Factors Affecting Revenue Collection: The Case Of Ambo Town, West Shoa Zone, Ethiopia

Abstract

The purpose of this study is to assess factors affecting revenue collection in West Shoa Zone Ambo town. An explanatory research design, which involved quantitative and qualitative research approach, was employed. The study is based on primary data collected from 133 sample selected at random using questionnaire. The primary data was also obtained from key informant interview. The collected data were analyzed by IBM SPSS Version 23 statistical software. A descriptive statistics like frequency, percentage, mean and standard deviation and inferential statistics (multiple linear regression models) were used to summarize the data collected on factors affecting revenue collection in Ambo town. The result of the study revealed that the practices of revenue authority of Ambo town were provide training to the tax payers, collecting tax, preparing brochures to enhance the awareness of the tax payer, applying new tax estimation, making audit, monitoring business activity, and legalize the business sector. The results from multiple linear regressions confirmed that internal control system, enforcement of laws, revenue collection personnel capacity and taxpayer’s knowledge were positively and significantly influenced revenue collection in Ambo town. The result from key informant interview also indicated that lack of man power, tax evasion, tax avoidance, insufficient training, lack of monitoring and evaluation, lack of budget allocated for tax collection and lack awareness of the tax payer on tax. The findings indicated stakeholder’s involvement in the revenue collection in Ambo town. Accordingly, tax payers were not participating in revenue collection and the government didn’t consider the majority opinions of tax payer. The experts and concerned body of the government impose taxes on taxpayers. The tax payers have no representatives in the tax authority and the government didn’t involve the tax payers in drafting tax policies. The government didn’t value their feedback on the tax system. The study concluded that the practices of the revenue authority and the stake holder’s participation in revenue collection were not satisfactory. It is recommended that providing training, strengthen internal control system, allocate sufficient budget, and enhancing the stakeholder’s participation in revenue generation plays a crucial role in improving revenue generation.