DETERMINANTS OF TAX COMPLIANCE (THE CASE CATEGORY A AND B TAXPAYERS IN WOLDIA TOWN)

ABSTRACT Despite the fact that taxes are a significant source of funding for governments worldwide, issues such as tax evasion and avoidance still act as roadblocks to effective tax collection. Individual, social, institutional, economic, and demographic factors all influence tax compliance behavior. The main objective of the research is to investigate the factors that influence voluntary tax compliance behavior among category A and B taxpayers in Woldia Town. To achieve the study's objective, the researcher employed a quantitative research approach and collected primary data. The target groups of the study are category A and B taxpayers in Woldia Town. Using a random sampling technique, a sample of 377 taxpayers from these categories taken from the total of 750 Category “A” and Category “A” tax payers in the town. Ten variables were considered in this study such as age, tax knowledge, perception of fairness and equity, probability of being audited, subjective norms, political stability, perception of government spending, inflation, gender, and penalty and enforcements. To evaluate the study's findings, an ordered logistic regression model was used to analyze the data with SPSS version 25.0.Then, The results reveal that age, tax knowledge, subjective norms, political stability, perceptions of fairness in the tax system, probability of being audited, and perceptions of government spending have a positive and significant impact on tax compliance. However, inflation, gender, and penalties/enforcements were found to be statistically insignificant. It is recommended that tax policy focus on enhancing taxpayer education, fostering political stability, and promoting fairness in the tax system, while leveraging social norms and increasing the probability of audits to improve compliance.