Factor Affecting Tax Compliance Of Small And Medium Business Enterprise; The Case Study Of Burayu Sub City, Sheger City, Ethiopia

Abstract

The economic development of any country is heavily influenced by its public finance system, with taxation playing a crucial role in generating government revenue to fund public goods and services. However, ensuring tax compliance, particularly among small and medium enterprises (SMEs), remains a significant challenge for many developing economies. This study aims to identify factors affecting tax compliance among small and medium enterprises (SMEs) in Burayu Sub city. Overall, this study provides valuable insights for Burayu sub city's tax administration to develop strategies for promoting tax compliance among SMEs. By addressing corruption, improving transparency, and implementing the suggested recommendations, the tax authority can encourage responsible tax practices within the SME sector. The main objective of the study was to assess factors affecting tax compliance of small and medium enterprises taxpayer in Burayu sub city tax administration. The study used descriptive research design. The total population of the study was 2875 small and medium business enterprises in Burayu sub city from which the sample sizes of 351 were determined for data collection. To ensure the representativeness of different business sectors of small and medium enterprises taxpayers, stratified sampling technique was adopted. It employs a descriptive research design, uses structured questionnaires for data collection. Data collected was analyzed by Statistical Package for Social Science version 24 and the findings were presented using tables and figures. The finding shows that Corruption and Tax Evasion have statistically significant and negative effect on tax compliance of small and medium business profit tax payers, but the Education level, Tax Audit, Tax Penalty, Social service, Knowledge and awareness, Service delivery, Attitude, and possible measures were statistically, significantly and positively associated with tax compliance of small and medium business profit tax payers. The study recommended that SME tax payers, the government shall maintain accountability and transparency on how the revenue collected from taxation was being disbursed and provide social services efficiently and effectively to the society so that tax payers was have trust and positive attitude towards the tax that they pay and educating the taxpayers to create the necessary awareness on tax laws and, to expand and make more regular and consistent auditing to detection of noncompliance and tax evasion so as to increases tax compliance of SME taxpayers.