Factors Affecting Revenue Collection in Ambo Town: (The case study of Ambo Town Revenue Office)

Abstract

The purpose of this study was to identify factors affecting revenue collection. The specific objectives of the study were to identify the effect of taxpayers’ awareness on revenue collection, to examine the effect of tax compliance on revenue collection, to examine the effect of revenue office capacity on revenue collection and to evaluate the effect of tax evasion on tax revenue collection. To this end the study employed explanatory design and quantitative research approach. Questionnaires, documentary review and interview guides were employed as basic research instruments for data collection. The survey is conducted on category “A” and Category “B” tax payers who declared tax for eight consecutive years. The secondary data collected from reports and manuals of Ambo Town Revenue Office. Data analyzed with descriptive statistics such as frequencies, percentages, mean, and standard deviation through statistical tool of SPSS version 25. The data presented in tables, charts, and histograms. In addition, these regression analyses employed to analyze the relationship of variables. The result of the study revealed that between 2014-2021 financial years Ambo Town revenue office persistently experienced several problems in collecting revenue from the town. A number of factors were noted to affect negatively revenue collection in Ambo town these include taxpayer’s awareness, tax compliance, revenue office capacity and tax evasion. The findings show that revenue collection is affected by taxpayer’s awareness, Tax compliance, revenue office capacity and tax evasion and the regression analyses show that tax evasion has strong negative relation with revenue collections. However, taxpayer’s awareness, tax compliance and revenue office capacity have strong positive relation with revenue collections. The revenue office prepares training program to taxpayers in order to create awareness on that tax is an obligation payment to the country. This paper recommended that, the revenue office have to capacitate its human power, technology and also train employees with serving of tax payers. The revenue office is better to make clear the rules and regulations towards tax compliance and make the tax compliance format easily understandable so that the non compliance can be reduced. Additionally, the revenue office has to strengthen auditing work and apply strong learnable punishment on the tax evaders in order to enhance taxpayer’s awareness. It is recommended that the Ambo Town revenue Office have to make appropriate measures to reduce or eradicate completely the factors affecting revenue collection in the town