Abstract:
This study aims to investigate the various factors influencing tax effectiveness at the Addis Ababa
Revenue Large Taxpayers Branch Office. To achieve this, a descriptive research design was
applied to investigate the relationship that exists between the dependent and independent
variable, in this study, a mixed research approach was applied. Data were collected from both
primary and secondary sources through questionnaires, interviews, and document analysis. The
study's sample comprises a total of 177 respondents for the questionnaire survey, and seven
respondents were purposively selected for in-depth interviews. The data collected were analyzed
using descriptive and inferential statistics, including correlation analysis and multiple regression
models, facilitated by SPSS Version 25. The findings reveal several key relationships. Tax office
capacity has a significant positive correlation with collection effectiveness (r = 0.483, p < 0.01),
and tax compliance is also positively correlated with collection effectiveness (r = 0.268).
Taxpayer awareness also significantly correlates with collection effectiveness (r = 0.251).
Furthermore, tax exemptions are positively correlated with collection effectiveness (r = 0.367). In
regression analysis, the summary shows that the factors we looked at (like tax office capacity, tax
compliance, taxpayer awareness, and tax exemptions) explain 26.7% of the difference in how
effective tax collection is. The study highlights several key challenges faced by the Ethiopian tax
system, including insufficient tax education, high resistance to compliance, outdated tax policies,
and inadequate staffing. Interviews with tax officials and taxpayers suggest that these issues
exacerbate tax collection ineffectiveness and hinder overall tax system performance. The
research also identifies organizational challenges such as frequent employee turnover and
political interference in staffing decisions, which further undermine tax collection efforts. Based
on these findings, recommendations are made to strengthen tax office capacity, enhance taxpayer
awareness, ensure fair and transparent tax policies, and improve compliance through incentives
and enforcement.
