Taxpayers' perception towards: Tax fairness, tax knowledge and tax complexity of Bole sub city category "B" business profit taxpayers

Abstract

Tax fairness is essential for a tax systems as tax system that have been perceived as fair leads to a high degree of voluntary tax compliance. Tax fairness issues encompass a number of tax fairness dimensions and other fairness affecting factors. If all tax fairness dimension and other affecting factors negatively interpreted by taxpayers, it could lead to the negative perceptions of the tax system by the taxpayers. Good understandings of business profit taxpayers’ fairness perceptions help the tax authorities to improve the tax system in order to narrow the tax gap, encourage business profit taxpayers’ compliance and consequently mobilize adequate tax revenues. Although past studies on tax fairness issues widely conducted in developed countries, literature and data concerning this topic are still scarce in Ethiopia. This study was conduct on Taxpayers' perception towards fairness specifically on Bole sub city category "B" business profit taxpayers. The study was conducted on business taxpayers' in Bole sub city including trader (wholesaler and retailers), manufacturers and service providers. The research followed mainly qualitative (literature review), and quantitative (survey) methodology. A questionnaire was developed asking about background of respondents and the respondents opinions about tax fairness, tax knowledge, tax complexity and potential measures to improve the tax system. The data for this study was collected from a sample of 149 Category B business profit taxpayers' in Bole sub city by means of questionnaires collected during the period April 27- May 15, 2017. The results show that Bole sub city category B taxpayers' perceive that the tax they are paying is unfair and they believe that they will not be caught when evading tax. Regarding to tax knowledge, even if most of the respondents' believe that they do not have a problem with completing and filing the tax return, they described the need of professional assistance to do that. Although most of the respondents' mentioned the complexity of business profit tax system, they also mentioned that the tax office makes sure to have the necessary information available to take decisions. The demography of the respondents shows that female, educated and young respondents dominated the survey, which indicates the increase in the involvement of the women and young generation in the business and in the tax system. Furthermore, the result of the study showed that most of the respondents agreed with the importance of taking measures to improve the existing tax system. This study highlighted the significance of improving the tax system by educating taxpayers', educating tax collectors to increase tax collection efficiency, develop simple and transparent tax collection systems, provide valuable information to taxpayers', building trust and confidence with taxpayers' to increase the positive perception of taxpayers' towards fairness.