| Abstract: | The problem of tax non-compliance is a serious global phenomenon, especially in
developing and least developed countries. In this regard, states design their tax
administration laws and tax compliance rules in light of the two most dominant
tax compliance theories: deterrence theory and behavioural theory of tax
compliance. These theories are ideals or indexes of a good tax administration
system. It is thus important to examine the base or policy of tax compliance rules
of the tax administration laws of Ethiopia. This Article examines when and in
what forms the tax administration law of Ethiopia is designed to embody the tax
compliance theories. Doctrinal research method is used and the major findings
show that –like many countries– the tax administration proclamation of Ethiopia
is largely designed in consideration of the economic deterrence model to achieve
taxpayers’ compliance which depends on audit and penalties when tax is evaded.
However, this approach is criticized due to its administrative inefficiency and its
inability to build equitable tax system. Aside from tax penalties, tax
administration policies and practice in Ethiopia should give much attention to
changing individual taxpayers’ attitudes toward the tax system. This requires
improving its perceived fairness and equity, making government expenditure in
the best interest of the taxpayers, improving procedural justice, tax education,
establishing the culture of mutual respect between tax authorities and taxpayers,
and making it easy to comply with the tax laws. |
