes.Taxes
t
hatcandi
rect
lydi
mini
shat
axpay
er'
sincomeandar
edi
rect
lyt
iedt
o
t
het
axpay
er'
spar
ti
cul
arci
rcumst
ancesar
eref
err
edt
oasdi
rectt
axes.
Theyar
elar
gel
yimposedoni
ndi
vi
dual
sandar
ebasedont
hei
rabi
l
ity
t
opayasassessedbyt
hei
rincomeorweal
th.I
tisbasedont
hepayas
y
ouear
n(PAYE)pr
inci
plesandi
slev
ieddi
rect
lyont
her
evenueear
ned
ort
ober
ecei
ved.Asar
esul
t,di
rectt
axesar
emoneypai
ddi
rect
lyt
o
t
hegov
ernmentdependi
ngonani
ndi
vi
dual
'
sear
nings.Di
rectt
axes
ar
epai
dent
ir
elybyt
heper
sonwhopay
sthem,andt
heyar
enot
t
ransf
erabl
e but pr
ogr
essi
ve.I
ndi
rect t
axes ar
elev
ied on f
inal
pur
chaser
sofpr
oduct
sandser
vices.Thet
axbur
denmi
ghtbeshi
ft
ed
orpassedt
oat
hir
dpar
tywhor
ecei
vest
hepr
oduct
sandser
vicesor
conduct
sthet
ransact
ion.Theyar
etaxest
hatar
epai
dbyani
ndi
vi
dual
t
hrought
hepur
chaseofgoodsandser
vicesandar
eunr
elat
edt
othe

7
 t
axpay
er'
sper
sonal
cir
cumst
ances.I
tincl
udesgener
alandsel
ect
ive

t
axesonconsumabl
epr
oduct
ssal
es,v
alueaddedt
ax(
VAT)oni
tems
i
nthemanuf
act
uri
ngpr
ocess,l
egalt
ransact
iont
axes,andi
mpor
tand
expor
tlev
ies,Themaj
ort
ypesoft
axest
hatexi
sti
nEt
hiopi
a,t
hei
r
meani
ng,r
atesand condi
ti
ons,aspr
ovi
ded byt
heFeder
alI
nland
Rev
enueAut
hor
it
y,ar
epr
esent
edasf
oll
ows:

2.
3.1.Val
ueAddedTax(
VAT)

Thi
sisasal
est
axbasedont
hei
ncr
easei
nval
ueorpr
iceofpr
oductat
eachst
agei
nit
smanuf
act
ureanddi
str
ibut
ion.Thecostoft
het
axi
s
addedt
othef
inal
pri
ceandi
sev
ent
ual
l
ypai
dbyt
heconsumer
.

Ther
ateandi
mposeofVAT:

1.Ther
ateofVATi
s15%oft
hev
aluef
orev
eryt
axabl
etr
ansact
ionbya
r
egi
ster
edper
son,
all
impor
tedgoodsot
hert
hananexempti
mpor
tandan
i
mpor
tofser
vices;

2.Theexpor
toft
axabl
egoodsorser
vicest
otheext
entpr
ovi
dedi
n
r
egul
ati
onsf
orzer
otaxr
atear
e:

3.Theexpor
tofgoodsorser
vicest
otheext
entpr
ovi
dedi
nther
egul
ati
on;

•Ther
ender
ingoft
ranspor
tat
ionorot
herser
vicesdi
rect
lyconnect
edwi
th
i
nter
nat
ionalt
ranspor
tofgoodsorpassenger
s,aswel
last
hesuppl
yof
l
ubr
icant
sandot
herconsumabl
etechni
calsuppl
i
est
akenonboar
dfor
consumpt
iondur
ingi
nter
nat
ional
fli
ght
s;

•Thesuppl
yofgol
dtot
heNat
ional
BankofEt
hiopi
a;and

8
•Asuppl
ybyar
egi
ster
edper
sont
oanot
herr
egi
ster
edper
soni
nasi
ngl
e
t
ransact
ionofsubst
ant
ial
l
yal
loft
heasset
sofat
axabl
eact
ivi
tyoran
i
ndependentf
unct
ioni
ngpar
tofat
axabl
eact
ivi
tyasagoi
ngconcer
n,
pr
ovi
dedanot
icei
nwr
it
ing,si
gnedbyt
het
ransf
erorandt
ransf
eree,i
s
f
urni
shedt
otheaut
hor
it
ywi
thi
n21day
saf
tert
hesuppl
ytakespl
aceand
suchnot
icei
ncl
udest
hedet
ail
soft
hesuppl
y.

2.
3.2.Exci
seTax

Thi
staxi
simposedandchar
gedonsomecommodi
ti
eswi
thi
nel
ast
ic
demand,such as l
uxur
y goods and basi
c goods.Fur
ther
mor
e,i
tis
consi
der
edt
hatl
evy
ingat
axont
hingst
hatar
ehar
mfult
oone'
sheal
th
andcausesoci
etalpr
obl
emswi
l
llowert
hei
rconsumpt
ion.Exci
sedut
y
mustbepai
dont
hecommodi
ti
esl
i
stedi
nthe'
Exci
seTaxPr
ocl
amat
ion
No.307/
2002'schedul
e.(
a)wheni
mpor
ted;(
b)whengener
atedl
ocal
l
yat
t
her
atesetf
ort
hint
heschedul
e.Thecostofpr
oduct
ioni
susedt
o
cal
cul
ateexci
set
axi
nthecaseofl
ocal
l
ypr
oducedi
tems,andt
hecost
,
i
nsur
ance,
andf
rei
ghti
susedi
nthecaseofi
mpor
tedgoods.Thepr
oducer
i
sresponsi
blef
orpay
ingexci
set
axondomest
ical
l
ypr
oducedi
tems,
whi
l
e
t
hei
mpor
teri
sresponsi
blef
orpay
ingexci
sedut
yoni
mpor
tedgoods.
Exci
set
axmustbepai
dwheni
mpor
tedi
temsar
ecl
ear
edf
rom cust
oms,
andi
tmustbepai
dnol
atert
han30day
saf
tert
hedat
eofpr
oduct
ionf
or
domest
ical
l
ypr
oducedcommodi
ti
es.

2.
3.3.Tur
nov
erTax

Thi
sisanequal
i
zat
iont
axi
mposedonper
sonswhoar
enotr
egi
ster
edf
or
v
alue-
addedt
axi
nor
dert
oful
fi
ll
thei
rdut
ies,
aswel
last
oimpr
ove

9
economi
ccont
act
sandexpandt
het
axsy
stem'
scov
erage.Regi
str
ati
on
undert
hev
alue-
addedt
axi
sli
mit
edt
othosewi
thannualt
ransact
ions
t
otal
i
ngmor
ethan500,
000Bi
rrduet
oadmi
nist
rat
ivef
easi
bil
i
tyconcer
ns.
Accor
dingt
othe'
Exci
seTaxPr
ocl
amat
ionNo.307/
2002,
'ther
ateof
t
urnov
ert
axi
s2%oni
temssol
dlocal
l
yand10%onot
her
s.

2.
4.Chal
lengesi
nTaxAdmi
nist
rat
ioni
nEt
hiopi
a

Accor
ding t
o a r
ecent r
esear
ch commi
ssi
oned by Et
hiopi
a'
s
gov
ernment
,ther
evenuesect
ori
ngener
al,andt
het
axadmi
nist
rat
ion
sy
stem i
n par
ti
cul
ar,f
ace a numberofsi
gni
fi
canti
ssues.The
pr
eval
enceofcompl
i
cit
yamongpar
tsoft
hesect
or'
sleader
shi
p,many
exper
ts,andt
axpay
erswant
ingt
oel
i
citunl
awf
ulbenef
it
s,aswel
las
di
sci
pli
nar
yconcer
nsemer
gingf
rom suchat
ti
tudesandbehav
ior
s,i
sa
maj
ordi
ff
icul
ty.Ev
ent
hepr
ivat
esect
orhasdecr
iedt
hepr
eval
enceof
t
ax ev
asi
on, cor
rupt
ion, i
nef
fect
ive t
ax admi
nist
rat
ion, and
weaknessesi
nthest
ruct
ureoft
het
axsy
stem”aswel
lasgapsi
n“t
he
assessmentandenf
orcementofVAT,pr
ofi
ttaxes,pr
esumpt
ivet
ax
andexci
sedut
ies”andhi
ghcompl
i
ancecost
sforsmal
lbusi
nessesas
keychal
l
engest
otaxcompl
i
ance.

2.
4.TaxEv
asi
on

Thef
ail
ureofat
axpay
ert
ocompl
ywi
tht
hepr
ovi
sionsoft
het
axl
aws
i
sknownast
axev
asi
on.I
thappenswhensomeoneknowi
ngl
yand
wi
l
lful
l
yfai
l
stonot
if
ythet
axi
ngaut
hor
it
iesaboutt
axabl
easset
sor
i
ncomeact
ivi
ti
es.Asar
esul
t,i
t'
sani
ntent
ionalf
ail
uret
opayt
axt
hati
s
l
egal
l
yowi
ng,
ort
heuseofdecept
iont
oconceal
theexi
stenceof

10
 t
axabl
eincomeand/
orgett
axexempt
ionsorr
efunds.Taxev
asi
oni
s
def
ined by Kat
h Ni
ght
ingal
ein herbook Theor
y and Pr
act
ice of
Taxat
ion as t
he i
l
legalar
rangi
ng oft
axpay
ers'af
fai
rsi
n or
dert
o
mi
nimi
zet
axl
i
abi
l
ity
.Taxev
asi
oni
sdef
inedast
hewi
l
lful
disobedi
ence
oft
hel
awi
nor
dert
oav
oidpay
ingt
axes.

TaxCompl
i
anceTheor
y

Taxpay
erf
il
esal
lrequi
redt
axr
etur
nsont
imeandt
hatt
her
etur
ns
accur
atel
yrepor
ttaxl
i
abi
l
ityi
naccor
dancewi
tht
heI
nter
nal
Rev
enueCode,
r
egul
ati
ons,
andcour
tdeci
sionsi
nef
fectatt
het
imet
her
etur
nisf
il
ed.

2.
5.Def
ini
ti
oni
fusedt
ermsandusedt
ermi
nol
ogi
es

At
axabl
eincomei
stheamountofi
ncomeonwhi
chi
ncomet
axl
i
abi
l
ityi
s
comput
edandpay
abl
e,i
tist
hebasef
orcomput
ati
on(
det
ermi
nat
ion)of
t
axl
i
abi
l
ity
,taxabl
eincomemayal
sor
efert
othei
ncomet
hati
srepor
ted
t
othegov
ernmentf
ort
hepur
poseofcal
cul
ati
ngt
hei
ncomeTaxl
i
abi
l
ity

A.Empl
oymenti
ncomet
axr
efer
stot
het
axi
mposedonempl
oyment
i
tist
het
axonear
ning/
incomeoi
ndi
vi
dual
s

B.Busi
nessi
ncomet
ax-
busi
nessi
ncomeorbusi
nesspr
ofi
tincl
udes
anyi
ncomewhi
ch i
sder
ived essent
ial
l
yfr
om busi
nessact
ivi
ty
r
ecogni
zed as t
rade.
iti
sthe i
ncome der
ived by t
raderf
rom
act
ivi
ti
esper
for
medt
oit
scust
omersubj
ectt
ocer
tai
ndeduct
ions
ofbusi
nessexpendi
tur
eandt
het
axwhi
chi
scal
cul
atedf
rom t
his

11
Tt
ypeofi
ncomei
scal
l
edbusi
nessesi
ncomet
ax

Cat
egor
yOfTaxPay
ers

1.Cat
egor
yAt
axpay
ert
hisi
ncl
udesbusi
nessest
hathav
esepar
ate
l
egalper
sonal
i
ty(
shar
e,PLCpubl
i
cent
erpr
iseandpubl
i
cfi
nance)
r
egar
dlessoft
hei
rannual
sal
esr
evenue

2.Cat
egor
yBt
axpay
ers-t
hisi
ncl
udesunl
essal
readycl
assi
fi
edi
n
cat
egor
y"A"busi
nesswi
thnol
egalper
sonal
i
tyandwhoseannual
sal
esr
evenuei
sb/
nbi
rr100,
000andbi
rr500,
000

3.Cat
egor
yCt
axpay
ers-t
hisi
ncl
udesanyot
herbusi
nesswhi
chat
e
notcl
assi
fi
edundercat
egor
y"A"and"
B"t
hati
sunl
essal
ready
cl
assi
fi
ed i
n cat
egor
ies "
A"or"
B"busi
nesses hav
ing no l
egal
per
sonal
i
tyandwhoseannualsal
esr
evenuei
sest
imat
edupt
obi
rr
100,
000

VATi
saconsumpt
ion/
expendi
tur
etaxchar
gedonear
ningt
hev
alue
addedt
ogoodsAndser
vicesbyi
mpor
ter
smanuf
act
urer
sandt
rader
sat
eachst
ageoft
hepr
oduct
ionanddi
str
ibut
ionpr
ocess

2.
6.CostbudgetandTi
mepl
anofst
udy

12
Ti
mepl
anofst
udy

R.
No Act
ivi
ti
es Ti
medur
ati
on
.

1 Sel
ect
ionofr
esear
cht
opi
c Nov
ember

2 Resear
chpr
oposal
fir
stdr
aftsubmi
ssi
on Nov
ember
-December

3 Resear
chpr
oposal
seconddr
aft December
submi
ssi
on

4 Dat
acol
l
ect
ion Januar
y

5 Dat
aedi
ti
ngandcodi
ng Januar
y

6 Dat
aanal
ysi
sAndsummar
yfi
ndi
ngs Febr
uar
y

7 Concl
usi
onandr
ecommendat
ion Febr
uar
y-mar
ch

8 pr
epar
ati
onoff
inal
draf
t Mar
ch

9 Compi
l
ingAndsubmi
ssi
onofseni
oressay Apr
il

10 Def
ense Apr
il

13
 2.
7.Cost
/Budgetschedul
e

Number Descr
ipt
ion Quant
it
y Uni
tcosti
n Tot
alcosti
n
Bi
rr Bi
rr

1 paper 200 3bi

rr
/uni
t 1200bi
rr

Pen 50 15bi
rr
/uni
t 750bi
rr

Cal
cul
ator 1 800bi
rr
/uni
t 800bi
rr

Copycost 150 4bi

rr
/uni
t 600bi
rr

2 I
nter
net 2GB 50bi
rr
/uni
t 250bi
rr

Tel
ephonecost 200bi
rr

3 Tr
anspor
tat
ion 1000bi
rr

4 Tot
al 4800bi
rr

2.
8.Resear
chet
hics

Resear
cher
spubl
i
shedf
ourmai
npr
inci
plest
ogui
det
heconductofet
hical
r
eser
ch.

1,
Ther
esear
chwi
l
lbeconduct
edi
mpar
ti
all
y,f
reef
rom bi
asorundue
i
nfl
uence.

14
2Ther
esear
chwi
l
lbeconduct
edi
naccor
dancewi
tht
hehi
ghestet
hical
st
andar
dst
oensur
etheconf
ident
ial
i
ty,
pri
vacy
,andwel
l
-bei
ngofal
l
par
ti
cipans

3,
,
Anypot
ent
ial
conf
li
ctsofi
nter
estwi
l
lbedi
scl
osedandmanaged
appr
opr
iat
elyt
omai
ntai
nthei
ntegr
it
yandcr
edi
bil
i
tyoft
her
esear
ch
f
indi
ngs.

4,
,
Anypot
ent
ial
conf
li
ctsofi
nter
estwi
l
lbedi
scl
osedandmanaged
appr
opr
iat
elyt
omai
ntai
nthei
ntegr
it
yandcr
edi
bil
i
tyoft
her
esear
ch
f
indi
ngs.

15
Bi
bli
ogr
aphy

Gupt
aA,
publ
i
cfi
nanceandt
axpl
anni
ngf
ir
stedi
ti
on,
2001anmol
publ
i
cat
ion,
newDel
hi

Thomas,
pope;
Kennet
hEAnder
sonandj
ohnL.
Kramer
,feder
alt
axat
ion
Pr
ent
icehal
l
s,2000

Gebr
iewor
ku,
taxaccount
ingi
nEt
hiopi
ancont
ext
,1stedi
ti
onAl
em
pr
int
ing.Pr
essAddi
sAbaba,
2006

Hi
stor
yoft
axat
ion,
ency
clopedi
abr
it
ani
caar
ti
cle,
2004

Howt
ohandl
ethev
aluet
hev
aluet
axi
ssuesofcat
egor
yBandCt
ax
pay
ersEt
hiopi
anchamberofcommer
ce-
HWKpar
tner
shi
p,Addi
sAbaba,
Augest2004

Adv
ancedt
axat
ion(
fi
nanceAct2002)
,ACCPA-
paper
3.2

Mi
srakTesf
aye(
MSC)Et
hiopi
ant
axaccount
ingt
heor
yandpr
act
ice,
1st
edi
ti
on(
2008)

Char
ter
edi
nst
it
uteoft
axat
ionwww.
tax.
org.
UK/

EBDSNwww.
bds-
ethi
opi
a.net
/fi
nance/
index
/HTML

16