Factors affecting tax compliance behavior of Merkato Number 2 Medium Taxpayers Branch office.

Abstract

Like most developing countries, Ethiopia has mainly relied on loans and foreign aid to fund its development efforts. The tax percentage of GDP has consistently been low because of low tax compliance. This study "examines the factors of Tax compliance behavior of Merkato number two medium tax payers in Addis Ababa City Administration Revenue Bureau-". 302 respondents' replies to closed-ended questionnaires were used as the study's primary source of data. The study employs descriptive and explanatory research designs along with quantitative research approach. Generally, the research signifies that the factors which make taxpayers not discharge their tax duties with their own self-assessment and right amount. The research implies that the researcher’s selected factors; perceived fairness of tax system, tax knowledge and education, fine and penalty and power and trust of the tax authority. The taxpayers have impact on the tax compliance level. The tax bureau strongly advised the local administration tax bureau to carry out a variety of initiatives in order to build a strong and trustworthy relationship with the taxpayers. For the taxpayers to have a clear understanding of how taxes are used by the government, the tax bureau should assume and give ongoing education. Additionally, strict enforcement of fines and penalties is necessary to discourage tax avoidance. The tax bureau has not sufficiently increased familiarity with its laws and regulations. When creating the tax code, tax policy, and tax decrees, it is important to consider the level of knowledge, income, and perception of the taxpayers.