Abstract:
Many Developed and developing countries in the world generate their government’s revenue from taxes.
Taxes can be classified as direct and indirect taxes. Direct taxes are taxes that are directly related to the
taxpayers; whereas indirect taxes are taxes paid by an individual through the purchase of goods and
services. VAT is one of the indirect taxes levied on consumption where the value of goods and services
increase as they charge hands in the course of production, distribution and final sales to the consumer.
This research investigates the impacts of factors affecting VAT on sales VAT registered business firms in
West Shewa Zone, specifically at Ambo town Inland Revenue authority branch. For the sake of achieving
the objectives of the study, the researcher used mixed research approach, that means both quantitative and
qualitative research approach were used. The information used for the study was gathered through self
administered questionnaire from a sample of 208 VAT registered business firms and 12 office employees of
the revenue authority branch of Ambo town. These respondents were selected using stratified sampling
technique and purposive sampling technique respectively. The researcher used questionnaires and
interviews to collect primary data and relevant documents to collect secondary data from the data sources.
The data collected by distributing the questionnaire were analyzed by statistical analysis of both
descriptive analysis and inferential statistical analysis such as correlation and multiple regression
analysis. The result of this study indicates that Compliance of VAT highly predict the revenue of VAT
payers while Mode of payment less predictor of the revenue of VAT payers among the selected explanatory
variables. Based on the findings of the study, the researcher forwards some recommendations to both VAT
registered business firms and the employees of VAT at the Inland Revenue authority branch of Ambo town
and suggestion for other researchers
