DETERMINANTS OF VOLUNTARY TAX COMPLIANCE: EVIDENCE FROM ADDIS ABABA CITY ADMINISTRATION TAX OFFICE

Abstract

Tax is an important source of revenue for government’s spending and development projects. The main objective of this study was to examine the determents of voluntary tax compliance of the tax payer’s at Addis Ababa city administration tax office. The study adopted a quantitative research approach to test the hypotheses and answer research questions. The data was collected from category A and B tax payer’s Addis Ababa city administration tax office. Two analysis methods were used; descriptive statistics and inferential statistics to examine significant determinant factors of voluntary tax compliance using statistical package for social science (SPSS). The result founds that majority of tax payers were compliant. It was also found that Government expenditure negatively affects voluntary tax compliance. Tax audit, Referral groups, and Personal financial status positively affect voluntary tax compliance. Tax knowledge, Service delivery of tax office, Penalties and fines, and Equity and fairness were found insignificant. The study suggests to the tax office create awareness on importance of government spending, tax laws, availability and amount of penalties and fines on tax evasion and late declarations. The study also advices the tax office to work on service delivery system (training workers, using appropriate technologies, etc. ) in order to improve efficiencies of its workers dealing with taxpayers. The study suggests, further investigations on this and related topic to be done, which helps to analyze these and other factors from different perspectives.