Value Added Tax Administration and Its Challenges: The Case of South Gondar Zone, Ethiopia

Abstract

Tax contributions are important for different public services such as security, health, education, building infrastructures and welfare programs. The growth of global economy has been another factor leading to change in the tax system. As the result tax is the main source of revenue for both developed and developing nations to maximize their economic development as well as national security. Taxes have usually two parts, direct tax and indirect tax, according to the point at which they are actually paid. One of the main parts of indirect tax is VAT. The main objective of this study is to investigate the main Value Added Tax administration challenges of South Gondar Zone. Mainly primary source of data were used in this study. Two main target groups were identified; taxpayers and tax officers. In the study, 384 tax payers who are registered for VAT and 102 tax officers were interviewed. The awareness level of the tax payers towards VAT was one point of interest and results show that out of the 102 tax officers, most of them reported that the awareness of the tax payers is low. Based on the results of the findings, the main challenges of Value Added Tax administration in South Gondar Zone are: lack of tax payers awareness, selling goods and services without tax invoice or lack of use proper Value Added Tax invoices, weak culture of taxpayers, and lack of fairness, lack of experience of Value Added Tax registrants, weak follow-ups and controlling mechanisms against those unregistered and registered Value Added Tax payers.  To alleviate awareness problem there is a need to have tax education campaign by coordinated efforts that must be exerted at all levels to enhance the awareness of the tax payers and other members of the community. The major task that the office should do is supervising and monitoring of those whether unregistered and registered Value Added Tax taxpayers up to door to door inspection. There is a need to enhance the capacity of the employees of the tax office. Of course, the study shows that both short term and long term trainings are given. But still, there is also a need for changing the attitude towards customer handling and other service giving methodologies.

Keywords: Vat, administration, challenges

DOI: 10.7176/JESD/10-23-03

Publication date: December 31^st 2019