Assessing the Gaps and Problems that Exist between the Business Community and Tax Authorities of Dire Dawa Administration

Abstract

The study was conducted to assess the challenges faced by the business community of Dire Dawa City, in relation to taxation. Although, data were collected from various sources, the tax payers’ survey and focus group discussions were the main sources of data for the study. In this regard, a total of 183 tax payers have participated in the study as a source of information. In addition, key informants from Dire Dawa Chamber of Commerce and Sectoral Association (DDCCSA), Tax and Revenue Authority (TRA) and Federal Custom and Inland Revenue Authority (FCIRA) were interviewed to support and checkup the reliability of the data collected using survey method. Descriptive statistics such as mean, standard deviation, percentages, frequency, charts, and graphs were used to summarize the study findings and present the results. Moreover, the Kruskal Wallis chi square test was also implemented in testing the statistical significance of mean differences, with respect to some variables, between category “C? and categories “A? and “B? tax payers. Generally, findings of the study revealed that most of the taxpayers, especially those in the category “C?, have been facing various problems related to the taxation system. Despite the business community’s positive attitude towards the general concept of taxation, most of the surveyed tax payers stated that what they are paying is beyond their ability to pay and that they neither have trust in the employees of the authority nor in the overall tax estimation, assessment and collection procedures. In light of these facts, the study concluded that the tax authority of the city administration is not being effective or is being reluctant in making the tax procedures objective, transparent and understandable to taxpayers. Thus, it is recommended that the responsible tax authorities should revise their working system and promote transparency, so that trust of tax payers on the tax system will gradually develop.