Challenges of Tax Revenue Collection in Ethiopia:Case of Ethiopia Customs Commission

Abstract

Taxes are involuntary fees levied on individuals or corporations and enforced by government entity in order to finance government activities (Lea D.Uradu, 2020). Lea D.Uradu in addition stated, government usually collects taxes to help fund public works, services and to build and maintain the infrastructures used in a country and used for the betterment of the economy and all living in it. Similarly, (UNDP Ethiopia, 2016:p2) stated that, a good tax system follows the principles of efficiency, fairness and easy to administer. Keeping the benefits of tax, the government of Ethiopia collects tax revenue from Domestic tax and Customs duty tax sources. However, the researcher understood that, There are plenty of challenges in tax collection process that do not seen by previous studies and many tax studies are not clearly identified/stated which tax source have great share in tax revenue collection in Ethiopia,(i.e., many people are confusing that which source of tax have great share in Ethiopia tax system). Thus, the objective of the article was to look which tax revenue has great share/contribution to the economy (i.e., Domestic tax or Customs duty tax?) and the challenges to perform tax in Ethiopia. To achieve the objective, a quantitative data of six(6) years tax revenue collected by Ethiopia’s ministry of revenues were taken for research question one and a multiple regression model were formulated. Regarding to second question, 31 field questionnaires was collected from randomly selected tax officials. And for the collected data, both descriptive and inferential statistics (regression analysis & nonparametric test) analysis method was applied .In conclusion, the author found that domestic tax revenue have great share to Ethiopian Economy than tax from customs duty(but not to undermine its share). And the tax collection challenges are identified as unstructured economy, poor tax paying habit and maladministration of officials respectively.  Thus, the author recommended that the government of Ethiopia as well as the tax collecting Authority should concentrate on effective domestic tax collection, organize the economy to suit tax collection, create tax knowhow on the society and avoid tax maladministration.

Keywords: revenue collection, tax, Government.

DOI: 10.7176/RJFA/12-1-02

Publication date: January 31^st 2021