Abstract:
The VAT has become the source of revenue for the government everywhere in the world. At the
same time, it has become a problem area because of taxpayers' tax evasion. To tackle such
problems, many countries established the scheme of withholding VAT through their own
domestic legislation. Like others, the ministry of revenue has drafted the VAT withholding
directive No.27/2002 (as amended), VAT (as amendment) proclamation No.1157/2019 and
subsequent VAT withholding implementation directives No. 60/2019 in order to minimize tax
evasion in relation to customers’ supplying goods and services to VAT withholding institutions.
To achieve the intended goal, the ministry of revenue has appointed the VAT withholding
enforcement agencies in Ethiopia, in particular to Hadiya Zone. Basing on such legal grounds,
the study has mainly examined the VAT withholding in Ethiopia from the angle of effects and the
enforcement with particular emphasis to case of Hadiya Zone. In doing this, the researcher has
collected the primary data through method of interview in depth and questionnaires as well as
secondary data from other sources to find the challenging factors that affect the good effect and
the enforcement of withholding VAT in the study area. The findings of the study show that VAT
withholding faces many challenges in the Hadiya Zone. At the end, the findings have been
recommended
