Determinants of Tax revenue in Jimma Zone: A study in Jimma City Administration

Abstract

Government revenue in the form of tax is the main fisical policy tool to finance domestic growth and to bring about desired level of economic stability. This study was conducted with the objective to investigate determinants of tax revenue in Jimma Zone with particular emphasis in Jimma City Administration among category”A” and “B” tax payers. To these end, the study made use of cross sectional design, and 223 sample respondents(tax payers)were selected using proportionate stratified random sampling approach. Of these respondent about 66 were category “A”, while the remaining 157 were category “B” tax payers. Both descriptive statstics and econometric tool of analysis were employed for the analyis. A Binary logistic regression methodology was applied as an econometric tool to analyise the data. The finding of the study revealed that out of explanatory variables included in the model age (Age), education level (EL), tax audit practice (TA), tax fairness (TF) and tax payers’ knowledge (TPK) were found positively significant at 5%, in influencing revenue, while social and economic instability (SEI) and tax system complicity (TSC) reaveled negative and significant result at 5% level of significance in infulencing performance of tax revenue in Jimma city revenue adminstration. Yet, tax payer personal financial ability (TPPFA) and service delivery of tax authority (SDTA) generated insignificant effect. Based on the findings, tax pudit practice is effective in generating paramount of revenue for the city revenue adminstration. Thus, increasing tax pudit practice would enable city revenue administration to sustain generation of revenue from its tax payers. Besides, ensuring tax fairness, giving a contined traning to tax payers’ to empower their tax knowledge and level of understanding had better been suggested as the focus area by the city revenue administration and when this is done, it will lead to a higher revenue performance.