ASSESSMENT OF VAT COMPLIANCE FACTORS: IN THE CASE OF ADDIS ABABA NO.2. MEDIUM TAX PAYERS BRANCH OFFICE

Abstract

The general objective of this research was to assess the VAT compliance factors the Addis Ababa No. 2 Medium taxpayer branch office. thus it is a descriptive type of research and quantitative data analysis techniques were used. Primary data were obtained with the help of questionnaire from VAT tax payers. Random sampling techniques were used to select appropriate and representative sample size from VAT registrants as results from 2,500 VAT registrants 345 samples were selected. From this 345 samples 266 questionnaires was returned and analysis took place which have a response rate of 77% rated as very good. From the outcome of the study the major determinants (factors) of VAT compliance are Administrative capacity, Compliance cost, perception and awareness, understanding and knowledge, VAT law and regulation affects the VAT compliance of the branch office. Concerning the administrative capacity of the branch office the study found that the branch office administrative are incapable for effective VAT collection in terms of human resource with sufficient technically competency in executing their duties and responsibilities, and there is inadequate control measures of fighting corruptions and embezzlements in branch office administration system. And also the studies found that proper utilization of collected revenue by the government will motivate taxpayers to voluntary comply. If taxpayers perceive the government as corrupt or not utilizing collected revenue well, they might feel betrayed and attempt to evade. To create more awareness and knowledge among the taxpayers the following should be considered; A multi-media approach to sensitization should be adopted to get taxpayers informed. Administrators should mainly communicate through meetings, seminars, radio programs, televisions, taxpayer visits and posters should as well be used to reach all eligible taxpayers and get them to appreciate the importance of VAT and been registered under the VAT law. In addition the study also recommends the office should recruit skilled manpower, multi-media approach to create awareness, prepare or design a reward for those business people who are performing highest VAT compliance.