COLLEGE OF BUSINESS AND ECONOMICS

DEPARTMENT OF ACCOUNTING AND FINANCE

A SENIOR ESSAY SUBMITTED TO DEPARTEMENT OF ACCUNTIN AND

FINANCEFORTHE PARTIAL FULFILLMENT AND REQUIREMENTS OF BA
DEGREE IN ACCOUNTING AND FINANCE

ASSESSMENT ON CHALLENGES OF EMPLOYMENT INCOME TAX

COLLECTION IN CASE OF JIMMA TOWN SMALL TAX PAYER OFFICE

BY: TSEGANESHFETENE

ADVISOR: ABEL WORKU

FEB.2018

JIMMA, ETHIOPIA

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Acknowledgement

First and foremost I want to thank my advisor Mr Abel Worku for the comment that he has
given for my study. Next I would like to thank the type writer Jemila Nega who helped me by
typing this study. At the end I would like to thanks all my family and my husband for their
support.

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ABSTRACT
This study was designed and conducted in order to assessment on challenges of employment
income tax collection in case of jimma town small tax payer office. The study was delimited on
the challenges of employment of income tax collection of Jimma town small tax payers office
or revenue bureau. Descriptive design of the study was taken as the design of this study, because
the nature of this study forced the researcher to use this design of study. Regarding the sources
of data collection of this study, primary and secondary sources of data was applied .The
researcher also used questionnaire and interview to collected the data from the respondents. The
researcher included 87 respondents out of the total employees of these offices using the simple
random technique. The collected data were interpreted and presented through charts and
percentages. Therefore, as the conclusion of this stud indicated that both employees and tax
payers were agreed that the tax payment period is enough.The tax payers are satisfied on the
present tax assessment and collection system. Knowledge of tax payers about tax is poor.
Employees of revenues bureau are not satisfied on their position and on their working
environment. Almost the majority of tax payers are suggested that the tax rate is not fair. The
coordination of revenues bureau with other offices is good. Then the researcher recommended
that The revenues bureau should extend awareness regarding tax to the community by using
different media, flyers, pamphlets and by face to face training. The revenues bureau should try to
smooth the way that the annual tax payment (tax rate) and income of the tax payers become
balanced. By informing the complain of tax payers to concerned body.

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 Table content

Contents Page
Acknowledgement........................................................................................................................................i
ABSTRACT ...................................................................................................................................................ii
Table of content …………………………………………………………………………………………………………………..…………………iii
CHAPTER ONE
INTRODUCTION …………………………………………………………………………………………………………………………………… 1

1.1 BACKGROUND OF THE STUDY …………………………………………………………………………………………… .....1

1.2. STATEMENT OF THE PROBLEM …………………………………………………………………………………… ……. . .…2
1.3 OBJECTIVES OF THE STUDY …………………………………………………………………………………………………….2
1.3.1 General Objectives...............................................................................................................................2
1.3.2 Specific Objective……………………………………………………………………………………………………………………….2
1.4 THE SIGNIFICANCE OF THE STUDY……………………………………………………………………………………….3
1.5 Delimitation of the study………………………………………………………………………………………………………………. 3
1.6 ORGANIZATION OF THE STUDY…………………………………………………………………………………………....3
CHAPTER TWO:
2. REVIEW OF RELATED LITERATURE........................................................................................5
2.1. THE THEORETHICAL CONCEPT OF TAXATION. ................................................................5
2. 2.1 Direct ........................................................................................................................................5
2.2.2 Income Tax…………………………………………………………………………………………………………………………....6
2.2.3 Gift Tax........................................................................................................................................6
2.2.4 Capital Gain Tax..........................................................................................................................6
2.2.5 Indirect Tax..................................................................................................................................6
2.2.6 Value Added Tax.........................................................................................................................7
2.2.7 Import and Export Duties……………………………………………………………………………………………………....7
2.3 IMPORTANCE OF TAX………………………………………………………………………………………………………....7
2.4 Principles of Taxation………………………………………………………………………………………………………..........8
2.4.1 Equity………………………………………………………………………………………………………................................8
2.4.2 Vertical Equity………………………………………………………………………………………………………..................8
2.4.3 Horizontal Equity………………………………………………………………………………………………………..............8

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2.4.4 Convenience………………………………………………………………………………………………………......................9
2.4.5 Certainty………………………………………………………………………………………………………...........................9
2.4.6 Economy………………………………………………………………………………………………………...........................9
2.5 Government and Tax………………………………………………………………………………………………………………….9
2.6 Laws on Taxation In developing countries..................................................................................11
2.7 Problems of Tax Administration..................................................................................................12
2.7.1 Lack of Taxpaying Culture among Taxpayers..........................................................................13
2.7.2 Low Wage Levels………………………………………………………………………………………………………...........13
2.7.3 Poor working condition and little encouragement………………………………....................................13
2.7.4 Low probability of detection and punishment for corruption....................................................13
2.7.5 Lack of Equipment………………………………………………………………………………………………………..........15
2.7.6 Embezzlement of Tax Revenue……………………………………………………………………………………….…...15
2.7.7 Cost of Collection and Exorbitant…………………………………………………………………………….…………. 15
2.7.8 Poor Record Keeping by the Associations…………………………………………………………………………..…15
2.8 Tools for Easy Tax collection………………………………………………………………………………………………… 15
CHAPTER THREE
3. RESEARCH METHODOLOGY AND DESIGN………………………………………………………………… ....20
3. Introduction……………………………………………………………………………………………………............................20
3.1 Research Design………………………………………………………………………………………………………................20
3.2 Population and Sampling……………………………………………………………………………………………………......20
3.2.1 Target Population……………………………………………………………………………………………………..............20
3.2.2 Sample Size……………………………………………………………………………………………………….....................20
3.2.3 Sampling Techniques…………………………………………………………………………………………………….........20
3.3 Sources of data…………………………………………………………………………………………………….....................21
3.4 Data Collection Instruments……………………………………………………………………………………………….......21
3.4.1 Questionnaire………………………………………………………………………………………………………..................21
3.4.2 Unpublished and Published Data……………………………………………………………………………………….....21
3.5 Data Analysis and Interpretation………………………………………………………………………………………………21
Chapter Four
4. Data analysis, Interpretation and Presentation...............................................................................23
4.1 Analysis of Data Gathered from Tax payer..................................................................................23

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CHAPTER FIVE
5. Summary conclusion and recommendation...................................................................................33
5.1 Summary.....................................................................................................................................33
5.2 Conclusion...................................................................................................................................34
5.3 Recommendation.........................................................................................................................35
References.........................................................................................................................................36
APPENDIX A...................................................................................................................................37

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 CHAPTER ONE
1. INTRODUCTION
1.1. BACKGROUND OF THE STUDY
Tax is a compulsory, non-refundable unrequited sum of money collected by the state from the
citizenry for the socio-economic development of the state. Funds generated from taxation forms
the greater percentage of the total revenue of most countries economy. Tax can be grouped into
Direct and indirect taxes. Direct taxes are those taxes which are levied on the possession and
incomes of persons and profit of organizations whose burden cannot be shifted to someone else.
A direct tax includes company tax, capital gain tax, personal income tax and property tax.
Indirect taxes are also taxes which are levied on commodities and whose burden can be shifted to
another depending on the elasticity of demand or supply of the goods. These include purchase
tax, sales tax, import duties, export duties, excise duty and VAT. Tax is observe as one major
source of revenue for the under developed countries such as Ethiopia. It has come to light that
the development of a country does not depend exclusively on external sources but the ability of
the country to generate founds internally. Direct taxes have been and will continue to be the
major source of government revenue .

According to Bird and Old man (1964), the administration of tax system of the country receives
relatively slight attention. Often the remarks devoted to administration are the forms of
generalities all of which notably come down to the repeated recommendation of improvement.
Richard M. Bird and Milka C de Jansher (1992) wrote that beat tax administration is not simple
one that collects the most revenue, but revenue is raised – that most revenue, but how that
revenue is raised that is, the effort on equity, on the political fortunes of the government and on
the level of economic welfare may be equal important. In developing countries like Ethiopia, the
citizens who do not known the essence of paying taxes try to evade or avoid it wholly. The self-
employed, companies and other tax payers consciously evade and avoid the paying of taxes due
to their fictitious assertion and assumption that direct tax is an unnecessary liability that the
governments intentionally impose on them without the tax payers’ interest being taken into
consideration.

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1.2. STATEMENT OF THE PROBLEM
Governments all over the world need revenue to provide the essential service to their countries.
This revenue can only be generated through taxation and other incomes. Unfortunately, there’s a
misconception on the part of the payer does not allow them to available themselves for tax
payment purposes. They always see the payment of taxes not as a responsibility of the citizen but
as something that is imposed on their right. The unwillingness on the part of the majority of the
people to pay taxes including the educated manifest itself in the lack of social amenities in our
society.

The Domestic Tax Revenue Division (DTRD) of Kumasi Metropolis which happens to be the
sole collector of direct tax faces some challenges. The contribution of income tax in the socio-
economic development of Ethiopia cannot be overemphasized.

However, there’s no research to indicate where people are not willing to pay taxes as one of the
challenges facing the tax administrator. It is for this reason that all attempts must be made to
identify problems what hinders smooth tax administration and help eradicate them. It is for this
reason that the researcher decided to undergo this study to ascertain the causes of these
challenges and to suggest ways to solve the problems.Therefore, the researcher was aimed to
answer the following basic research questions
 What are the challenges that affect public tax collection inJimma city tax bureau?
 What problems do tax collectors face in tax collection at Jimma city?
 What are the Factors that hinder the people while they pay tax inJimmacity?
1.3 OBJECTIVES OF THE STUDY
1.3.1 General Objectives
The general objective of the study was to assess the challenges of tax collection officeof
Jimmacity.
1.3.2 Specific Objective
 To identify the factors that affect tax collection in Jimma city
 To examine the problems tax collection office face in Jimma city administration
 To explore the causes and consequence of poor tax collection of Jimma town on the
economy of the town

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1.4 THE SIGNIFICANCE OF THE STUDY
Once the challenges are identified and better solutions are prescribed for them, tax administration
was smooth and the domestic tax revenue division was able to raise enough revenue for the
government. This may also make the people be aware of the serious effect that their failure to
execute their tax obligation has on the socio-economic development of the metropolis. The study
may show the need to educate the general public on the need to pay tax and also the collection of
the tax in the metropolis.

The study may again, let the domestic tax revenue division realize the need to equip its staff,
educate and motivate them effectively for efficient working mind-set. Moreover the study may
help the domestic tax revenue division to build up and sue appropriate mechanism in the
collection of taxes so that their relationship with the community may enhance effective tax
system in the metropolis.
1.5 Delimitation of the study
This study delimited on the challenges collection of tax in Jimma city administration .The reason
why the researcher delimited only in this town is that, there may be the problem of logistics that
affect the running of this study .Therefore, the study only delimited itself on Jimma
administrative .This does not mean that there are no problems in any other city about challenges
of collecting tax from different concerned body of the government and non-government
organization. The conceptual scope of this study was to identify the causes and consequence of
tax collection and challenges of Jimma tax payers and its remediation to be taken to reduce the
problem related of the town.

1.6 ORGANIZATION OF THE STUDY

The study consists of five chapters. chapter one, the current chapter, entails the introduction and
context of the study which includes the background of the study. Statement of problem, research
questions, significance of the study, structure of the study, scope of the study and the limitations
of the study. The second chapter is solely on literature review. This is basically the review of the
researchers that have been done relating to the topic under study by other people. Chapter three
covers the methodology used on obtaining and analysis of data chapter four deals with the

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analysis and discussions of finding. The last chapter, which is chapter five, comprises
thesummary, conclusion and recommendations of the study

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 CHAPTER TWO:
2.REVIEW OF RELATED LITERATURE
2.1. THE THEORETHICAL CONCEPT OF TAXATION.
Taxation is the process of levying of compulsory payments or contributions by the government
on individuals, entities and or property to support the cost of government activities, (Gbadago,
2010).
The person upon which tax is levied is usually referred to as ‘tax payer’. The tax payer could be
seen as an individual investor or a limited liability company. Taxation plays a very key role in
revenue mobilization. This in turn requires well-designated tax policies that are translated into
clear legislation and are administratively feasible. Perhaps the greatest challenge facing countries
is how to improve upon the effectiveness of their tax administration .The amount usually
imposed on the tax payer is known as tax. Tax is therefore the financial charges imposed on the
tax payer by tax authorities. Taxation has certain basic aims. For example, to raise revenue, to
decrease the consumption of undesirable goods and can also serve as fiscal policy tool during
inflation. This research looks at taxation as revenue-raising instrument. It also looks at the
challenges of the Internal Revenue Service in an attempt to levy and collect taxes.Taxation
serves as the backbone of Ghana’s economy for the mobilization of tax in the country.For
instance, in the year 2004, the total tax to the government accounted for 72.70% of the total tax
revenue to the state and non-tax revenue accounted for 27.30% of the total tax revenue. Out of
the 72.70% tax revenue, direct tax accounted for 23.32% whiles the indirect taxes accounted for
42.41% and import duties accounted for 18.49 %. Below are the two types of taxes:
 Direct Tax
 Indirect Tax
2. 2.1 Direct Tax
With reference to the lecture note by Mr. George Obeng Takyi at the University of Education,
Kumasi campus, ‘Direct tax is referred to as ‘tax imposed or levied and is paid by the person or
organization on which it is actually levied. Direct tax is generally progressive of which the
Internal Revenue Service are more particular with. The incidence and yield are easy to determine
and the tax payer knows with certainty what he is expected to pay. Yield increases automatically
as wealth and population increases even though the effect on incentives and savings may be
considerable and cost of administration may be high as compared to indirect taxes. In Ghana for

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instance, the Internal Revenue Service adopt the direct tax system which is progressive as far as
mobilizing tax revenue.
The types of direct taxes are:
 Income tax
 Gift tax
 Capital gain tax
2.2.2 Income Tax
Income tax is a type of direct tax imposed on the profit or gains attributed to a person as
defined by the law governing such tax system, Internal Revenue Act2000(Act 592).The law does
not specifically defines income. However, it gives an indication of what are seen as income to be
taxed.
2.2.3 Gift Tax
Section 110 of Act 592 defines gift as a receipt without consideration or for inadequate
consideration. The receipt may constitute certain types of assets identified by the law which may
be transferred between persons. Taxable gift means any of the following:
 Assets situated in Ghana such as:
i. Building of permanent or temporary nature
ii. Land
iii. Shares, bond and other securities
iv. Business and business assets
v. Any means of transportation (land, air, sea)
2.2.4 Capital Gain Tax
Capital gain tax is the taxation of the increase in the capital value of assets between the date of
acquisition of the assets and the date of disposal. Tax payers are required to report any capital
gain and pay any tax arising there from within thirty days of the realization of an asset.
2.2.5 Indirect Tax
Indirect taxes are taxes collected from someone other than persons or organization responsible
for paying the taxes. Indirect taxes levied on the person or organization with the expectation that
the tax would be shifted or passed on to another. Indirect taxes may take the form of specific
duty (rate of duty based on fixed or specific amount per some physical attribute of the

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commodity being taxed).With indirect tax payment of tax is easy and convenient and evasion is
difficult. The types of indirect taxes are,
 Value added Tax (VAT)
 Import and Export duties
 Excise duties
 National Health Insurance levy
2.2.6 Value Added Tax
Value added tax (VAT) is a tax applied on the value that is added to goods and services at each
stage in the production and distribution chain imposed under the value added tax(VAT)Act
1998(Act 546). It forms part of the final price the consumer pays for the goods or services.
2.2.7 Import and Export Duties
Import and export duties are levied on items, goods or service, imported or exported out of the
country.

2.3 IMPORTANCE OF TAX

With reference to the lecture notes by Mr. George ObengTakyi, the revenue generated from
taxation plays the following important roles in the economic development of a nation or tax
jurisdiction. Namely,
(a) Taxation serves a major source of government revenue
 To finance spending programs
 Maintaining law and order
 Protection of lives and property
 Financing infrastructure development and projects of the government of the day.Example
construction of roads, dams, school buildings etc.
(b) Restrain consumption of harmful goods such as alcohol and tobacco which are not good for
our health and morality as well.
(c) Protection of infant local industries
(d) Control of certain aspects of the local economy such as,
 Balance of payment
 Fiscal tool to control inflation
 Narrowing budget deficit

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 Reduce inequalities arising from the distribution of wealth such as narrowing the gap between
the rich and poor.
2.4 Principles of Taxation
A nation’s tax system is often a reflection of its communal values or the values of those inpower.
To create a system of taxation, a nation must make choices regarding the distribution of tax
burden. Thus, who pay taxes and how much to be paid and how the taxes collected will bespent.
According to Adams Smith (father of economics) talked about four basic principles of taxation
as far as mobilizing tax revenue. Below are the principles:
 Equity
 Convenience
 Certainty
 Economy
2.4.1 Equity
Equity means fairness. Thus, tax must be proportional to one’s income (The higher the income
the greater the tax and the lower the income the smaller the tax). In other words taxpayers must
contribute in proportion of their abilities (economic resources under one’s control). Equity
attribute of a good tax system can be seen in the following circumstances:
 Vertical equity
 Horizontal equity
2.4.2 Vertical Equity
Vertical equity is based on ability to pay. A person with higher income levels pays more than
persons with lower income levels. It is also concerned with a fair tax rate structure by which to
calculate the tax on different amounts of income.
2.4.3 Horizontal Equity
Horizontal equity refers to a tax system where persons with approximately the same income
Levels pay the same amount of tax. A good tax system should cause the least inconvenience to
the tax payer as well as the tax admini8strator. Thus, tax payers should not overly suffer in order
to comply with the tax laws. The tax payer must know where and when to pay the tax. A good
tax system should be convenient to pay, do not require undue time and cost. Tax is one of the
principles which Adam smith elaborated on. This implies that the true tax liability must be
determined with reasonable certainty or a fair degree of accuracy. The tax collector must not

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cheat the tax payer whereas, the tax payer must be certain on the rate of tax the time of payment,
the place of payment, rights etc. Taxation is not based on arbitrary assessment or extortion.
Finally the tax system should be perceived to be good, the cost associated with the collection and
enforcing the tax should form a very small proportion of the tax collected.
2.4.4 Convenience
A good tax should cause the least inconvenience to the tax payer as well as the administrator.
Thus, tax payers should not overly suffer in order to comply with the tax laws. The tax payer
must know where and when to pay the tax. The place where payment must be made must be
easily accessible to the tax payer. Also, the necessary logistics should be available to help the
administrator to enforce compliance. A good tax system should be convenient to pay, do not
require undue time and cost, example is the PAYE.

2.4.5 Certainty
This implies the true tax liability must be determined with reasonable certainty or a fair degree of
accuracy. The tax collector must not cheat on the tax payer whereas the tax payer must be certain
on the rate of tax, the time of payment, the place of payment, rights, obligations and possibly the
penalties for non-compliance. Taxation is not based on arbitrary assessment or extortion. The tax
administrator must be able to defend his or her position.
2.4.6 Economy
This means that for a tax system should be perceived to be good, the cost associated with the
collection of and enforcing the tax should form a very small proportion of the tax collected. A
good should be very simple and plain to administer and enforced. It should not create political
tension.
2.5 Government and Tax
The effectiveness of any government, at central or local level, depends on the willingness of the
people governed to surrender or exchange a measure of control over poverty in return for
protection and other services. Taxation is one of the forms of this exchange. It has been the aim
of governments world over to maximize the social and economic satisfaction of their citizens by
providing social amenities like good drinking water, electricity, health facilities to mention a
few. These government has also got to accelerate economic growth by developing infrastructures
like roads, bridges etc. They are also committed to develop their economies by directly

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establishing industries, irrigation schemes etc. One of the key issues that face government in
modern times is how to finance its entering increasing expenditure. Taxation has become and
will always be one of the key sources of domestic public revenue Otieku (1992). It is the major
fiscal tool not only in mobilizing the much needed public revenue but also for directing
investment flow and other desirable socioeconomic behavior. For example, in the year
2004/2005, total tax revenue to the government accounted for 72.70% of the total revenue to the
state and non-tax revenue contributed only 27.30% Of the total revenue, direct taxes accounted
for 47.41% and tax on international trade accounted for 18.41% compared to the developed
countries where direct tax contribute greater percentage to the state (The State of the Ghanaian
Economy, 2004). One major trend which is always cited is that from administrative point of
view, it is much easier to levy and collect indirect taxes than direct taxes.

This is because indirect taxes present less political discouragement to enterprises than direct
taxes. Moreover, there is a heavy reliance on indirect tax because it is difficult to identify and tax
the sole proprietors (who form the bulk of income earners in Ghana) directly Mr. D.K Otieku in
a speech delivered as an inter-faculty lecture at the University of Ghana, Legon on March 26,
1992, recounted some of the factors that have always made it difficult to tax the sole proprietors
(made up of self-employed artisans, craftsmen, petty traders, portfolio ‘businessmen etc.). He
cited moving from one place to another, non keeping of proper records of their business
operations, non filing of annual returns to the tax authorities either as a deliberate attempt to
evade tax, illiteracy, ignorance of the tax laws or the relatively high costs of accountancy and
taxation services. These have however, encouraged government to rely heavily on indirect taxes
in developing countries to rise In the World Bank IMF assisted adjustment program, emphasis
was placed on the need to reduce fiscal deficits through increased revenue mobilization and
reduction in government expenditures. Exchange rate devaluation and the removal of price
controls ad the effect of realigning the informal and formal sectors of the economy resulting in
an increase in the tax base and consequently tax revenues. This has translated into a censure of
the expenditure revenue gap even though both sides have been on the increase over the post
adjustment period. Net foreign borrowing mainly finances fiscal deficits over 1983 to 1991.
Huge deficits in 1992 coupled with a short fall in inflows resulted in the government resorting to

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domestic sources mainly the Central Bank for finance. This no doubt contributed to increase in
domestic interest rate and inflation in the years that followed. In more recent years divestiture
receipt have also become significant financing items (Dordunoo 2000:100-103). However, these
non-revenue sources of financing are by their nature temporally and improving the tax system is
crucial to macroeconomic stability and growth. When it was envisage that oil price increase in
2000 will have adverse effect on Ghana’s economy (and therefore the fiscal position), IMF
encouraged the government of the day to increase VAT rate 12.5% as a strategy to improve the
fiscal position. The oil price in 2000 called into questioned this projection and will put pressure
on the government to raise taxes at a faster rate than the originally planned-unless more aid is
forthcoming to offset the negative fiscal effect of the terms of trade shock. The government has
consistently failed to meet its fiscal target in recent years and this caused into question the
realization of vision 2015; considerably catch up is needed to remain on target to meet them.
First, as previously noted the divestiture receipt is a short inflow for the government and
therefore expected to dwindle in not too distant future. Finally, the major source of revenue of
West African countries particularly Ghana includes:
 Taxation
 Licensing
 Lotteries
 Divestiture
 Royalties
 Court fines
 Revenue from participation in economic activity
 Internal and External Borrowing
2.6 Laws on Taxation in developing countries
Taxation was first introduced into Ghana by the colonel masters in the then Gold Coast as
means of raising revenue to finance the ever increasing cost of administering the colonies. It has
since then undergoes so many changes and modification to the current tax system in operation.
Tax jurisdiction is an area in which a particular set of tax laws applies. A tax jurisdiction may
apply taxes on a source basis or global basis. Component authority in tax jurisdiction is
responsible for administering taxes and ensuring that the taxes are collected. Component tax
authority could be more than one with each being responsible for different forms of taxes are

11
collected Component tax country. In Ghana, GRA is responsible for taxes such as IRA, 2000
(Act 592), VAT Act, 1998 (Act 546), CEPS management law etc.
In Ghana the source jurisdiction is applied which implies that income is taxable in Ghana as
longas its source is Ghana where the source of income is not Ghana, it is not taxable in Ghana
where the source of the income is not Ghana for the income to be taxed it must be brought in or
received in Ghana to make it subject to tax in Ghana (s.6 of IRA, 2000 (Act 592).Sources of Tax
rules and laws in Ghana are:
 Domestic Legislations
 IRA, 2000 (Act 592)
 CEPS (Management) Law 1993
 VAT Act, 1998 (Act 546)
2.7 Problems of Tax Administration
Over the past two decades many developing countries have implemented comprehensive reforms
of their tax administrations in order to increase revenue and curb corruption , the International
Handbook on the economics of corruption, edited by Susan Rose- Ackerman and forthcoming,
2006). Despite dramatic improvements in tax collection, and the success of Ghanaian tax
collection relative to its neighbors, there is little doubt that taxation remains subject to very large
leakages. These leakages area more a question of administration than of policy, which is a
reflection of the oft- cited claim that in developing countries “tax administration is tax policy”
tax administration is divided among three primary agencies: the Domestic Tax Revenue Division
(DTRD), the value-added tax service ( VATS) and the customs, Excise ( Casanegra de Jantscher
1990). David Adom, Commissioner of the domestic tax revenue division (DTRD) (1998)
reported that the rapid growth in the size and form of business conducted over the internet and
other communication networks, has raised a number of concerns for the formulation of tax policy
and effectiveness of existing administrative procedures and techniques. This is the direct result of
the nature of electronic-commerce transactions, which blur frontiers, changes the character of
income and result in the loss of audit trail. “These reduce the tax man’s ability to check the
accuracy of profits reported by taxpayers and narrow the tax base”, he added. (Accra, Sept 6,
1998, Ghana News Agency) Adom (1998), mentioned schemes for tax avoidance, irregular flow
of resources taxation of the informal sector and the inability to establish the ‘tax court; as other
challenges to increased revenue collection. He expressed regret that some self-employed persons,

12
including professionals and affluent in the society, belong to a category of taxpayers, who
contributed only 5.2 per cent of total revenue collection in 1998 while employees contribute 29.8
per cent during the same period. “This poor performance to tax group is due to problems with
taxpayer identification, illiteracy and poor record keeping and sometimes, Willful intention of
these potential taxpayers to evade tax”
2.7.1 Lack of Taxpaying Culture among Taxpayers
This was partly caused by a tax system perceived as unfair. Relative’s high rates and a complex
and partly incoherent set of rules, especially for customs and corporate taxes resulted in large
potential rewards for taxpayers willing to bribe to cut their own tax burden and/or speed up
customs clearance of their goods (Terpker, 1999)
2.7.2 Low Wage Levels
The poor salaries at the tax administration compared to the private sector invited corruption. The
average public employee’s salary in 1989 was about 20 percent of the correspondent salary in the
private sector, and was only 5 percent for unskilled staff (fjeldstad and Tungodden, 2003).
2.7.3 Poor working condition and little encouragement
Poor working condition and little encouragement for staff to exercise initiative Working
condition were generally characterized by a lack of technical equipment and poor office
facilities. Moreover, the criteria for recruitment, promotion, and rewards of staff and
management are unclear to substantial discretion (Barber and Mclaren, 1997).
2.7.4 Low probability of detection and punishment for corruption
Low probability of detection and punishment for corruption internal auditing and monitoring
functions had become for the most part non-operative and infective due to weak management
and poor information. In practice, the probability of being detected and punished for corruption
was virtually nonexistent. (Barber, 1997)Two glaring administrative challenges remain. This
.first is the continued difficulty of achieving full integration of the different tax agencies, as well
as effective collaboration with other relevant branches of government. Experience in other
countries suggests that one of the most effective means to improve the equitable and efficient
collection of revenue is improve information sharing between agencies (Terkper, 1998). He
added that, the simple ability to cross reference tax filings across agencies has the potential to
more general level, the challenge of tax collections fundamentally about informational and the
ability to draw on multiple information sources to identify taxpayers and their actual tax liability.

13
Thus, being able to draw on information from, among others, the Registrar General, the
Department of Vehicle of Licensing and Administration(DVLA) and the Ministry of lands,
Forestry and Mines, holds huge potential for improving tax collection through greater knowledge
of the assets and activities of taxpayers. Yet these forms of information sharing remain far too
limited, owing to bureaucratic infighting, and an overall absence of the political will to bring the
assets of high net worth individuals more clearly into the public eye. The second challenge and
the most failure is to implement an effective IT system within the Domestic Tax Revenue
Division (DTRD). Discussion of the need for improved use obit has been ongoing for more than
a decade and has involved major external pressure as well as important internal voices. Yet, the
Domestic Tax Revenue Division (DTRD) remains an almost entirely manual system. While six
offices in Accra have recently been involved in a relatively successful pilot automation program
with support from the German development agency GTZ,concerns remain about the willingness
of the government to pursue the project at the national level.”It is possible to point to four
general areas of significant revenue loss, though precise estimates of tax incidence are
notoriously problematic. The first is a general inability to tax large informal sectors that have
most recently been estimated at between 30% and 60% of total economic activity in most
developing countries. The second is an inability to tax professionals who provide difficult to
monitor service, such as consultancy or legal advice. The third is the difficulty of taxing capital
income. This is particularly true when capital income is held overseas, as it is hugely unlikely
that such income will be reported, while the tax administration generally lacks the capacity to
purse such cases effectively. The final issue is the inability to tax rental income and property,
both of which would be progressive and yield significant revenue Ghana is generally no different
from this overall story, with reasonable levels of corporate tax collection and low levels of
income tax collection overwhelmingly drawn from withholding taxes (Bird andZolt, 2005).

According to Tax Justice Network (2005), Tax avoidance is a significant issue including through
false invoicing and trade mispricing. The root of the problem is a lack of capacity to monitor and
audit firms, and to amend exiting laws when loopholes are identified. Shepherd and Gyimah-
Boadi (2004) wrote, “A major factor impending tax collection is the lack of identification of
potential tax payers. As a result it is those in the formal sector who are burdened with tax with
this lack of identity it is difficult to establish tax payers’ income to form of levying tax.Osei-

14
Dadzie (2009), stated, “The Revenue are poorly equipped. The Domestic Tax Revenue Division
(DTRD) is yet to be computerized and even ordinary calculators to work with are lacking in
some of the offices. The government has identified such deficiencies and is seriously addressing
these problems. For instance in April, I presented some calculators to theAgbogbloshie offices of
the Domestic Tax Revenue Division (DTRD)”.
2.7.5 Lack of Equipment
Lack of appropriate equipment to work with has resulted in a situation where information on
potential tax payers is not even captured. In some circumstances officers collude with taxpayers
to cheat the system through quoting lower figures than the state deserves as tax. Some even
exploit the ignorance/illiteracy of taxpayer to rob them. Still other does not exhibit high levels of
professionalism in treating the tax payers. The concept of customer service is alien to our
culture” (Kagina, 2004)
2.7.6 Embezzlement of Tax Revenue
The weak administrative capacity makes it difficult to monitor the numerous payments made on
weekly basis. These executives of the groups keep tax collection to themselves and turn them
over before paying to the tax authorities. These cause problems of delayed payments. In extreme
situations, the executives embezzle monies collected without much action for recovery by the tax
authorities.

2.7.7 Cost of Collection and Exorbitant

The cost of stationery and printing receipt books coupled with commission paid to the executives
made cost of collection high in spite of its simplicity in collection. This high cost violates the
Adam Smith’s economy- one of the four cannons of tax system.
2.7.8 Poor Record Keeping by the Associations
High levels of illiteracy and the low level of education among members of the association,
resulting poor record keeping by the association making accounting and auditing procedures
difficult(World Bank, 2002).
2.8 Tools for Easy Tax collection
Adom (1998), said there should be a provision in the tax laws to establish a special court to try
tax cases. But unfortunately this has not been established, causing delays in the adjudication of

15
tax disputes. He mentioned that a draft bill, designed to bring together all the laws relating to
direct taxation, must be prepared and be placed before Parliament for consideration. In addition,
he said special taxpayers, and urged the tax-paying public to co-operate with income tax
administration by voluntarily providing information on tax-evaders.Okine (1998) Re-echoed the
call by the above authors for increased budgetary allocations to the revenue authorities to enable
them to improve their performance to meet national aspirations it’s suggested the introduction of
stringent provisions in the existing tax laws, including both fine sand jail terms for tax evasion
and smuggling.

The CEPS Commissioner noted that it has almost become acceptable for people to dupe the
system and get away with it and said some seriousness should be made to bear on tax law so that
offenders are with drastically. At a more general level, effective automation of the tax authorities
would dramatically improve overall fiscal transparency and capacity of the government to
monitor illicit activities. This is particularly important in light of the major oil revenues that will
enter the system from 2010 or2011 (Mckay, 2007).An efficient and effective tax regime thrives
in the presence of well developed ‘Para tax professions. In the absence of qualified accountants,
auditors etc. whose work impact directly or indirectly on tax administration, the system falter.
Accordingly, well trained professionals within the national economy could constitute an integral
component in improving the organizational structure of the tax administration (Kagina, 2004).
There are simply too many taxes in our system with some even overlapping. It is suggested that
extant tax laws are reviewed periodically with all amendments and changes consolidated. Both
tax administrators and taxpayers can have ready and easy access to the updated tax
position(Kagina, 2004).Recruitment of staff should be so designed as to ensure that the Revenue
agencies are adequately and effectively staffed. Training is also recognized as an important pre-
requisite of efficient and tax administration (Kagina, 2004).Revenue staff as the organizations
greatest assets must be well qualified and well-motivated especially so when the competition is
keen. Adequate motivation eliminates or greatly reduces the incidence of dishonesty and
corruption. Not only will staff not engage in activities that may result in a loss to the state but
also contribute to taxpayers being more confident in the tax administration (Kagina, 2004).

16
To enhance the capacity of tax administration, a computerization process has been initiated to
computerize all the tax Districts in Accre-Tema Metropolitan Area. Plans are far advanced to
open sub-offices and collection points to make the services of the Domestic Tax Revenue
Division (DTRD) more available to the tax payer (Osei- Dadzie, 2009).Terkper, (1998) wrote
“Through the assistance of Revenue Mobilization Support (RMS) OFGerman technical Co-
operation. Domestic Tax Revenue Division (DTRD) staff together with staff from the RAGB and
a partner visited Tanzania to study their ITAX software developed byGTZ AND Tanzania
Revenue Authority for tax administration systems. At the instance of Government, Domestic Tax
Revenue Division (DTRD) staffs have been selected to participate in a World Bank sponsored
project on e-Ghana. A major component of this project is e-Government which aims at
improving the efficiency of selected Government services through the use of public/private
partnerships (Baine, 2006).
To improve on policy analysis in the area of Taxation a Tax Policy Unit (TPU) has been set up at
the Ministry of Finance and Economic Planning. It is hoped that the Unit will collaborate
strongly with the Revenue agencies, especially the Research and Monitoring Departments, to
strengthen their Performance (Baine, 2006).Potential tax payers and investors can obtain
information about their liability to direct taxes. The Domestic Tax Revenue Division (DTRD)
has intensified its efforts at educating the public on tax issues. A key element of the tax
administrative reform is to move existing revenue departments out of the Ministry of Finance
into a semi-autonomous revenue authority overseen by a fairly independent Board of Directors.
The objective behind this move is mainly to provide incentives for the staff to improve its
performance and thereby increase revenues (Osei, 2000).A revenue authority, established outside
the civil service system, is not bound to wage rates and employment regulations that apply to
other sectors of government (Devas et al, 2001). This mean that the Tax Authority, in principle,
can pay rates which will enable it to attract and retain highly qualified staff. Hence, there should
be consultants involved in setting up the recommended management and professional staff
remuneration that should be competitive with the private sector.

The reform should strengthen accounting and internal monitoring systems and curtailed the
opportunity of tax officers to use their own discretion in dealing with cases. The general scarcity
of qualified accountants, lawyers, and IT-experts in Kumasi Metropolis means, however, that an

17
authority would also have only small numbers of these professionals (Therkildsen, 2004).Also
working conditions for employees should be improved by upgrading offices, expanding
computer services, purchasing vehicles, and so on. Thus the initial focus was mainly o internal
matters; less attention was paid to the Authority’s external relations (Devas et al,
2001).“Motivation of staff to make them resist any temptation to collude with taxpayers to evade
tax is another major challenge faced by tax administrators, an issue which is not often given the
attention that it deserves” Mr. Asamoah reported to a forum in 2005 that revenue institutions
have to sometimes organize training sessions for taxpayer on the existing tax laws and
regulations and how they affect them. Annan (2008), wrote that it is very crucial at this time of
the nation’s development, that education on tax payment is intensified for the public to wake up
to its tax obligations. “People will obviously not want to pay taxes if they are not well educated
to accept the need to do so. Drastic measures must be put in place to break the culture of
corruption” in the administration. All former revenue staff, including the revenue commissioners,
should be transferred to the Authority and employed on a probation basis (Therikildsen, 2004).
Baneful stated “In summary tonsure that government has enough revenue to undertake its
activities, Domestic Tax Revenue Division (DTRD) needs to do the following:
I. Ensure more efficient tax collection system without necessary adding further burden upon the
taxpayer;
II. Educate everyone in the country on the importance of paying taxes;
III. Improve the tax administration that is Domestic Tax Revenue Division (DTRD) must
ensure all eligible taxpayers file tax returns, have tax revenue programs and administer them
fairly and manage the associated risk;
IV. Enforce existing laws and in this Domestic Tax Revenue Division (DTRD) must produce an
enforcement procedures and practice manual;
V. Reduce corruption and the incidence of revenue intended for government going to line the
pockets of officials

VI. Examine the tax laws and where necessary prepare advice for Government on possible
amendments. He added “in my opinion, higher tax revenues can be reached, without additional
burdens on businesses, taxpayers and the economy if there is political will to resolve the

18
problems in the current taxation systems introduce a single TIN and reduce corruption by
improving upon governance and accountability.

19
 CHAPTER THREE
3. RESEARCH METHODOLOGY AND DESIGN
3. Introduction
This chapter discusses how the necessary data needed for this research was gathered. The section
provides information on the research methodology and techniques used to conduct the study. It
defines the population from which the sample will select and describes the sampling procedures
used to select the sample size. It also discusses the research design and the method of data
collection which mainly involved data organization and analysis are also included in this chapter.

3.1 Research Design

This study adopted descriptive research which describes phenomena as they exist. Descriptive
research is use to identify and obtain information on the characteristics of a particular problem or
issue.
3.2 Population and Sampling
3.2.1 Target Population
The total collection of individuals who are potentially available for observation and who have
the attributes common to those which the research questions refer.

3.2.2 Sample Size

As indicated, the size of the sample and the way in which it is selected for the confidence the
researcher have in the data collection and the extent to which you can generalize. Owing to
the fact that the population of Jimma town domestic tax revenue division is very large, the
study selected eighty seven (87) staff and tax payers which feel with the target group and 3
officials of these offices. Sample size selection was based on the reliability of the response. The
jimma town administration has three (3) branches, these are GinjoGuduru ,Bocho Bore, and
Hermata branches .
3.2.3 Sampling Techniques
The sampling is the process of selecting a sufficient number of elements from a population so
that by studying the sample and understanding the properties or characteristics of the sample,

20
researcher was able to generalize the properties of the sample to the population. Convenience
sampling was use to select the respondents.

3.3 Sources of data

The researcher was collected data for the study from two main sources. These sources are
primary and secondary sources of data. The primary sources of data are those collect by the
researcher through the administration of questionnaires and interviews granted. They are first-
hand information collect by the researchers. The secondary data are data collected by the
researcher from magazines and other sources like quotes by researchers on this topic. They are
already in existence.
3.4 Data Collection Instruments
3.4.1 Questionnaire
In this study, questionnaires were use as the primary research instrument. The questionnaires
include mostly closed- ended type of questions (pre-coded) that make it simpler for the
respondents and also for easy analysis. The nature of the study was explained to respondents, and
respondents’ confidentiality of any information provided are also assure. Respondents are
provided with detailed instructions as to how the questionnaires was completed and returned.
The rationale behind providing clear instructions and assuring confidentiality of information are
Based on the fact that, this significantly reduces the likelihood of obtaining biased
responses(Sekaran, 2003).The questionnaire use is in two folds. The first fold was designed for
staffs and the second fold for taxpayers.
3.4.2 Unpublished and Published Data
Secondary sources of data collection were obtained for additional information. The study rely on
both unpublished and published data such as, articles from academic journals and the internet
which was related to the topic. Sources of all secondary data are duly acknowledged at the
reference section of the research. The internal revenue act, 592, 2000 is an invaluable source of
information.
3.5 Data Analysis and Interpretation
The data so was collected using percentages, tables and bar charts. The data was analyzed with
regards to the sole traders. Explanations were given to throw light on some of the tables to

21
promote further understanding of the results of the presentation and manual calculator was used.
Finally, the analyses data was summarized in chapter five of this research.

22
 Chapter Four

4. Data analysis, Interpretation and Presentation

This chapter deals with analysis and interpretation on the base of data gathered through
questionnaires and interview. In order to acquire information for the study totally 115
questionnaires were distributed to tax payers and employees of tax bureau. From randomly
selected 100 tax payers only 87 were correctly filled and returned the questionnaires. From 15
employees of the revenues bureau all are correctly and actively participated in responding the
questionnaires. Furthermore, to gather additional data the researcher was held interview with
manager of the revenue bureau.

4.1 Analysis of Data Gathered from Tax payers

Table 1 General Profile of tax Payers

Gender Male Female Total

No of respondents 46 41 87
Percentage 52.9% 47.1% 100%
Age group 20.30 32-41 41-50 Above Total
No of respondents 18 24 30 15 87
Percentages 20.7% 27.6% 34.5% 17.2% 100%
Educational back ground 1-6 6-12 Certificate Diploma Degre Total
e
No of respondents 35 20 14 15 7 87
Percentage 40.2% 22.9% 16.1% 12.6% 8.2% 100%

The data collected through questionnaires indicate that almost about 53% of the respondents was
male and 47% was female all respondents age lie above 20 years. The age group from 41- 50
cover the highest ration with 34.5%. With regard to educational bock ground 40.2% of the
sampled respondents learned primary

Schools,22.9% secondary school, 16% have certificate,12.6% have diploma and 8.2% have
degree.

Table 2 Types of tax payers take parts in responding the questionnaires

23
 Types of tax payers No of respondent Percentage
Employment income tax payer 15 17.2%
Business income tax payers 55 63.2%
Agricultural income tax payers 17 19.6%
Total 87 100%

From the whole respondents 63.2% are engaged in different types business, 19.6% engaged on
agricultural activity and 17.2% are public servants.

Response of tax payers

Table 3 Do you face any problem when you pay your tax liability?

Response Total No of respondent Percentage

Yes 59 67.8%
No 28 32.2%
Total 87 100%

For the above question 67.8% of the tax payer tell us that a problems when they pay their tax
liability. As the data gathered from questionnaires indicate major problems mentioned by tax
payers are in efficiency of tax collectors (by 60%), the existence of over taxation (22.8%) and
problem of procedure of tax collection with 17.2% of respondents.

Table 4 Is your annual tax liability based on your income?

Response Total No of respondent Percentage

Yes 59 17.2%
No 72 82.8%
Total 87 100%

24
As tried to show in above table above 82.8% of the tax payers have complain on tax amount
imposed on them because the tax they paid is not based on their income.

Table 5 when do you pay tax?

Response Total No of Respondent Percentage

When receive assessment 14 16.5%
notification
Before due date 42 48.3%
After due date 32 35.6%
Total 87 100%

As the data gathered implies that 51.7% (16.5% + 35.6%) of the tax payers are not paid their tax
liability on time for the same question the response of revenues bureau employees was almost
nearest to this percentage with 53.3%. The late payers reason out some problems for the late
payment like of cash on hand on exact time of payment and etc.

Table 6 Does the tax rate imposed by government is fair?

Response Total No of respondent Percentage

Yes 31 35.6%
No 56 64.4%
Total 87 100%

25
From the total sampled respondents 64.4% have complain on the tax rate imposed on them
because they feel it is above their capacity

Table 7 is the payment period enough?

Response Total No of respondent Percentage

Yes 77 88.5%
No 10 11.5%
Total 87 100%

Among the respondents 88.5 of the tax payer’s answers indicate that the payment period is
enough. The remaining 11.5% say the payment period is not enough. This realizes that range of
time that given for payment is enough

Table 8 Do you know why tax is compulsory?

Response Total No of respondent Percentage

Yes 40 45.9%
No 47 54.1%
Total 87 100%

Knowledge of tax payers about taxation is still not adequate about 54.1% of tax payers have no
idea why they pay tax. Some tax payers when ask why they pay tax they reply that only they pay
tax because it is obligatory.

Table 9 How do you see present taxation system?

Response Total No of respondent Percentage

Good 35 40.2%
Not bad 27 31%
Need restatement 25 28.8%
Total 87 100%

From all respondents 71.2% (40.2% + 31%) almost have positive about present taxation system
and the remaining 28.8% feel not good. For the same question submitted for employees the
majority of them have good feeling.

26
Table 10 how do you feel about taxation?

Response Total No of respondent Percentage

As an obligation 30 34.4%
As a debt 37 42.5%
As useful 20 23.1
Total 87 100%

As indicated in above table only 23.1% of taxpayer see taxation as useful about 76.9% the tax
payer considered tax as debt and obligation this implies that the knowledge of tax payer is poor.

Table 11Are you satisfied with the method of assessment?

Response Total No of respondent Percentage

Yes 47 54.1%
No 40 45.9%
Total 87 100%

Based on the above table 45.9% of the respondents are not satisfied with the method of
assessment. The following are some of the reasons mentioned by the tax payers are the tax
system are not modernized; the appointed tax collectors are not feel responsible or have no
interest on their position.

4.2 Analysis of data gathered from employees

This part of the analysis discussed with question that offered for the employees of revenues
bureau and their answers 15 employees of the bureau and their manger were actively participated
in answering the questionnaires and stringy assist me by giving all necessary data for my study.

Table 12 General profile of the employees

Gender No of Percentage Educational qualification

employees diploma Percentage
53.3
Male 9 60% Degree 46.7%
Female 6 40% M.A -
total 15 100% Total 100%

27
As it is shown in the above chart the total of employees of jimma revenues bureau are only 15. 9
are males and the remaining 6 are females. Educational back ground of the employees tell us that
about 54.3% of them have diploma and 46.7 of the employees graduated from college by degree.

Table 13 Do most tax payer pay their tax liability on time

Response Total No of respondents Percentage

The policy 2 13.3%

Tax payers - -
Tax office 4 26.7%
All 9 60%
Total 15 100%

Only 60% of the respondents answered that tax collection and assessment is the responsibility of
all the remaining 40% answered different answer.

Table 14 How do you evaluate the coordination of your office with others

Response Total No of respondents Percentage

Excellent 2 13.4%
Very Good 3 20%
Good 5 33.3%
Hess 5 33.3%
Total 15 100%

28
For the question above about 66.7% of the respondents to tally answered excellent good and very
good only 33.3% said less this averagely implies us the offices coordination with others office is
good.

Table 15 what do you think about the bureaus structural adjustment?

Response Total No of respondents Percentage

Complete the work quickly 9 60%

Complete the work 5 33.3%
moderately
Complete the work 1 6.7%
excessively
Total 15 100%

According to data gathered from the respondents about bureaus structural adjustment 60% of the
employees believe that it is good and complete the work quickly, 33.3 of respondents feel that its

Complete the work moderately and the remaining 6.7% believe its complete the work
excessively.

Table 16 how do you evaluate the knowledge of tax payer about taxation.

Response Total No of respondents Percentage

High - -
medium 3 20%
Low 12 80 %
Total 15 100%

29
The response of employees concerning knowledge of tax payers describe that 80% of the
respondents come out with the knowledge of tax payer is low, and the remaining 20% respond
that their knowledge is medium.

Table 17 what do you feel about the position you have assigned?

Response Total No of respondents Percentage

Is the right position 6 40%

Beyond my capacity - -
Under my capacity 9 60 %
Total 15 100%

From total employees only 40% of the employees fail the right about their position the majority
of the respondent (60%) feel their position is under their capacity this implies that they have no
satisfaction on their position.

Table 18 what is your idea about present tax collection andassessment system?

Response Total No of respondents Percentage

Is effective 9 60%
Show discrimination 4 26.7
Have in sufficient manpower 2 13.3%
Total 15 100%

Among the respondents 60% of the tax payers approve that the present tax collection and
assessment system is effective 26.7% of the respondents said it shows discrimination while the
remaining 13.3% of the respondents answered have insufficient power of man.

30
4.3 Analysis and Presentation of Secondary Data

Table 19 the five years budgeted and actual amount of tax collected in jimma revenue
office.

Year Budgeted amount Actual amount of tax Percentage

of tax collected
1999 4,ooo,ooo 4,187,552 104.65% Source: jimma
2000 4,448,000 5,801,536 130%
2001 5,200,000 4,925,234 94.71% Revenues Bureau
2002 5,620,265 5,024,441 89.39%
2003 6,789,000 5,322,161 78.39% As presented in
Total 26,057.265 25,260,924 96.94% the above table
the actual amount
of tax collected in 1999 and 2000 was above budgeted tax amount with 104.68% and 130%
respectively. But, this result is reversed for the next consecutive years of 2001,2003, and 2003
with 94.71%,89.39% and 78.39%. The declined amount of tax collected in these three years also
resulted in the decreased amount of actual tax collected for cumulative five years from the
budgeted tax by 96.94%.

The data gathered via interview with the manager of the revenues bureau indicate that the two
major factors for decreased amount of actual tax collected from the budgeted amount of tax are:

The other factor that understates the actual tax collected from the budgeted tax is bankruptcy of
the registered tax payers.

31
 CHAPTER FIVE

5. Summary conclusion and recommendation

5.1 Summary

The major findings that included in this research summarized as follows.

Both employees and tax payers were agreed that the tax payment period is enough.
The tax payers are satisfied on the present tax assessment and collection system.
Knowledge of tax payers about tax is poor.
Employees of revenues bureau are not satisfied on their position and on their working
environment.
Almost the majority of tax payers are suggested that the tax rate is not fair.
The coordination of revenues bureau with other offices is good.
Lack of training and education concerning tax for employees of revenues bureau.
The major factors for diminished amount of tax collected from the budgeted are conflict
between ethnic group and bankruptcy of the registered tax payers.

32
5.2 Conclusion

To conduct these study questionnaires were distributed for 100 tax payers and 15 questionnaires
were distributed for employees of revenues bureau. In addition to this, different opinions were
collected from manager of the office and the previous year report of the office. As the result of
the study indicate that the prominent problems of tax collection in jimma revenue are the
following.

The other significant problem identified by the study is poor knowledge of tax payers
concerning tax.
The annual tax payment (the tax rate) imposed by government is not fair or not comparable
with their income.
Lack of adequate training and education with respect to tax laws and amendment of tax low
which improve knowledge of employees
The revenues bureau faced a problem in service delivery by reason of dissatisfied employees
on their position and their working environment.

33
5.3 Recommendation

To stamp out the distinguished problems and improve (sustain) the strength which shown in
Jimma revenue offices , with respect to tax collection and assessment, the town revenues bureau
should take the following measures.

The revenues bureau should extend awareness regarding tax to the community by using
different media, flyers, pamphlets and by face to face training.
The revenues bureau should try to smooth the way that the annual tax payment (tax rate) and
income of the tax payers become balanced. By informing the complain of tax payers to
concerned body.
It should necessary to create the spheres which upgrade the knowledge of the employees.
And different training relating to tax low and amendment of tax law must be provided.
To reduce dissatisfaction of employees on their position job rotation is one way and the
revenues bureau should try to make the working environment attractive and comfortable by
making the environment green, by providing refreshment center for worker and by creating
duties that improve friendly relation between the workers.

34
References
Hyman D., N., (1983) Public Finance: A Contemporary Application of Theory to Practice.
Haricot College Publishers, USA
Hyman. D, .N. (2002) Public Finance: A Contemporary Application of Theory to Practice7thed,
Haricot College Publishers, USA
IMF (2002) Finance and Development, A Quarterly Magazine, Vol. 39 No. 2,
Washington.
IMF (2003) Social Impacts of a Tax Reform: The Case of Ethiopia, Working Paper,And
WP/03/232: Washington. International Tax Dialogue (2005) Conference on the VAT: The Value
Added TaxExperiences and Issues. Accessed Dec.10,
2010<http://www.itdweb.org/VATconference/pages/newupdates.aspx>
Kothari. C., R., (1985) Research Methodology Methods and Techniques, Wishwa
Pakashan CA Davision of Wiley Easter Ltd: New Delhi.
Krever R., (2008) VAT in Africa: International VAT monitor, Pretoria University Press:
South Africa.
McGee. R., W., (2004) The Philosophy of Taxation and Public Finance, Kluwer
Academic Publishers: USA.
MoR (2004) Ministry of Revenue Working Paper. Implementation of VAT in Ethiopia,
Addis Ababa’
Nightingale K., (2002) Taxation: Theory and Practice, 4th ed, Printince Hall.
Rosen H., S., (1988) Public Finance, Richard D. Irwin FNC, 2nd Ed.
Russell B.,(2010) Revenue Administration: Developing A Taxpayer Compliance
Program, IMF: New York.
Shirazi.,K., J., and Shab,. A. (1991) The Value Added Tax: Its Causes and
Consequences, IMF
Tait A., A., (1988) Value Added Tax International Practice and

35
 APPENDIX A

JIMMA UNIVERSITY

COLLEGE OF BUSINESS AND ECONOMICS

Department of accounting and finance

The main object of this study is to assessment on challenges of employment income tax collection in case
of jimma town small tax payer office .Therefore, you are kindly request to give your genuine response on
the following questions

I. Dear respondent you are not required to write your name to give you freedom, to respond
confidently and to keep your secret safely.
II. Please put √ mark in the place provided for you in box for both open and close questions.
Appendix I

Questionnaires related to tax payers

 personal information
 Age A. 20-30  B. 31-40 C. 41-50  D. above 50
 Sex A. Male  B. Female
 Education background:
A. primary school (5-6)  B. Secondary school (7-12) 

C. Technical school  D. college (diploma) 

E. College (degree) 

 Types of business:
1. How do you feel about taxation? A. as an obligation 
B. as debt  c. as useful 

2. Is the tax payment period enough? A. yes B. No 

3. When do you pay tax?

A. when I receive assessment notification 

B. before due data C. after due date 

4. Is your annual tax liability based on your income?

36
 A. yes  B. No 

5. Do you face any problem when you pay tax liability?

A. yes  B. No 

6. If your answer is “yes” for question number

5 what is your possible reason?

A. Problem of procedure of tax collection system

B. Weakness among tax collector

C. The existence of over taxation

D. If any other specify ________________________________

7. How do you see present tax system? A. Good  B. Not bad 

C. Need restatement 

8. Do you know why tax is compulsory? A. Yes  B. No 

9. If your answer is “no” for question no 8 what is your reason?

A. No awareness creation by concerned body

B. Because tax is not so far contribute for one’s country’s development
C. I am not obliged to pay tax because it is not my responsibility.
D. If any other specify ________________________________
10. Are you satisfied with the method of assessment? A. Yes  B. No 

11. If your answer is “no” for question no10 because of what?

A. Power to collect tax is not delegated on the woreda

B. Tax collection system is not modernized one

C. Appointed tax collectors are not feel responsible

D. If any other specify ________________________________

12. Does the tax rate imposed by government is fair? A. Yes B. No

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Appendix II

Questionnaires related to revenues bureau employees personal information

 personal information
 Age A. 20-30  B. 31-40 C. 41-50  D. above 50
 Sex A. Male  B. Female
 Education Qualification:
A. Technical school  C. College (degree) 

B. College (diploma)  D. MA/MSC 

1. Who is responsible for tax collection and assessment?

A. the policy  B. Tax payer 

C. Tax office  D. All 

2. How do you evaluate the coordination of your office with the

other office? A. Excellent  B. very good 

C. Good  D. Less 

3. How do you feel about the position you have assigned?

A. is the right position  B. beyond my capacity 

C. Under may capacity 

4. What do you think about the bureau’s structural adjustment?

A. will complete the work quickly  B. will work

excessively  C. will work moderately 

5. What is your idea about the present tax collection and

assessment? A. Effective  B. show discrimination 

C. Have in sufficient man power 

6. How do you evaluate the knowledge tax payer about taxation?

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 A. High  B. Low  C. Medium 

7. Do most tax payer pay their tax liability on time?

A. Yes  B. No 

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