Determinants of Tax Revenue Collection in Ethiopia: A Case Sululta Town Revenue Office

Abstract

The main objective of this study was to investigate the major determinants of tax revenue collection. To achieve this objective a cross-sectional data was used. An explanatory and descriptive research designs were applied to investigate the relationship that exists between the level of tax revenue collection and its determinants. In this study, a mixed research approach was applied. Both primary and secondary sources of data were utilized for this study. A self-administrated structured questionnaire and interview were distributed to the target population. As a result of Ethiopian business income taxpayer’s nature, a stratified sampling method was used, and total of 279 sample data was collected from each category of taxpayers, and an interview using purposive sampling method was applied to collect data from employees of the tax revenue office. Due to the qualitative nature of the response variable ordered logistic model was used with three categories. Descriptive and inferential methods were used for data analysis. The results from the analysis suggest that illicit financial out flows are found to be significant determinants of tax revenue collection in Sululta town. The study has revealed technology and organizational strength of tax authority have a positive and significant effect on tax revenue collection. The study further revealed an increase in the level of political instability and tax delinquency decreases the probability of collecting a high level of tax revenue. The study recommends the government should strengthen tax authority by providing the latest technology that enables to collect tax appropriately