THE EFFECTS OF CHALLENGES IN VALUE ADDED TAX (VAT) COLLECTION PERFORMANCE FROM MEDIUM TAXPAYERS: A CASE STUDY OF THE MERKATO NO.1 MEDIUM TAXPAYERS BRANCH OFFICE.

Abstract

This study investigates the effects of challenges on the performance of Value Added Tax (VAT) collection from medium taxpayers at the Merkato No.1 Medium Taxpayers Branch Office. Despite VAT being a crucial revenue source for the government, inefficiencies in collection mechanisms have led to significant revenue losses. The research aims to identify and investigate administrative, technological, communication, economic, and training-related factors that impact VAT collection efficiency. Using a mixed-methods approach, the study was combines quantitative data from surveys and qualitative insights from in-depth interviews. A structured questionnaire was administered to staff officers at the branch office, focused on five key areas: administrative challenges, technological infrastructure, communication and support issues, economic and financial impacts, and training and capacity building needs. The survey results wereanalyzed using descriptive and inferential statistics, while thematic analysis was employed to interpret interview data.To check the reliability of the questionnaire, a pilot test was conducted and the analysis generated a Cronbach alpha value of 0.935. The sample size of the study was 199 individuals selected through purposive sampling and the response rate was 90.3%. A Questionnaire with 34 items was distributed to employees who are involved in VAT collection. The studyconcludes that medium taxpayers at the Merkato No. 1 Branch face significant challenges in complying with VAT collection performance. Key issues include administrative inefficiencies, inadequate technological infrastructure, poor communication, and substantial economic and financial burdens. These challenges hinder the effectiveness of VAT collection and compliance. Provide actionable recommendations to address these challenges, emphasizing the need for procedural reforms, technological upgrades, improved communication strategies, economic support measures for taxpayers, and enhanced training programs for staff to enhance VAT collection performance.