Taxpayers’ Perception on the Seriousness of Tax Evasion in Dessie Town Administration, Ethiopia

Abstract

Tax evasion is found to be threatening to tax authorities in developing countries including Ethiopia. Hence, this study was designed to evaluate the understanding of taxpayers themselves on the seriousness of tax evasion in Dessie town, Ethiopia. For this set objective, data were collected from 318 randomly selected self-employed taxpayers using 7 point likert scale questionnaire. The study found out that the more the respondents are educated and older, the more they likely to perceive that the government losses more due to tax evasion by tax evader. Seeing how serious tax is being evaded the study found out that only few people report all of their income to tax Authority (64.6%) and deliberate tax evasion is on the increase in study area (60.4%) though deliberate tax evasion is not considered acceptable by society (60.4%). Likewise, the summarization of taxpayers perception about the study area  tax administration indicated that taxpayers pay too much tax on what they earn already (76.4%), the taxes collected are used poorly (68.5%), there is a culture of tax evasion (63%), and the risk of getting caught for tax evader is low(49.1%). Overall, we can conclude that taxpayers themselves recognized that taxes are being seriously evaded due these different reasons. Therefore, tax authority is expected to improve its tax collection enforcements and exert efforts to change the culture. Further researches should be conducted to investigate the reasons for increment of deliberate tax evasion and tax evasion culture in the town.

Keywords: taxpayers’ perception, tax evasion, seriousness, tax loss, Ethiopia