Determinants of Voluntary Tax Compliance (THE CASE CATEGORY A AND B TAXPAYERS IN DIRE DAWA ADMINISTRATION)

Abstract

Improved tax compliance boosts the revenues available for supporting public services without increasing the current tax burden on compliant tax payers. The voluntary compliance behavior of the taxpayers is determined by various factors and identifying these factors and treating them accordingly should be the central premises of any tax system in order to maintain voluntary compliance at satisfactory levels. The study investigate the five key determinants of voluntary tax compliance from existing literature and previous studies which include Demographic factors, Economic factors, Institutional factors, Social factors and Individual factors. The main objective of the study is to examine the determinants of voluntary tax compliance behavior of category A and B tax payers in Case of Dire Dawa City Administration. To achieve the objective, the authors use Pragmatics or mixed research approach. To this end, the researchers used both primary and secondary data.  The target populations of the study are category “A” and “B” tax payers in Dire Dawa City Administration. A sample of 366 category “A” and “B” tax payers is taken by using multi stage sampling procedure. The findings from the regression analysis indicate that, compliance is significantly affected by nine determinant factors which consist of: Age, Education, Tax knowledge, Financial Constraints, Absence of Fairness, Role of the Tax Authority, complexity of Tax System, Absence of Tax Audits and Government Spending. This study also evidenced that, other variables such as Gender, Sales turn over, Religion, Penalties, Type of organization and Tax Rate were not significant determinants of tax compliance id Dire Dawa City Administration.

Keywords: Tax Compliance, Category A&B Tax Payers and order logit regression model

DOI: 10.7176/RJFA/11-13-05

Publication date:July 31^st 2020