Factors Influencing Taxpayers' Voluntary Compliance Attitude with Tax System: Evidence from Gedeo Zone of Southern Ethiopia

Abstract

Taxpayers' voluntary compliance attitude with tax system is influenced by demographic, individual, social, institutional and economic factors. Thus, the objective of this study was to examine the factors influencing tax voluntary compliance attitude with tax system the case of Gedeo Zone. To this end, the author used mixed research approach. The target populations of the study were tax authority and taxpayers in Zone. A sample of 323 taxpayers was randomly taken from the 1,678 taxpayers in the Zone but tax officers were judgmentally selected by the researcher in order to collect sufficient and relevant information required to prepare the report of this study. Both primary and secondary data were collected. Primary data were collected through structured questionnaire and interview with officers and taxpayers representatives. The secondary data were also collected by reviewing of related published and unpublished materials. Binary logistic regression model was employed to analysis the data through Stata software application version 12.0 and SPSS version 23.0 were used to present the results of this study. Then, the result of this study showed that out of fourteen explanatory variables incorporated in the model, seven variables such as gender, age, lack of tax knowledge, simplicity of tax system, awareness on penalty, probability of being audit, and perception on tax rate were found to be key factors influencing taxpayers' voluntary compliance attitude with tax system in the study area. Whereas variables such as education level, tax authority efficiency, peer influence, occupation, income level of taxpayers, perception on government speeding, and perception on fairness and equity have no significant influence on tax voluntary compliance attitude. Finally, the findings of the study may inform policy makers about the factors influencing voluntary compliance attitude towards tax system in the Zone and supports to formulate constructive policy in order to achieve the goal of raising required tax revenue to promote the economic development of the country.

Determinants of Voluntary Tax Compliance (The Case Category A and B Taxpayers in Dire Dawa Administration)

“…Income; The studies of Allingham and Sandmo (1972) revealed that higher income level attracts higher compliance on the other hand Johns and Slemrod (2008) argued that increment in income levels resulting increase in tax evasion behavior. Kanbiro (2018) found that income does not have significant influence on tax voluntary compliance attitude. Religion; According to Kirchgässner (2003), religiosity, measured as church attendance and the perceived degree of religiosity may also play a role in tax morale and voluntary compliance as those who take their religion to heart may find attempts at non compliance as been "unrighteous".…”

“…Jackson and Milliron (1986) argued that as one of the main principles of the taxation system, Perceptions of equity or fairness have a positive influence on the compliance level of the tax payers. Whereas the studies made by Kanbiro (2018), Akalu (2016) and Tadesse and Goitom (2014) found that equity or fairness doesn't have any impact on compliance level.…”

“…tax audits can change compliance behavior from negative to positive. Perceptions of government spending; Tadesse and Goitom (2014) and Kanbiro (2018), found that Perception of government spending were not significantly correlated with tax compliance.…”

“…2.3.2. Individual factor Tax knowledge; Daba (2017) and Lemessa (2007) stated that there is a positive relation between tax knowledge and compliance, while Manchilot (2018), Tadesse and Goitom (2014), and Kanbiro (2018), found that tax knowledge does not significantly correlated with compliance behavior of tax payer. Personal financial constraints; According to Daba (2017) and Tadesse and Goitom (2014), personal financial constraints is the major determinant of voluntary compliance.…”

“…The study of Richardson (2008) and Manchilot (2018) also suggested that the role of a government has a significant positive impact on determining attitudes toward tax. Tadesse and Goitom (2014) and Kanbiro (2018), found that Role of the tax authority doesn't have any impact on compliance level. Complexity of tax system; According to Swarnathilaka and Kevin (2017) and Manchilot (2018) simplifying tax administration is important because it can facilitate efficient and enhanced administration and reduce noncompliance level.…”