Factors Affecting Voluntary Compliance To Value Added Tax: In Case Of Holeta Town Administration

Abstract

This study aimed to identify the factors that affect the voluntary compliance of VAT-registered taxpayers in Holeta town administration the case of number two medium taxpayers’ office. The research utilized descriptive methods to examine the impact of economic, individual, social, and institutional factors. The primary data was collected using Likers scale questionnaires distributed to the number two medium VAT registered taxpayers. Dependent variable (Tax compliance) was measured in terms of complied to tax law that is registered timely, collect VAT by a legal receipt, file the VAT returns in the actual filing date, compute the tax liability as per the tax rate specified in the law, paid the right amount of VAT within the time frame stipulated in the tax law and have adequate records to complete tax returns and associated tax documentation. The predictor or independent variables were tax knowledge, referral group, simplicity of tax system, Principle of Fairness, awareness of offenses and penalty, Plan of Government Spending, Efficiency of the tax authority and Tax audit. The target population was 402 from VAT registered taxpayers and 30 tax office staffs. The researcher utilized systematic random sampling for taxpayers and purposive sampling for tax office staffs techniques to select the participants. A sample size of 200 has been drawn from the tax population in Holeta town medium taxpayers’ branch office of taxpayers to fill questioner and 13 were questioned by the tax office staff. The descriptive statistics was used to analyze the tax compliance and inferential analysis to determine the cause and effect relationship Independent variables on dependent variable and to test the research question. According to the re the Tax knowledge, Referral group, Simplicity of tax System, Principle of Equity and Fairness and Awareness of offences and penalty affect the tax compliance significantly and positively. The remaining variables were negatively related with tax compliance and their contribution was statistically insignificant. All these independent variables are making 39.2% of the contribution for tax compliance. The results of this study also provide specific insights and enable policymakers to gain a better understanding of key variables that are significantly linked to tax compliance and enable them to implement appropriate strategies to minimize potentially harmful factors, as well as improve tax collections for their government is important to consider these factors to encourage taxpayers to comply with tax laws and improve government revenue