THE EFFECT OF TAX KNOWLEDGE AND PENALTY ON TAX COMPLIANCE THE CASE OF MINISTRY OF REVENUE WEST ADDIS ABABA SMALL TAXPAYERS

Abstract

This thesis aimed as to depict the effect of Tax Knowledge and Penalty on tax compliance at Ministry of Revenue West Addis Ababa small taxpayers branch office. To attain the objectives of this study explanatory research design was used. From the total population 11,815, by using convenience sampling technique, 400 participants were involved in this research. Data was collected through questionnaire from a sample of 400 taxpayers of Ministry of Revenue West Addis Ababa small taxpayers branch office. The data collected from the questionnaire were analyzed using statistical tools such as mean, standard deviation, correlation, and multiple regression analysis. The results of this study indicate that, general tax knowledge, legal tax knowledge, procedural tax knowledge, and tax penalty have positive and significant relationship to tax compliance. Additionally, the above-mentioned general tax knowledge, legal tax knowledge, procedural tax knowledge, and tax penalty significantly contribute 52% to tax compliance in Ministry of Revenue West Addis Ababa small taxpayers branch office. Based on the findings of the study, the researcher mentioned recommendations that the branch office should employ the best practices of general tax knowledge, legal tax knowledge, procedural tax knowledge, and tax penalty and should emphasizing more on doing extensive tax education and training schedules.