Factor Affecting Tax Compliance: A Case of Toke Kutaye Woreda, West Showa Zone, Oromia, Ethiopia.

Abstract

Tax Compliance is the individual or business decision to comply with a country's tax laws. The act of paying taxes corresponding to income, wealth, capital, and consumption by the tax law; since it finances the system of public goods provided by the state (e.g., mandatory education, healthcare, law enforcement, national defense, public infrastructure, rule of law, social security, unemployment). The purpose of this study was to determine the factors affecting tax compliance in West Shoa Zone Toke Kutaye Revenue Authority. In 2020/21 the targeted revenue was 9951830 birr with the actual revenue being 9156683 birr (equivalent to 92.25% or a difference of 795147) was existence of a tax collection gap. Therefore, this research attempted to identify institutional factors, social factors, and macroeconomic factors that determine the tax compliance of taxpayers in the districts. This study used mixed research approach. Primary data were collected through structured questionnaires and a depth-interview schedule administered on (282); taxpayers were selected using a convenient sampling technique. Moreover, the survey was supplemented using secondary data, and key informant interviews. The Binary logistic regression method using the SPSS software 26 was used to analyze the data. Furthermore, combinations of data analysis methods such as the descriptive and econometrics model were used for data analysis. The result of binary logistics indicated that tax compliance was positively significantly affected by trust and power of authority, rewarding of taxpayers, fairness of tax system and reference group while tax enforcement, treatments of taxpayers, and perception of tax government spending have been negatively influenced by participated of taxpayers on tax compliance. Therefore, the policy aims at increasing taxpayer's access to modern infrastructure, strengthening tax enforcement among non-compliance of taxpayers, equally response power and trust of authority toward authority, improving the treatment of taxpayers, increasing the number of taxpayers by giving the rewarding/incentive to accelerate the tax compliance development were some of the recommendations forwarded to alleviate determinant of tax compliance in the study areas.