ENCODO COLLEGE

FACULITY OF BUSSINESS AND ECONOMICS DEPARTMENT OF

BUSSINES MANEGMENT

ASSESSMENT OF AGRICULTURALL INCOME AND LAND USE FEE

TAX COLLECTION PRACTICE IN CASE OF WOLDIA
ADMINISTRATIVE REVENUE OFFICE

PRIPAIED BY:-
Name;- IDNO
1,Mekdes Alemu.............................................................
2,mekdes Molla .........................................................

Augest. 2023

WOLDIA, ETIHOPIA
 Approval
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Advisor’s Name
Abdurehman

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Examiner’s Name

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Examiner’s Name

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 ACKNOWLEDGEMENT

We would like to thank our advisor abdurehman for his suggestion, comments and
advices while we are writing this proposal. We are grateful to our families for their
financial support, consistent follow up and encouragement till the start of our lesson up to
the completion of this paper. We are also thankful to our friends for they encouraged ours
to bear the challenges faced during the study period.

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ABSTRACT

Agricultural income and land use fee tax collection practice is an important activity for
the improvement of our country’s economy especially at this high time of growth and
transformation. This proposal mainly focuses on the role of agricultural income and land
use that involved on reduction of fraud and its major constraints that hindered the
development of the sector at Woldia zuriya woreda. Out of the 1500 people who are
engaged in agricultural income and land use are 115 of them using Yamane’s formula
will use taken as sample population. Data will collect through questionnaires, interviews
and analyze and interpreted using figures.

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Table of Contents No of page
Approval..............................................................................................................................i
ACKNOWLEDGEMENT........................................................................................................ii
ABSTRACT..........................................................................................................................iii
Table of contents…………………………………………..………………………………………………………………iv

CHAPTER ONE.................................................................................................................... 1
1. INTRODUCTION..............................................................................................................1
1.1 Background of the study.......................................................................................... 1
1.2. Statement of the problem.......................................................................................3
1.3 Objective of the study..............................................................................................3
1.3.1 General objective.................................................................................................. 3
1.4 Research question....................................................................................................4
1.5. Significance of the study..........................................................................................4
1.6 Scope of the study....................................................................................................4
1.7 Organization of the study.........................................................................................5
CHAPTER TWO................................................................................................................... 6
2. REVIEW OF RELATED LITERATURE..................................................................................6
2.1 Theoretical literature review........................................................................................6
2.1.1 Concept of income tax.......................................................................................6
2.1.2 Concept of Agricultural Income Tax.............................................................6
2.1.3 An overview of tax structure in Ethiopia....................................................8
2.1.4 Current agricultural tax structure in Ethiopia.................................................9
2.1.5 Agricultural Tax Revenue Growth...............................................................10
2.1.6 Land use fee..................................................................................................11
2.2 Empirical Literature Review..................................................................................13
CHAPTER THREE...............................................................................................................16
3. METHODOLOGY OF THE STUDY...................................................................................16
3.1 Research approach and design...............................................................................16

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 3.2 Data source and method of data collection...........................................................16
3.3 Study Population, Sampling technique and sampling size determination..............16
3.4 Data analysis technique..........................................................................................19
Reference.........................................................................................................................20

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 CHAPTER ONE
1. INTRODUCTION

`` z 1.1 Background of the study

Economic growth and rural development in developing countries require substantial
financial resources for infrastructure, education, health and other social services. One of
the revenue resources to meet the developmental needs is collected in the form of
taxation. In this respect, the sub-Saharan African countries face a challenge to improve
the tax collection (Gupta and Tareq, 2008). The rural development largely depends on the
agricultural sector contribution to the economy. Thus, the primary thrust of this study is
in examining the responsiveness of agricultural taxation to agricultural GDP.
Agricultural tax revenues are legal levies imposed on farmers from the income generated
by the agricultural activity as well as the fee imposed on the land owned for this purpose.

The economy of Ethiopia is very agrarian, focusing mainly on the production and
export of commodities such as coffee, flower, half processed leather and others.
Consequently, the country is particularly vulnerable to drought and the adverse effects of
fluctuations in commodity prices. Since 1992/93 in the country tax reforms have been
carried out, focused on economic performance in general and more specifically to enhance
competitiveness in the global market. During this time the Economic Reform Program
(ERP) has been implemented, as part of this reform program, the government has
undertaken different tax policy and tax administration measures.

According to proclamation number 152 of 1978 individuals’ formers and agricultural

producer cooperatives earning up to 600 birr per annum are required to pay birr 10% to
`89% for income above 600 birr. Income from agricultural activity said to be determined
by estimating the price. In the area of croup before harvest if the croup is sold the price
declared shall be the basis the assessment of income. Agricultural income tax levied on the
agricultural income from farmers. To use the role regions in leaving and assessing tax on
income derived from agricultural activities is high but since we have different regions to
use the mode of assessment and collection tax will differ from region to region. (Yohanes
M and Sisay B, 2009). Therefore, the objective of this study will be analyzing the
agricultural income tax and land use fee collection practice in case of Woldia
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administrative revenue office.

With a per capital income of about 280 us dollar, Ethiopian is one of the poorest
countries in the world. The agriculture sector which accounts for the average 45% of
GDP is a source of livelihood for about 80% of the country population (MOFED,2010)
with population of about 79 million people; it is the second most populous country in
Africa. Moreover, its population is growing rapidly at an annual growth rate of 2.6
percent (CSA,2007).

The combination of high population and high urban growth rates coupled with a high
prevalence of urban poverty have placed enormous strain on Ethiopia cites. This is
especially true in Ethiopia as it has share of 23% of the country’s urban population
(CSA,2007).

The urban poverty is manifested by persistently growing unemployment; poor quality

dwelling and homelessness; increasing number of slums and squatter neighbors;
congestion; lack of basic services and infrastructure. These factors combine to produce
the critical urban issue; the lack of affordable, health housing for all sectors of the urban
population.

Currently, in Ethiopia there is strong housing demand as a result of the mismatch

between the expanding urban population and limited housing supply (Tesfaye, 2007).

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 1.2. Statement of the problem
According to Tigst D, (2018) investigation to highlight some of the expected and existing
problems on assessment and collection of agricultural income tax and land use fee in
Raya Kobo woreda administrative revenue office. The problems are attitude of tax payers
and tax officers towards rules and regulations. Raya Kobo Woreda administrative
revenue offices have faced problems in agricultural income tax and land use fee
collection. Which is lacked of skill, measurement, survey, awareness of the employee and
tax officer toward rules and regulation and inability to detect error in manner, Poor tax
payer’s educational program about agricultural income tax and land use fee, from finding
can understand that enough training is not offered to tax payers. So, that the level of tax
compliance is very low. Based on collected information the response of some
respondents of employees and tax collectors there are farmers that are still not pay
appropriate amount of tax and the office does not offer enough training program to tax
payers concerning assessment and collection of agricultural income tax and land use fee.
The previous study indicate some challenges of agricultural income tax and land use fee
collection and revenue contribution in Raya kobo only two kebeles are Tigist’s D and
other researchers study but this study differ from the above mentioned studies by
geographical area, wide coverage area and specific objective fill these gap by assessing
of the agricultural income tax and land use fee efficiently and effectively in Woldia
zuriya woreda. In our observation, we get that there is delay of tax payment and fraud.
The research related with economic, social and political issues. Economically (it
increases governmental revenue),socially (it creates peace and security among citizens)
and politically (it develops governmental stabilities).

1.3 Objective of the study

1.3.1 General objective

The general objective of the study is to assess agricultural income tax and land use fee
collection practice in the case of Woldia administrative revenue office .

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 1.3.2 Specific Objective

 To assess the problem in agricultural income tax and land use fee practice in the study
of Woldia Zuria wereda.
 To assess mechanisms that revenue officer use to collect agricultural income and land
use fee tax
 To evaluate the revenue office collect agricultural income and land use fee tax
efficiently and effectively from tax payers in Woldia Zuria wereda

1.4 Research question

 What are the assessments of agricultural income and land use feet ax practice in the
study of woldia Zaria were da?
 What are the mechanisms that revenue officer use to collect and agricultural income
and land use fee tax?
 How effective and efficient is agricultural income and land use fee tax collection
system for tax payers in Woldia woreda?

1.5. Significance of the study

The findings of this study may give clear understanding of what problems are there and
how those problems will be handled by both tax payers and Administrators. Thus, the
government will be able to adopt a comprehensive police and strategy and minimize by
observe agricultural income tax and land use collection problems and to increase tax
revenue. At the end of the study a clear picture will emerge showing the agricultural
income tax and land use collection practice is taking place. The revenue bureau may
use this finding to revise its strategies concerning agricultural income tax and land use
collection. Furthermore, the results of finding will serve as a reference for other
researchers on this area.

1.6 Scope of the study

Conceptually, the current research is delimited to understand the agricultural income and
land use fee tax collection, specifically, it will emphasis on the nature, factors and
mechanism of their agricultural income and land use fee tax collection in Woldia.
Geographically, the research will be able to carry in Woldia zuria wereda of Amhara

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Region. Because the research proposal is only concern with in woldia zuria wereda.

1.7 Organization of the study

This paper will organize in three chapters. The first chapter is back ground of the study,
research question, statement of the problem, objective of the study, significance of the
study, scope of the study and organization of the study. The second chapter includes
review of literature which gives over all view about of agricultural tax structure, land use
fee tax collection whereas, the third chapter will contain methodology of the study and
also references

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 CHAPTER TWO

2. REVIEW OF RELATED LITERATURE

2.1 Theoretical literature review

2.1.1 Concept of income tax

Income tax or tax on income refers to a tax lived charged and collected by government on
the amount of taxable income of taxable person. It is charged by a government on taxable
person and is calculated by applying rates of tax prescribed under the tax law. Income tax
liability arises on taxable person. Income tax is charge levied on both earned
income(wages, salaries, commission) and unearned income (dividends, interest, rents).in
addition to financing a government's operations, progressive income taxation is designed
to distribute wealth more evenly in population, and to serve as automatic fiscal stabilizer
to cushion the effects of economic cycles. Its two basic types are (1) personal income tax,
levied on income of individuals, households, partnership, and sole proprietor ships; and
(2) corporation income tax levied on profit (net earnings) of incorporated firms.
(MisrakT,2014)

2.1.2 Concept of Agricultural Income Tax

Taxing agricultural income is controversial issues in different economies of the world.

There are many studies on agricultural taxation in developing countries, especially in the
context of the ongoing policy debate about the tax structure and administration, affecting
agricultural producers. Taking this problem into consideration Khan (2001) used the
examples of number of countries; and analyzed the conceptual and practical problems
associated with different tax regimes. He found that governments in most countries have
reduced indirect taxes on agricultural producers. However, the revenue from direct taxes
on farmers has not increased. On the other hand, major problem in most countries has
been the measurement of actual agricultural income. Different measures for presumed
income have been used. They seem to have the most potential for increased revenue in
many countries. But their effective implementation is constrained by the political and
economic administrative considerations. According to Anderson (2009) this matters for

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the majority of households in the world, because 45 per cent of the global workforce is
employed in agriculture and 75 percent of the world’s poorest households depends
directly or indirectly on farming for their livelihoods. It matters even more in Asia’s
developing economies where 60 per cent of the workforce and 81 per cent of the poor
(625 million people earning less than $1/day) are engaged in agriculture (World Bank,
2007). Similarly, Spencer & Stewart (1973) discussed the concerns that number of
different kinds of agriculture systems are in place. Varied approaches and conceptual
formulations have been used, but these often mix together the bases for categorization.
Differences in the concepts are clarified, and nine primary criteria having second-order
elements are set up to distinguish thirteen agricultural systems that have evolved since the
beginning of primary production late in the Mesolithic Era. The effect of tax policies on
aggregate agricultural investment is very vital. Leblanc &Hrubovcak, (1986) provide
evidence that tax policies are effective in promoting agricultural investment. Nearly 20
percent of net investment in agricultural equipment and structure during the particular
period was attributed to tax policy.

Daugbjerg (1998) demonstrated through his research that there is huge link between the
political power of producers and policy design. It is argued that the more politically
powerful they are, the more likely policy makers are to reimburse tax revenues, to give
producers control over the spending of the revenue and to design tax schemes. A
comparison of fertilizer and pesticide tax policy making in Denmark, Norway and
Sweden supports his argument.

Thompson (1996) described the overriding objective of American agricultural policy.

That is to ensure that there is a safe, reliable, low-cost, nutritious supply of food to the
American public. And secondary objective is for the agricultural sector to contribute to
the balance of payments by generating export revenue. He used four distinct categories of
public policy that affect agriculture: those that affect the overall environment in which
agriculture functions, those that reduce the cost of agricultural production and marketing,
those that support or stabilize agricultural prices or incomes, and those that increase
demand for agricultural products. Agricultural policy is stagnant since 1947 in terms of
taxation. Agriculture tax is the land revenue system. Being income and price inelastic, the

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replacement of the system with agricultural income tax seems to be inevitable for
meeting the financial needs of a growing national economy. In fact, under pressures from
World Bank and International Monetary Fund (IMF), contrives introduced various
variants of agricultural income tax in the past and in full during 1993 and 1996
respectively. (Chaudhry, 1999) But that system never implemented properly.

The studies of individual economists are no less controversial in this respect. There seems
to be a general consensus among such writers as [Hamid (1970); Yaqub (1971);
Chowdhury (1971); Khan (1991) and World Bank (1999)] on the repeal of land revenue
system in favor of agricultural income. On the other side, many economists have shown
dissatisfaction over this system. (Chaudhry, 1999) Hertel&Tsigas, (1988) used
computable general equilibrium model to analyze the effects of eliminating farm and
food tax preferences in 1977.They examined the Tax differentials on capital income,
labor payments, production and sales taxes. Results indicate that these combined
preferences lowered food costs by about $4.5 billion while enhancing after-tax returns to
farm land, labor, and capital. Notwithstanding, the merits and demerits of agricultural
income tax perceived by various writers in theory and practice are a major source of the
controversy.

This type tax is levied on the agricultural income of farmers. Through farmers also exist
it also obvious that most farmers reside on regional territories. Thus, the role of region is
in levying and assessing tax on an income derived from agricultural activities is higher
but, since we have different regions, the mode of assessment and collection of tax differ
from region to region. Coming to federal government, the law that govern taxation from
agricultural laws that govern proclamation number 152/1978.According to such
proclamation, the amount declared will be assessed by the tax authority in manner
described under the schedule of the proclamation (YohanisM and Sisay B,2009)

2.1.3 An overview of tax structure in Ethiopia

In this period, the Derg regime (1974-1991) has been characterized as an agrarian
socialist rule. It was wide spread that government controlled all economic spheres
including agriculture that meant the state emerged as dominant economic agents in the
economy. The land reform declared in 1975 proclamation had nationalized the land,

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and a step further had taken by distributing equally among the peasants. Consequently,
the peasants were forced to establish and organized as peasant associations (Prichard,
2015).
During this period, the agricultural tax had an objective to transfer a substantial portion
of the agricultural surplus to the industry. As a result, the government had taxed the
agricultural sector heavily. Especially the agricultural income tax rate was progressive
and was as high as 89 percent in the highest income bracket. The taxation on exports
of the main crop had reached as high as 100 percent of the farm gate price (Rashid et
al., 2009).

Because of the change in the government of Ethiopia, the year 1991 had ended with
the old policy regime. There was a reform initiated in 1992, which included new
legislation for employment income tax, business income tax, rural land and agricultural
income tax (Geda and Shimeles, 2005). During the year 1992, the agricultural taxation
was not collected because of the transition period and difficulties in collecting from the
farmers.

Since 1992, IMF and the World Bank supported Ethiopia to form liberalization and
improve Structural Adjustment Programs (SAPs) to control the internal and external
imbalances of the economy. The government had initiated different types of reforms to
liberalize the economy. It had undertaken comprehensive tax reforms encompassing
most of the principal revenue sources. Reform of the tax system was among the range
of liberalization policies that also extended to the monetary policy tools, foreign and
domestic trade, production and distribution (Geda and Shimeles,2005). The major
goals of the tax reforms focused on increasing the tax base, improving the tax
collection, tax incentives for the private sector, as well as dealt with the equity of
taxation.

2.1.4 Current agricultural tax structure in Ethiopia

The Ethiopian tax system consists of direct and indirect taxes. The direct tax categories
include agricultural income, land use fee, personal income, rental income, business
profit, interest income and capital gain tax. So, the small holder farmers’ burden of the
tax is from agriculture income tax and land use fee. The indirect taxes include such as
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VAT, turnover tax, excises, stamp duties, customs duties and export taxes.

Small holder farmers in Ethiopia depend on small acres of land that is owned or rented
to generate their income. The term “agricultural taxation” as used in this study includes
only taxes paid by the farmers.

The 1978 agricultural income tax was amended in 1995 and 1997. Moreover, annual
revenues exceeding Birr 1,200 is subject to a progressive tax rate. Agricultural income
tax assessment imposed by regional states with the provision of the constitution and
wide ranging from 5%-40%. The agricultural income taxation is based on the size of
land holding rather than the amount of annual agricultural production. In the Amhara
Regional State (the largest and most populous region in Ethiopia) initially adopted a
progressive agricultural income tax system, but replaced this practice with an
agricultural income tax system based on the size of land holding, rather than the
amount of agricultural produce (ONRS, 2002, ONRS, 2005).

Agricultural income tax is one of the most difficult features of income taxation in
general. In most developing countries, governments impose taxes on agricultural
income, but it is hard to determine the income of small holder farmers and to reach the
income earners. These difficulties are due to the high number of small units of income
generation, the absence of accounting procedures suited to income taxation, the
fluctuating nature of agricultural productivity and profits, and low level of education
the agricultural income tax rate, exemption limits, and assessment slightly differ among
regions to regions. Each region levying the tax at present has its statute with specific
provisions for determining the taxable income.

2.1.5 Agricultural Tax Revenue Growth

In macroeconomic terms, the level of tax revenue is measured relative to its Gross
Domestic Product (GDP). Measuring the tax ratio on its relative GDP compares the
level of taxes collected on the tax bases. So this helps to evaluate the tax performance
for the given tax base. Evidently, developing countries have fewer tax ratios to GDP
when compared to developed countries. According to Besley and Persson (2014),
developing countries collect taxes 10 to 20 percent of GDP, whereas developed

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countries on average raise around 40 percent of GDP. In this connection, Ethiopia’s tax
revenue against its GDP remains low. Despite the government’s tax revenue
mobilization efforts, the total tax revenue-to-GDP ratio is 11.4 percent in 2009/10 and
with some small fluctuation; it rose to 11.7 percent in2013/14.

2.1.6 Land use fee

In principle, relatively the land taxes are less complex on agricultural income tax.
Because to assess the land tax it requires the total area of the land, its location and type
of land grade that shows suitability for irrigation, land fertility and rural transportation
for a market. This information, as Newbery (1987) suggested, it might not be too costly
to collect. Based on this information, a simple presumptive tax structure could be
possible to design for land tax (Sarris,1994).

The small holder farmers could decrease the burden of the land use fee from their
expenditure budget by improving and enhancing the productivity of the farmland. It
may apply based on discriminate tax rate and by holding equitable factors for
production to tax less for the most productive than the least productive farmers
(Deininger, 2003).

According to Bird and Slack (2002), land taxes are based on the property value tax that
could improve the financing of decentralized resource mobilization that would help
development-oriented programs in rural areas and municipalities. According to the
amended proclamation number 77/1997 of income tax for land use and agricultural
activities, the small holder farmers in the regional states are taxed Birr 10 for the first
hectare and Birr 7.5 for each extra half hectare (Geda and Shimeles, 2005). In some
regions, the areas of land and the land classification system that is based on relative soil
fertility estimates determine the level of taxation. During 2004 to 2014 the total rural
area cultivated are expanded for agricultural purpose increased by 2.7 percent per year
and the number of small holder farmers rose by 3.8 percent. The total agricultural
output level also increased. (Moller,2015, Bachewe et al., 2015).

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 2.1.6.1 Rural Land Use Tax

The FDRE constitution clearly has given power of determination, livening and collection
of taxes on rural and land use fee payment to states. As we have different regional states,
the tax rate mode of assessment and collection procedures of payment and taxing relating
to rural land use fee vary from region to region. From times immemorial land revenue has
been an important source of income to government of Ethiopia. It can be said that it is
one of the oldest tax. It is compulsory payment and non-agriculturalist is exempted from
it of course since we had differently land ensures system the land revenue system varied.
During Derge regime, we had proclamation number 77/1976 and proclamation number
152/1978 which was designed to govern issues of rural land use fee and house tax.
According to proclamation,

A. every farmer who is not a member of agricultural producer cooperative shall pay
5birr
B. Every farmer who is not a member agricultural producer cooperative shall pay 10
birrs
C. Every government agricultural organization shall pay a land use fee of 2 birr per
hectare.
D. The fee is collected annually between December and April. (YohannesM and
SisayB, 2009)

2.1.6.2 Urban Land Use Tax

This type of tax imposed on a piece of land which is used for non agricultural purpose
like contracting a residential building or erecting an industrial plan as the owner of the
land gets an earned increment, because of the extra ordinary increase in value of land
particularly with the vicinity of growing towns and cities. The assessment of non-
agricultural land has assumed especial importance with increasing urban development.
The urban land use houses taxes are those imposed on urban dwellers. Ethiopia had
proclamation number 80/1976 and proclamation number according to which families,
persons, organizations or cooperative societies are required to pay tax on multi
municipalities or in their absence of town administration. Through, like rural and land use

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tax, it might vary from region to region; lands are classified in to grades. There are three
grades which are (Grade1; -The highest land, Grade 2; - Middle grade, Grade3; -The
lowest grade). This grading system helps to determine the rate of taxes imposed, like
other taxes, exemption was allowed under proclamation number 801/1976

A. public roads, squares recreation and sport center, and cemeteries

B. Place of work ship, nonprofit making private schools, hospitals and charitable
institutions.
C. Governmental institute drawing their budget from the central treasury.
D. Drawing whose annual return value is less than 300. (YohannesM and sisay B,
2009)

2.1.6.3. Other Regional States

As can be understood from article 97 of the FDRE constitution exclusive power of
taxation is given to regional states of Ethiopia besides their power to administer levy and
collect taxes on agricultural income rural land use and urban land use they have the
following powers. They can levy and collect tax on employees of states and private
enterprise owned by states. They are also empowered determine and collect fee and
charge relating to license issue and service rendered by state organs, fix, and collect
royalties for use of forest resource. They can levy and collect tax on income from
transport service laundered on water with in their territories, taxes on income from
private house and other property within states. (Yohannes M and SisayB, 2009).

2.2 Empirical Literature Review

Different studies have investigated the impact of GDP on the sensitivity of tax revenue.
Among these, Osorio (1993) concluded that the main categories of taxes in Tanzania,
elasticity are found to be less than one percent. However, in comparison to buoyancy due
to its discretionary changes, it becomes higher than elasticity coefficient.
MawiaandNzomoi (2013) evaluated the tax buoyancy of different taxes in Kenya and
found that tax bases did not respond well to economic changes with an exception of
excise duty. Muhammad & Ahmed (2010) analyzed 25 countries for the period of 1998-
2008 and applied a pooled least squares analysis method. Their results showed that the

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growth of the agricultural sector has little impact on the efficiency of tax revenue, as well
as less responsive to revenue mobilization in the case of developing countries. It is mainly
due to difficulties in assessing the income generated, the low income that may not be
taxed or under taxed. In other studies, it showed that agricultural share contribution has
demonstrated the consistently negative impact on revenue collection, but the tax revenue
increased with the trade share (Prichard, 2015). Leuthold (1991) studied in eight African
countries by measuring the tax effort for the period of 1973-1981 in a panel data using
OLS estimation. The author argued that agricultural share would affect the estimation
coefficient of the direct and indirect tax revenues negatively.

The tax buoyancy and tax elasticity concepts measure the response of tax revenue to
changes in income. These concepts are required to investigate for sub-Saharan African
countries like Ethiopia because of its due importance where the tax collection may not be
efficient as its potential and where it is possible for many individuals not to pay the
required taxes (Howard et al., 2009). A tax is buoyant if revenue measures increase by the
excess of one percent for a one percent increase in the GDP or national income
(McCluskey and Trinh, 2013, Creedy and Gemmell, 2008). atax buoyancy that is more
than one percent would show a tax increment by more proportionate than GDP, and in
turn showing the potential leading to more revenue. The difference between elasticity and
buoyancy measures is the inclusion and exclusion of discretionary changes in tax policy.
Therefore, tax buoyancy that includes the discretionary changes is a measure of the
efficiency of the tax bases and the soundness of tax policy changes regarding the revenue
collection and mobilization.

Azime A. Hassen, (2016) attempted to analyze and measure the responsiveness of

agricultural tax to the economic growth in Ethiopia. The agricultural tax buoyancy
measures the growth in agricultural tax revenues as a ratio of the growth in agricultural
GDP. The study concludes that growth in the agricultural GDP does not have a significant
impact on the growth of agricultural income tax collection. The agricultural share has an
adverse influence on revenue collection consistently, but non-agricultural GDP has shown
positive impact and tax revenue increased by personal income and business profit. In
general, a tax buoyancy or elasticity coefficient that is lower than one may indicate to

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issues related to the structure of the tax, administration or compliance in the tax system.
So, this study will be identifying the agricultural income tax and land use fee collection
and revise some literature gap differ from the above studies.

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 CHAPTER THREE
3. METHODOLOGY OF THE STUDY

3.1 Research approach and design

For the purpose of this study, the researchers will use descriptive research design because
it tries to describe and explain the agricultural income and land use fee tax collection
practice. The objective of descriptive research is to show an accurate profile of persons,
events or situations. Descriptive research, such as that undertaken using attitude and
opinion questionnaires and questionnaires of organizational practices, will enable you to
identify and describe the variability in different phenomena.

3.2 Data source and method of data collection

Both primary and secondary data will be used to the research. Primary sources of data are
an original material that have not been distorted in any way and gives the firsthand
information for the researcher. The primary data sources will be employed to get clear
and effective first hand information from the agriculture producer and attain the specific
objectives. For the purpose of this study, interview and questionnaires are used as the
primary source of data collection.

Secondary data source is also use to substantiate the result of primary data. The
secondary data are those which have already been collected by someone other than the
investigator himself. Secondary source of data are documents or records that are related
to the study. This data will be collected from internet, different published book, previous
researcher, annual report of the Woldia Woreda agriculture office.

3.3 Study Population, Sampling technique and sampling size

determination

The target population of the study is 1500 (Jenetober 780,Mehal Mecharie 290, Golla
Mecharie 400) farmers of each kebeles and 30 employees of revenue authority in Woldia
zuria woreda. This will be employed by stratified sampling method to select the
appropriate sampled respondent, in this stage, three kebeles will be select from the

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Woldia Zuria woreda and from these kebeles, householders will be selected based on
population proportion of each kebeles.

The study will be used both probability (for farmers) and non-probability(for employees)
sampling techniques. Because non-probability sampling will be applied to identify key
information based on the researchers judgment(Babbie, 1973). With regard to the sample
size and selection of those Woreda, Kebele tax payers will be taken as a pivotal theme,
because they are key local units of tax administrative as they play key roles in prioritizing
the delivery of governance services. Three kebeles namely Jeneto ber, Mehal Mecharie
and Golla Mecharie will be select purposively due to high prevalence of agricultural
income tax and land use fee according to the Woldia Zuria Woreda tax administrative
office, 2012 and reports these three kebeles have 1500 (Jenetober;-780, Mehal
Mecharie;-290 and Golla Mecharie;-400) tax payers each Kebeles and employee are;-30
Out of this, 115 tax payers will be select to fill questionnaires. The researcher determined
a sample size by the use of a Yemane Taro (1967) mathematical sampling technique
formula:
Where n = sample size
N = population
e = error term (10%)

N
n=
1+ N ¿ ¿

1500
n=
1+1500 ¿ ¿

1500
n=
1+1500 (0.01)

1500
n=
1+12.03

1500
n=
13.03

n = 115

Under this sample size, the total populations will be classifying into three kebeles those
are Jeneto ber,Mehal Mecharie and Golla Mecharie and then the sample units will be
Page 17 of 29
selected from each kebeles by stratified sampling technique. stratified sampling means
dividing the parent population into several types or layers and then sampling randomly
from each layer, the advantage of this method is it narrows the difference between
different types of individuals through classification (J. S. Milton, et al. 2002).The
samples for each stratum will be selected based on the number of population of each
kebeles. Total population (N) = n1+n2+n3 +n4 sample size (n) of the total population.
Number of samples from each stratum of both farmers and employee will computed by
this formula,

ni = number of population from stratum * simple size

Total population (N)
Where ni = n1, n2, n3 and n4 simples for each stratum
The sample size of each stratum is calculated as follows.
n1 = (780 * 115) = 60
1500
n2 = (290* 115) = 22
1500
n3 = (400 * 115) = 31
1500
n4 = (30 * 115) =2
1500
In general number of samples in Jeneto berkebele are 60
Mehal Mecharie are 22
Golla Mecharie are 31
Employees are 2
Total number of sample (n) = 115

There for Justification of the main reason to use the above yemane’s formula is useful
both tax payers and tax officers

3.4 Data analysis technique

Page 18 of 29
In the study process different types of raw data will be collect by using interview and
questionnaires. This raw data will be process, editing, classify, analyze, error will be
omitted, examine and interpret. Regarding the data that will be collect through
questionnaires will be analyzes by using descriptive statistics like percentages,
frequencies and graphs.

Reference

Azime A. Hassen, 2106 Agricultural taxation and economic growth in Ethiopia Invited

Page 19 of 29
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