Determinants of tax compliance behavior: among category “a” and “b” taxpayers in hosanna town

Abstract

Tax compliance issue is a major problem in revenue generation by government in African countries, Ethiopia especially. Our country tax mobilization was also the lowest among subSaharan African countries and thus, this study was conducted with the aim of identify and analyze factors of tax compliance behavior of taxpayers and identify the major factor that face Hosanna town tax administration. The survey research design was used in conducting investigation. Survey data for this study were collected based on structure questionnaires from a sample of Hosanna Town business income taxpayers by distributing the total sample Stratified sampling based on settlements area to three sub cities namely Addis ketem,Gofare mada and Sechi duna using proportional sampling techniques and then simple random sampling was used. The primary source of data was used and two hundred and seven six (276) copies of self-administered question were distributed. The number of questionnaires completed and returned was two hundred and twenty-eight (228), constituting 83% response rate. Four explanatory variables were used in the multiple regression model. The p-value was used to test the significance of the study variables. The results showed that perception on government spending; perception on equity and fairness of the tax system; and business tax rates are factor that positively significantly affect tax compliance. However, a referral group (friends, relatives) was negatively significantly affect tax compliance. Therefore, researcher recommended the efforts made to improve taxpayer’ perception on government spending, so as to improve voluntary tax compliance and consequences improve government revenue generation.