Abstract:
This study was conducted to assess the impact of Electronic Tax Register Machines (ETRs) on
VAT collection. The study has determined the effect of ETRs on Audit follow up, administration
cost, compliance cost, maintenance time, the extent of tax evasion/fraud, the extent of VAT return
and clearance after using ETRs with related to tax payers organizations and tax collectors. This
study has also analyzed and examined the trend of revenue collection capacity by Revenue
Authority in Ethiopia for the past eight years. The paper has identified problems related to the
use of ETRs from the perspective of tax payers and tax collector (Ethiopian Revenue and
Customs Authority). The study has used both primary and secondary sources of data. Using
stratified random sampling method 363 tax payers were selected from the total population of
6794 with 86% return rate. Both descriptive as well as econometrics approach have been used to
analyze the data collected Thematic analysis also has been used. The major findings are: The
use of ETRs decreased the administration cost of the tax collectors and improved the efficiency
and effectiveness of the tax collectors. The use of ETRs improved timely filling of the monthly
VAT returns, decreased the extent of VAT evasion/fraud. ETRs are found to have a great
contribution for improvement of VAT collection. Econometrics approach has indicated that:
awareness, audit follow up and maintenance time have a significant impact on VAT income. The
major problems faced by the tax payers are unallowable expenses due to the problem of ETRs
suppliers and the lack of consistency and transparency in imposing penalty for tax personnel.
ERCA has to improve the awareness creation on tax collection system of the country to minimize
tax evasion. To improve the problems of power and net work interruptions, ERCA has to work in
cooperation with Ethiopian Electric Power Corporation and Ethio-telecom. To address the
problem related to maintenance time and cost of ETRs, ERCA has to increase the number of
ETRs suppliers and create competition among them to reduce maintenance time and cost. ERCA
has to enforce the regulations imposed on suppliers of ETRs.
