Determinant Factors of Tax Evasion in East Addis Ababa

Abstract

Most governments rely heavily on tax revenue as a source of income. Government budgets in most nations are unbalanced due to a lack of complete tax compliance, and as a result, the difference between revenue and expenditure is widening. What factors does shove taxpayers to evade taxes was the key topic that this research attempted to address. The goal of the study was to identify the factors that contribute to government tax evasion in East Addis Ababa, with a particular focus on category "A." A sample of 371 taxpayers was chosen using a non-random sampling technique, and data were collected from them using a structured questionnaire. The collected data was examined using a binary logistic regression model, and the study's findings showed a statistically significant correlation between evasion and eight determinant variables (tax education, service quality, tax rate, income level, fairness of legal system, financial Constraint, audit, and penalty). The rate, income level, audit, and justice of the legal system have all negatively affected evasion, whereas financial constraints, tax education, service quality, and penalties have favorably affected it. In order to ensure efficiency and quality delivery among other things, the government should lower the tax rate and automate the tax delivery system.

Keywords: taxpayers, tax evasion, tax compliance, logistic regression, Addis Ababa

DOI: 10.7176/RJFA/14-3-03

Publication date: February 28^th 2023