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Determinants of Tax Compliance: A Case of Nekemte Town Category ‘C’ Business Profit Tax Payers

Received: 24 March 2020     Accepted: 28 April 2020     Published: 3 June 2020
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Abstract

This study is designed to investigate the determinants of tax compliance in a case of category “C” business profit taxpayers in Nekemte town. To achieve the designed objectives the study employed a quantitative approach. Necessary data for the study were gathered via questionnaire and reviewing necessary documents. To do this the researcher took out 346 samples from the total 2580 population size of category “c” taxpayers and analyzed the returned 240 questions. The sample size of the study was determined by using simple random sampling technique. Responses of respondents were presented by using the data presentation tools and analyzed via STATA 10 software application and descriptive analytical methods using tables and charts. The study found that, family size and length of tax payment period has a significant negative influence on tax compliance. On the other hand, tax knowledge and awareness and tax penalty and fines has a significant positive influence over the level of tax compliance. The assessed amount of tax, probability of auditing and attitudes towards equity and fairness are insignificant factors in determining the compliance behavior of taxpayer. Finally the researcher recommended that different job opportunities and incentives should be provided by the authorized body to increase earning of large size family members. ERCA should be follow up taxpayers and control their activities to easily prevent evasion by taxpayers; and sufficient and adequate training, awareness creation and education should be offered to taxpayers to enhance their knowledge regarding to tax. Besides ERCA should take measures and penalties on those taxpayers who are not willing to pay their tax liability within a specified time period for the purpose of generating more revenues.

Published in International Journal of Economics, Finance and Management Sciences (Volume 8, Issue 3)
DOI 10.11648/j.ijefm.20200803.11
Page(s) 89-97
Creative Commons

This is an Open Access article, distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution and reproduction in any medium or format, provided the original work is properly cited.

Copyright

Copyright © The Author(s), 2020. Published by Science Publishing Group

Keywords

Assessed Amount of Tax, Length of Tax Payment Period, Tax Compliance, Taxpayers, Penalty

References
[1] Misrak, T. (2011). Ethiopian tax accounting principle and practice. Addis Ababa, Ethiopia.
[2] Serkan B., Tamer, B., & Mohdali, R. (2016). The impact of religiosity on tax compliance among Turkish self-employed taxpayers, Religions 7 (2). pp. 37-39.
[3] Marti, L. O. (2010). Taxpayers attitudes and tax compliance behavior in Kenya. African Journal of Business & Management.
[4] Marziana, H., Mohamed, N., Orkhazimah, A., & Mohamed, S. D. (2010). Perceptions of taxpayers with level of compliance: A comparison in the east coast region, Malaysia. Journal of Global Business and Economics, 1 (1), 241-257.
[5] James, S.,& Alley, C. (2004). Tax compliance cost, University of Exeter Business School Streatham, United Kingdom.
[6] Niway, A. A.,& Wondwossen, J. (2016). Determinants of voluntary tax compliance: Evidence from SNNPRs, Ethiopia. International journal of science and research (IJSR), Vol. 5, Issue 12, December 2016.
[7] Kirchler, E. (2007). The economic psychology of tax behavior. Cambridge: Cambridge University Press.
[8] Ojochogwu, W. A.,& Stephen, A. O. (2012). Factors that affect tax compliance among Small and medium enterprises (SMEs) in North Central Nigeria.
[9] Suresh, V., & Srinivas, G. (2012). Factors that influence rental taxpayers compliance with tax system: An empirical study of Mekelle City, Ethiopia.
[10] Abubakari, & Christopher. (2013). Evaluating taxpayers attitude and its influnce on tax compliance decisions in tamale, Ghana.
[11] Nelson, M. (2014). The impact of personal tax knowledge and compliance costs on tax compliance behavior of SMEs in Zimbabwe. Elite Research Journal of Accounting and Business Management Vol. 2 (3), July 2014.
[12] Tilahun, A., & Yiedersal, D. (2014). Determinants of tax compliance behavior in Ethiopia: The case of Bahirdar City Taxpayers, Vol. 5 No. 15, 2014.
[13] Ketema, D. W. (2016). Factors affecting tax compliance of small and medium business profit taxpayers in Addis Ababa.
[14] Daniel, M., & Shaik, A. M. P. (2017). Factors affecting voluntary compliance of category ‘C’ taxpayers attitude of Arbaminch, SNNPR, Ethiopia. International Journal of scientific and research publications, Vol. 7, issue 6.
[15] Yamane, T. (1967). Statistics, an introductory analysis (2nd ed.). New York, NY.
[16] Allingham, M. G., & Sandmo, A. (1972). Income tax evasion: A theoretical analysis. Journal of Public Economics, 1 (3-4), pp. 323-38.
[17] Beron, K. L., Tauchen, H. V., & Witte, A. D. (1988). A structural equation model for taxcompliance and auditing, NBER working paper no 2556, National Bureau of Economic Research.
[18] Jackson. B. R., and Milliron, V. C. (1986). Tax compliance research: Findings, problems, and prospects. Journal of Accounting Literature, 5, pp. 125-65.
[19] Andreoni, J., Errad, B., & Feinstein, J. (1998). Tax Compliance, Journal of Economic Literature, Vol. 36, pp. 818 – 819.
[20] Dubin, J. (2004). Criminal Investigation Enforcement Activities and Taxpayer Noncompliance. IRS Research Conference. Washington D. C.
[21] Taylor and Francis Journals, vol. 9, No. 3, pp. 281-289.
[22] J. S. Kramer. (1991). The Logit Model for Economists. Edward Arnold Publishers, London,; and G. S. Maddala, op. cit.
[23] Kirchler, E., Hoelzl, E., & Whal, I. (2008). Enforced versus voluntary tax compliance: The “slippery slope’’ framework. Journal of Economic Psychology, Issue 29 (2008).
[24] M. R. Palil. (2010). Tax knowledge and tax compliance determinants in self-assessment system in Malaysia.
[25] Samuel, A., & Viswanadham, P. (2016). An assessment of business income taxpayers tax knowledge, tax complexity, and tax compliance: A Case of Amhara Regional State ofEthiopia. International journal of Science and Research (IJSR) ISSN, pp. 2319-7064.
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  • APA Style

    Dereje Birhanie Jemberie. (2020). Determinants of Tax Compliance: A Case of Nekemte Town Category ‘C’ Business Profit Tax Payers. International Journal of Economics, Finance and Management Sciences, 8(3), 89-97. https://doi.org/10.11648/j.ijefm.20200803.11

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    ACS Style

    Dereje Birhanie Jemberie. Determinants of Tax Compliance: A Case of Nekemte Town Category ‘C’ Business Profit Tax Payers. Int. J. Econ. Finance Manag. Sci. 2020, 8(3), 89-97. doi: 10.11648/j.ijefm.20200803.11

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    AMA Style

    Dereje Birhanie Jemberie. Determinants of Tax Compliance: A Case of Nekemte Town Category ‘C’ Business Profit Tax Payers. Int J Econ Finance Manag Sci. 2020;8(3):89-97. doi: 10.11648/j.ijefm.20200803.11

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  • @article{10.11648/j.ijefm.20200803.11,
      author = {Dereje Birhanie Jemberie},
      title = {Determinants of Tax Compliance: A Case of Nekemte Town Category ‘C’ Business Profit Tax Payers},
      journal = {International Journal of Economics, Finance and Management Sciences},
      volume = {8},
      number = {3},
      pages = {89-97},
      doi = {10.11648/j.ijefm.20200803.11},
      url = {https://doi.org/10.11648/j.ijefm.20200803.11},
      eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.ijefm.20200803.11},
      abstract = {This study is designed to investigate the determinants of tax compliance in a case of category “C” business profit taxpayers in Nekemte town. To achieve the designed objectives the study employed a quantitative approach. Necessary data for the study were gathered via questionnaire and reviewing necessary documents. To do this the researcher took out 346 samples from the total 2580 population size of category “c” taxpayers and analyzed the returned 240 questions. The sample size of the study was determined by using simple random sampling technique. Responses of respondents were presented by using the data presentation tools and analyzed via STATA 10 software application and descriptive analytical methods using tables and charts. The study found that, family size and length of tax payment period has a significant negative influence on tax compliance. On the other hand, tax knowledge and awareness and tax penalty and fines has a significant positive influence over the level of tax compliance. The assessed amount of tax, probability of auditing and attitudes towards equity and fairness are insignificant factors in determining the compliance behavior of taxpayer. Finally the researcher recommended that different job opportunities and incentives should be provided by the authorized body to increase earning of large size family members. ERCA should be follow up taxpayers and control their activities to easily prevent evasion by taxpayers; and sufficient and adequate training, awareness creation and education should be offered to taxpayers to enhance their knowledge regarding to tax. Besides ERCA should take measures and penalties on those taxpayers who are not willing to pay their tax liability within a specified time period for the purpose of generating more revenues.},
     year = {2020}
    }
    

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    AU  - Dereje Birhanie Jemberie
    Y1  - 2020/06/03
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    UR  - https://doi.org/10.11648/j.ijefm.20200803.11
    AB  - This study is designed to investigate the determinants of tax compliance in a case of category “C” business profit taxpayers in Nekemte town. To achieve the designed objectives the study employed a quantitative approach. Necessary data for the study were gathered via questionnaire and reviewing necessary documents. To do this the researcher took out 346 samples from the total 2580 population size of category “c” taxpayers and analyzed the returned 240 questions. The sample size of the study was determined by using simple random sampling technique. Responses of respondents were presented by using the data presentation tools and analyzed via STATA 10 software application and descriptive analytical methods using tables and charts. The study found that, family size and length of tax payment period has a significant negative influence on tax compliance. On the other hand, tax knowledge and awareness and tax penalty and fines has a significant positive influence over the level of tax compliance. The assessed amount of tax, probability of auditing and attitudes towards equity and fairness are insignificant factors in determining the compliance behavior of taxpayer. Finally the researcher recommended that different job opportunities and incentives should be provided by the authorized body to increase earning of large size family members. ERCA should be follow up taxpayers and control their activities to easily prevent evasion by taxpayers; and sufficient and adequate training, awareness creation and education should be offered to taxpayers to enhance their knowledge regarding to tax. Besides ERCA should take measures and penalties on those taxpayers who are not willing to pay their tax liability within a specified time period for the purpose of generating more revenues.
    VL  - 8
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Author Information
  • Department of Accounting and Finance, College of Business and Economics, Debre Markos University, Debre Markos, Ethiopia

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