Determinants Of Tax Compliance Behavior: The Case Of Category ‘C’ Tax Payers Of Ambo Town

Abstract

The purpose of this study was to examine the determinants of tax compliance behavior of category “C” taxpayers in Ambo town. An explanatory research design, which involved quantitative and qualitative research approach, was employed. The study is based on primary data collected from 151 sample selected at random using questionnaire. The primary data was also obtained from key informant interview. The collected data were analyzed by IBM SPSS Version 23 statistical software. A descriptive statistics like frequency, percentage, mean and standard deviation and econometrics (binary regression models) were used to summarize the data collected on determinants of tax compliance behavior of category “C” taxpayers in Ambo town. To assess the internal consistency of the instrument, Cronbach’s alpha was used. The instrument was validated through content validity and reliability. The result of the study revealed that the category ‘C’ tax payers haven’t adequate knowledge and awareness, tax laws are not easy and simple to understand and to implement. The study indicated that the tax proclamations, regulations & directives are not clear. The finding of the study indicated that penalty or legal enforcement increase positive tax compliance. The study also revealed that the prevailing inflation level of the country discourages positive tax compliance. The results from binary logistic regressions confirmed that compliance behavior of category ‘C’ tax payer was positively and significantly influenced by tax knowledge of the tax payers, tax system, level of income, penalties and legal enforcement, and trust and power authority. The study concluded that the tax compliance behavior of category ‘C’ tax payers in Ambo town was not satisfactory. It is recommended that creating awareness, enhancing legal enforcement and improving payment systems plays a crucial role in tax compliance behavior of category ‘C’ tax payer