Determinants of value added tax Revenue in Kibet town, Central Ethiopia Regional State, Ethiopia

ABSTRACT The sustainable development of any country depends on the ability of the government to generate a sufficient amount of revenue from its internal source of finance. VAT has an important role in the revenue system of the Ethiopian government. To sustain its role the governments ensure that the revenue generated by this tax is raised as efficiently as possible. However, revenue collected by this tax system is low and not as good as expected due to weakness in the tax administration. The study was conducted to examine the determinant factors of Value Added Tax revenue collection performance in Kibet Town. To meet this objective, a descriptive research design was used that used both quantitative and qualitative research approach, in which non- probability sampling methods were employed to include all 74 VAT-registered taxpayers and employees of Kibet Revenue Authority office . And both primary and secondary sources of data were used. Primary data were collected from VAT-registered taxpayer’s and employees of Revenue Authority in Kibet Town and secondary data were collected from published document and office annual reports. The data were analyzed using the descriptive and econometric method to examine factors influencing determinants of value-added tax revenue collection performance of the Revenue Authority at Kibet Town. The result of the study showed that the determinants factors of Value Added Tax revenue collection performance which affects statistically significant and positive with tax education, political stability, taxpayers’ compliance, and whereas attitudes of taxpayers towards tax authority or government and unemployment rate affect negative statistically significant. Based on the findings of study, the researcher recommended that Revenues Authority should fulfill necessary manpower increase the taxpayer awareness by giving continuous training to the taxpayers to improve the tax payers knowledge and understanding about VAT rules and regulations, improve the attitude of the business community. and revenue authority should create continuous follow up to improve Value added tax revenue collection performance, mechanisms to increase government’s revenue collection capacity by reducing the resistance against VAT registration by taxpayers and improve VAT administration capacity in the town to earn high revenue from VAT collection that leads the economic growth