Abstract:
The main focus of the study was to analyze presumptive taxation in Oromia Regional
Administration law and practice in Ambo Town. The study sought to find out challenges of
Category “C” taxpayers or small business taxpayers during the presumptive tax assessment and
the payment process in Ambo Town and how could be these issues be addressed. It also focused
on that how Category “C” taxpayers perceive the presumptive tax regime with respect to its
fairness, administrative simplicity, equity and administrative capacity in the study area. The
study adopted a descriptive research design and questionnaires were used to collect quantitative
data. The total population size consisted of 3,250 respondents and the representative sample size
for this study is 356 Category “C” taxpayers selected in Ambo Town Administration respondents
for questionnaires. After accomplishment of the data collection procedure, the collected data
were analyzed using descriptive statistics frequency, percentage, mean and standard deviations
through SPSS version 20. The study found out that there are problems such as lack of equity and
fairness in presumptive tax assessment, poor perception of taxpayers on tax evasion, lack of
clarity and simplicity of tax procedure, the complexity of tax rules, Category “C” taxpayers,'
poor awareness on the tax system, poor participatory tax systems, and poor social norms
between taxpayers and the revenue authority. The study recommended that the government ought
to play an active role by making sure that presumptive tax assessment implemented by the
revenue authority has a legal basis. The government should regulate that tax liability imposed on
Category “C” taxpayers in line with major principles of taxation stipulated under Oromia tax
system such as Equitability; Efficiency; Clarity & Simplicity and Effectiveness and Fairness. The
research also recommended the revenue authority to avert the problem of the lack of efficiency
and taxpayer’s knowledge about presumptive tax laws the Revenue Authority requires further
assessment and training including awareness creation.
