Abstract:
This study was conducted with the aim of identifying the determinants of tax compliance in Jimma
town. The target populations of the study were category B taxpayers of Jimma town which were
1143 in number. A sample of 288 category B tax payer was taken using proportional stratified
sampling followed by random sampling from each strata. The' category B taxpayers were stratified
into merchandise (retailer and wholesaler), service sector and manufacturing (process) according
to their field of work. By distributing a total of 288 questionnaires to Category B sample taxpayers
of the town, the study tried to explore the main determinants of tax compliance and how these
determinants are related with tax compliance. Tables, graphs and charts were used to present the
result of the analysis. Pearson correlation matrix and Logistic regression model was used to
identify the main factors that determine tax compliance. The findings of the study shows that tax
rate, probability of detection, penalty rate, reference group and tax knowledge are significant
determinants of tax compliance. In general, it is recommended that the tax authority and other
responsible bodies; to increase taxpayers' awareness which help to enhance the level of voluntary
compliance of taxpayers, evaluate the detection method, analyze and evaluate the taxation system
in order to investigate the loopholes. This will help to enhance the level of compliance which
helps taxpayers to comply voluntarily through all possible ways.
