JIMMA UNIVERSITY

COLLEGE OF BUSINESS AND ECONOMICS

DEPARTMENT OF ACCOUNTING AND FINANCE

PROGRAM: Msc IN ACCOUNTING AND AUDITING

TITLE: DETERMINANTS OF TAX COMPLIANCE BEHAVIOR AMONG
TAX PAYERS: THE CASE LARGE TAXPAYERS OF ETHIOPIAN MINISTRY
OF REVENUE (THE CASE OF JIMMA BRANCH)
A RESEARCH PROPOSAL FOR PARTIAL FULFILLMENT OF THE
REQUIREMENT FOR THE AWARD OF MASTERS DEGREE IN
ACCOUNTING AND AUDITING

BY:

MOGES GETAHUN

MAIN ADVISOR: TESFAYE GINBARE (Ass. Prof)

CO-ADVISOR: FEDA ETEFA (MSc)

Jimma, ETHIOPIA

Sene, 2014

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Table Contents
Chapter one..........................................................................................................................................5
Introduction.........................................................................................................................................5
1.1 Background of the Study...............................................................................................................5
1.2 Statement of the problem...............................................................................................................6
1.3 Research Question.........................................................................................................................8
1.4 Objectives of the study..................................................................................................................9
1.4.1 General Objective...................................................................................................................9
1.4.2 Specific objectives..................................................................................................................9
1.5. Significance of the study..............................................................................................................9
1.6 Limitation of the study..................................................................................................................9
1.7 Organization of the paper............................................................................................................10
Chapter Two:.....................................................................................................................................11
Review of related literatures..............................................................................................................11
Introduction.......................................................................................................................................11
2.1. theoretical literature review........................................................................................................11
2.1.1. Tax Compliance...................................................................................................................11
2.1.2 Tax non-compliance.............................................................................................................11
2.1.3. Benefits of tax compliance..................................................................................................12
2.1.4. Costs of Tax Compliance.....................................................................................................12
2.1.5. Determinants of tax compliance..........................................................................................13
2.1.5.1 individual factors...............................................................................................................13
2.1.5.2 institutional factors............................................................................................................14
2.1.5.3 psychological factors.........................................................................................................17
2.2. Review of Empirical studies......................................................................................................19
2.2.1. Conclusions of the empirical review and knowledge gaps..................................................23
2.2.3. Research Hypothesis............................................................................................................24
2.2.4 conceptual frame work..........................................................................................................26
Chapter Three....................................................................................................................................27
Research Methods and Methodology................................................................................................27
Introduction.......................................................................................................................................27
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3.1 background of the study area.......................................................................................................27
3.2 Research Design..........................................................................................................................27
3.3 target population..........................................................................................................................28
3.4 data type and source....................................................................................................................28
3.5 sample size and techniques..........................................................................................................28
3.6 method of data collections...........................................................................................................29
3.7 methods of data analysis..............................................................................................................29
3.7.1 Model specification...............................................................................................................30
WORK PLAN AND COST BREAKDOWN....................................................................................32
4.1 Time Schedule or Work Plan...................................................................................................32
4.2. Budget Breakdown.................................................................................................................33
References.........................................................................................................................................34

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 Abstract

A tax is a compulsory financial charge or some other type of levy imposed on a taxpayer (an
individual or legal entity) by a governmental organization in order to fund government spending
and various public expenditures (regional, local, or national). It is seen as a primary source of
income and a vital mechanism for financing most government programs. Despite its
importance most of countries especially the developing ones did not ensure tax compliance. So
many researches were done in previous some decades in trying to identify the factors which result
in noncompliance. Although those studies come up with important conclusions they did not found
same implications. When we came to Ethiopia the tax system is not efficient in collecting its
revenues as planned in time. Thus, this study is designed to examine the impact of some important
factors on tax compliance behavior of ministry of revenue’s tax payers, Jimma branch. The
researcher will select samples using purposive and simple random sampling to distribute close
ended questionnaire. The collected data will be analyzed using STATA 16.

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 Chapter one

Introduction
This chapter deals with introduction of the study which consists of background of the study,
statement of the problem, the research questions and objectives of the study, and significance of
the study.

1.1 Background of the Study

A tax is a compulsory financial charge or some other type of levy imposed on a taxpayer (an
individual or legal entity) by a governmental organization in order to fund government spending
and various public expenditures (regional, local, or national) (Charles and Mclure, 2015). It is a
main source of country’s revenue which used to spend the government expenditure and
development. Government needs financial resources to act as a government and play a role that
is expected from it by the society (Bhatia, 1976; James, 2000). The first known taxation took
place in Ancient Egypt around 3000–2800 BC (taxes in the ancient world, 2002). In the today’s
world governments’ expenditure is increased rapidly. The economic resources available to
society are limited, and so an increase in government expenditure normally means a reduction in
private spending. In this regard James (2000) states that taxation is one method of transferring
resources from the private to the public sector. Taxes play a greatest role in the economy
since they are used as an instrument to stabilize the economy, and reduce private demand when
resources are released for public sector use (Murphy and Higgins, 2001).

Taxes are seen as a primary source of income and a vital mechanism for financing most
government programs around the world, for the tax revenues support to finance the greater part
of facilities that governments offer including education, welfare, public safety, infrastructure and
other basic public services (Granger, 2013). Thus, governments pay great attention to tax
and its way of collecting or for tax compliance. Tax compliance refers to policy actions and
5
individual behavior aimed at ensuring that taxpayers are paying the right amount of tax at the right
time and securing the correct tax allowances and tax reliefs (Charles and McLure, 2015). But still,
most of countries especially the developing ones did not ensure tax compliance. It is for this
reason that tax compliance has been an important subject of research in a large number of
developing and a number of developed countries (World Bank, 2013).
Non-compliance with the tax laws is as old as establishment of government in the world, with
Plato commenting on this phenomenon in his writings over two thousand five hundred years
ago [Tanzi and Shome, 1994]. Despite this lengthy existence, the issue of compliance with the
tax laws twisted petite interest and received minimal attention until the last few decades. Since
the 1970s, however, research into tax compliance has intensified, with both governments and
academicians giving significant attention to the concern (alemayehu, 2020). This increased
research into the area of tax compliance appears justified when estimates of the
level of noncompliance in

1.2 Statement of the problem

Tax compliance is a growing concern for tax authorities and public policy makers as tax
noncompliance seriously affects government revenue. Most of the developing countries face
difficulty in generating sufficient revenue to fulfill public demands. Although taxpayers’
noncompliance is a global problem, studies revealed that it is more serious in developing
countries especially in sub-Saharan countries. In Ethiopia government reports showed that
revenues generated from taxes and related incomes didn’t satisfy the current and capital
expenditures yezina werku (2019). As a result tax compliance is an area of concern for the
central government and all regional tax authorities in the country.

Furthermore, Tadele (2015) indicated that although the overall economic performance of
Ethiopia, measured by growth in real GDP, between 2003/04- 2010/11, registered an average
annual growth rate of 11.4%, and the contribution of tax revenue to GDP in 2010/11 is about
11.5%, this ratio was proved to be low compared to other developing countries such as Botswana
(35.2%), Djibouti (20%) Kenya (18.4%). Various institutional and tax reforms (institutional
reform such as merging of the former Ethiopian Custom Authority and Inland Revenue
Authority in 2006; tax reforms such as revising income tax law in 2002, replacing of sales tax by
Value Added Tax in 2003, etc..) have been taken by the Ethiopian government. However, the
result of these efforts was not satisfactory. Hence, the issue of non-compliance is posing a
serious challenge for the revenue authorities. Yezina
6 Worku(2019) in her book, illustrated the
federal tax revenue collection trend of Ethiopia from 2008 to 2018 where the marginal increase
in the tax collection was up and down from year to year.

7
Dealing with the problem of non-compliance requires an understanding of the underlying factors
that affect taxpayers‟ decision about whether to pay or evade taxes. Understanding of tax payers’
behavior helps revenue bodies to design and implement effective compliance strategies that
contribute to the efficiency of taxation systems. A study conducted by Tilahun and yidersal
(2014) revealed that perception on government spending, equity and fairness of the tax system,
penalties, personal financial constraints, changes on current government policies; and referral
group (friends, relatives etc.) are factors that significantly affects the tax compliance behavior.
Also, in that research it is indicated that gender and probability of being audited have no
significant impact on tax compliance behavior.
According to haile and Destaw (2020) tax rate, audit probability, and compliance cost are
identified as statistically significant negative determinants of tax compliance, though Penalty
rate, Perception of government Spending, training to enhance tax knowledge and age of the
respondent is found to have statistically insignificant effects on compliance behavior. People
with a higher education level are more compliant than people with lower education level. This is
because those peoples with higher education level have more understanding about the purpose of
taxation to their country than those with lower education level (Chan et al (2000), Jackson and
Milliron (1986), Haile and destaw (2020). On the other hand, Richardson (2008) revealed that
there is a negative association between education and tax compliance. With regard to the impact
of gender on tax compliance Hasseldine and Hite (2003) and Mohamad ali et al (2007) concludes
that female tax payers were more compliant than male. In contrast Richardson (2008) concludes
that gender has no significant impact on compliance across a study of 45 countries. Finally,
Derejie Birhanie (2020) concludes that probability of being audited and attitude towards equity
and fairness are insignificant factors in determining the compliance behavior of tax payers.

From the above discussion we can conclude that results of different researchers are not consistent
on the same variables. Thus, this research will be conducted to provide a clear clarification on
those variables which lacks consistency across different research results.

Ethiopian large taxpayers’ Branch office report showed that about 70% of the federal
government tax revenue is collected from large taxpayers (tax payers whose annual income is
more than birr500,000). However, the government claims that government is not earning
equivalent tax from the growing economy due to taxpayers’ noncompliance behavior
(Alemayehu 2020). Unlike this truth previous studies were mostly made on medium and small
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taxpayers. To the knowledge of the researcher, although there have been a number of studies on
tax compliance factors of medium and small taxpayers, particularly in Ethiopia, there is only
one study, Alemayehu (2020), that exhaustively examined tax compliance factors at large
taxpayers’ level from which about 70% of the tax revenue is generated. alemayehu (2020) has
tried to assess the impact of about 10 variables on tax compliance behavior among large
taxpayers in Addis Ababa. But factors like rewarding faithful tax payers, perception of
corruption, ethics/norms were untouched in his study. So, this study will try also to examine the
impact of those factors on tax compliance behavior among taxpayers, the case of all types of
taxpayers including the large one, in Ethiopian Revenue and Custom authority, Jmma branch,
in addition to the other variables.

Also to the knowledge of the researcher in the study area (jimma city) there is only one study
(amina, 2013). Amina’s research was conducted on category “B” tax payers of the city and she
apply SPSS statistical tool for analysis. Amina concludes tax rate, negative perception of reference
group, and tax knowledge negatively affects tax compliance. On the other hand, she states
probability of detection and penalty rate have a positive impact on tax compliance. Thus, in my
study I will try to conduct the study in the ministry of revenue, jimma branch by adding some
important variables using STATA. This will have its own contribution with regard to filling
knowledge gap and giving some important direction for policy makers.

1.3 Research Question

The study will address the following research question in addition to the hypotheses formulated at
the end of chapter two after proper theoretical and empirical review has made.

1) What is the effect of individual factors on tax compliance behavior of Ministry of

Revenue’s tax payers’ branch Jimma branch?

2) What is the effect of on institutional factors on tax compliance behavior of Ministry of

Revenue’s tax payers’ branch Jimma branch?
2) What is the effect of psychological factors on tax compliance behavior of Ministry of
Revenue’s tax payers’ branch Jimma branch?

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1.4 Objectives of the study
1.4.1 General Objective

General Objective of the Study In the context of the problem and research question highlighted
above is to assess determinants of tax compliance behavior among tax payers: the case Ethiopian
Ministry of Revenue (Jmma branch). Based on this broad objective the study has the following
Specific objectives.

1.4.2 Specific objectives

The specific objectives of this study are;
1. To assess the effect of individual factors on tax compliance behavior of ministry of revenue’s
taxpayers Jimma branch.
2. To assess the effect of institutional factors on tax compliance behavior of ministry of revenue’s
taxpayers Jimma branch.
3. To assess the effect of psychological factors on tax compliance behavior of ministry of
revenue’s taxpayers Jimma branch.

1.5. Significance of the study

If the study will be completed as per planned its results will be significant from both theoretical
and practical standpoints. From a theoretical standpoint the study may help in developing a
comprehensive theory of tax compliance. From a practical standpoint the findings may be of help
for policy makers who will gain a better understanding of the factors that determine compliance for
policy interventions. It will also serve as a future reference for researchers who want to further
conduct researches in this area.

1.6 Limitation of the study

There are enormous of taxpayers at federal and regional tax office level in Ethiopia. but, because of
resource and time limitation, the study will be delimitated at one branch office of ministry of
revenue (jimma branch). First of all, taking samples by its nature have its own limitation, but this is
the problem of many researches. Thus, it will not be possible to generalize the outcome beyond the
specific population from which the sample was drawn. Another limitation is, the study may not
incorporate all the important factors which may have their own influence on the dependent
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variable, since it will take only the selected one based on the literatures reviewed.

1.7 Organization of the paper

The proposal is organized in three chapters. The first chapter presents the introduction part which
contains background of the study, statement of the problem, objective of the study, significance of
the study and limitation of the study mainly. The second chapter explains the relevant review of
related theoretical and empirical reviews of the studies. Also this chapter includes hypothesis of the
study. The last chapter deals with the research methodology, which includes the research design,
research methods, population & sample size, questionnaire design, data analysis techniques etc.

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 Chapter Two:

Review of related literatures

Introduction
This chapter presents a review of related literatures to provide foundation of knowledge on the
topic and to serve as background for this study. Currently several empirical studies were
conducted to identify the factors that influence tax compliance in the world and in Ethiopia too.
Nevertheless, the variables that were identified as determinants of tax compliance vary from
study to study and from country to country. This chapter covers theoretical and empirical
reviews related to the study in an understandable way. Finally, the chapter ends with
formulation of hypothesis.

2.1. theoretical literature review

2.1.1. Tax Compliance
Tax compliance is the full payment of all taxes imposed by government with in the given time
(Bidin et al., 2011). Tax compliance can be also defined as the accurate reporting of income and
claiming of expenses in accordance with the stipulated tax laws (Noor and Jeyapalan, 2013). On
the other hand, Palil and Mustapha (2011) define tax compliance as taxpayers’ ability and
willingness to comply with tax laws which are determined by ethics, legal environment and other
situational factors at a particular time and place. Palil and Mustapha (2011) stated that tax
compliance requires a degree of honesty, adequate tax knowledge and capability to use this
knowledge, accuracy and adequate records in order to complete the tax returns and associated tax
documentation. Mohd et al, (2011) stated that the tax compliance is an act of filing their tax
returns, declaring all nonexempt financial gain accurately, and disbursing all collectable
taxes at intervals the stipulated amount while not having to attend for follow-up actions from the
authority, as cited in Muoki and Peter (2014).

2.1.2 Tax non-compliance

The best way to describe non-tax compliance is the difference between the total amounts of
taxes due and the actual amount of taxes paid by taxpayers. The difference could be due to
overstating or understating income, expenses 12
and deduction on tax allowable. According to
Cummings et al., (2009), reasons for non-compliance include intentional evasion and
unintentional noncompliance such as calculation errors and inadequate understanding of tax
laws. Taxpayers’ mistakes can be unintended; thus, do not necessarily represent attempts to
evade (Abd Hamid et al., 2018), (Antonides and Robben, 1995) or could even lead to over
reporting of tax.

2.1.3. Benefits of tax compliance

Tax compliance is an important issue for nations around the world as governments collect
tax revenues to meet public needs (Abd Hamid et al., 2018). For the taxpayer also tax
compliance does not entail only costs There is also tax compliance benefits which need to be
considered. (Smulders et al., 2012). Of those benefits the following are most popular one:

 tax deductibility benefits: arises when the income tax system permits some
tax compliance costs to be treated as a legitimate deduction for tax calculation
purposes, for example where the tax system permits a business a deduction
for the services of their tax practitioners and tax-related incidental expenses
from their taxable income(Smulders et al., 2012).
 Cash flow benefits: are the benefits derived from the use of tax revenues for a
period before they must be paid over to the revenue authority, such as property tax
collected by banks or supermarkets, the deduction of “pay-as-you-earn tax”
(PAYE) by employers and VAT by vendors, before these are paid over to the
relevant revenue authority (Smulders et al., 2012). A further example is the benefit
from the lawful delay that arises when the income received by a taxpayer is not
immediately or fully taxed on accrual or receipt.
 Managerial benefits: are the benefits that may arise due to a requirement in terms
of tax legislation to maintain records, such as better recordkeeping, the use of
technology, improved knowledge of the financial affairs of the business in
particular in the form of increased knowledge of their complex accounting
information systems and improved business or managerial decisions (Smulders et
al., 2012).

2.1.4. Costs of Tax Compliance

tax compliance costs are costs which are incurred because of fulfilling obligations related with tax
Smulders et al. (2012). As alemayehu (2020) discussed in his research those costs include:
 Costs paid to professionals or employees13hired by tax payers to have more understanding
 in the tax system and to get help in complying (monetary cost).
 Costs related with shifting businesses. Those costs are happened because governments
gave some tax advantages for some businesses over the other and this results in altering of
businesses for tax payers and subsequently the will incur efficiency costs.
 Another costs include time costs (costs related to time spent in complying the tax
obligation), psychological cost (anxiety, stress, frustration, fear….)

2.1.5. Determinants of tax compliance

As Alm (2012) has explained There is increase in the volume of research that has
investigated factors that influence tax compliance and tax compliance behavior. Specifically,
Saad (2014), identified the factors that influence tax compliance as sanctions, tax audits, age,
gender, tax rate, education, income level, occupation, peer information, source of income,
attitude, ethics, tax knowledge and the perception of fairness. Those factors that influence tax
compliance behavior are varied from one country to another country and from one individual to
another individual Dereje (2020). Thus, the factors recognized vary from one study to the other
and are considered important to the specific context or situation at hand (Bello & Danjuma,
2011). These are grouped into economic and behavioral factors. But for this study I will use
dereje’s (2020) with some modification as following.

2.1.5.1 individual factors

In individual factors I incorporate age, gender, awareness and knowledge of tax payers.
1. Age-Age is considered as a factor affecting the level of tax payers’ compliance behavior in
many literatures. But, the significance and way of influencing differs from one study to the
other. The conclusion of some researchers indicate age has no significant effect on tax payers’
compliance behavior. Others indicate positive and significant and the rest concludes a
significant negative relationship between tax payers age their compliance behavior.

A research conducted by Widianto (2015) using the logit model shows that age have statistically
significant and negative influence on tax payers compliance behavior. This means that older
taxpayers are less likely to comply than younger taxpayers. Also Tadesse & Goitom (2014) on
their study found a negative association implying that older taxpayers were less compliant.
Niway & Wondwossen (2016) also concludes age have not significant impact on tax compliance
behavior in their study. Whereas, the study of Adimassu &Jerene (2016) and Manchilot (2018)
14
stated that age of tax payers has positive but no significant impact on compliance level of tax
payers. Deyganto (2018) and Amina & Saniya (2014) conclude that age has a significant and
positive impact on tax payers’ compliance behavior. Means old tax Payers are less compliant than
the younger one.

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2. Gender_ it is considered one of the important factors when studying the
determinants of tax compliance level of tax payers. For example, Widianto (2015) depicted that
gender variable has a statistically negative significant marginal effect on compliance behavior. In
other words, female taxpayers have more likely to comply by abiding tax laws than male
taxpayers. This finding is consistent with the finding of Tadesse & Goitom (2014) that
female taxpayers are more compliant in comparison with males in the study area. But, the study
of Aronmwan, Imobhio& Izedonmi (2015), Manchilot (2018) and Adimassu & Jerene (2016)
stated that gender of tax payers has positive but no significant impact on compliance level of tax
payers. Also, a higher level of noncompliance has been noticed in female in a study conducted by
Houston and Tran (2001).
3. Tax knowledge and awareness- Tax knowledge is an essential element in a voluntary
compliance tax system (Saad, 2014). Tax knowledge/awareness refers to taxpayers’
understanding of tax laws and regulations on the specific tax issues that relate to them. Tax
knowledge can be gained through self-learning, and attending formal and informal training
(Halla,2012). This is also another issue that has to be dealt while examining the factors affecting
tax compliance behavior of tax payers. The finding of Adimassu & Jerene (2016) showed that tax
compliance is positively related with education level of tax payers. Smith, (2018) affirmed that
one
of the fundamental ways to increase public awareness is for taxpayers to have knowledge about
taxation. Also Saad (2014) suggested that unintentional non-compliance among small business
taxpayers is due to their lack of knowledge. Such evidence was also documented among
individual taxpayers in Malaysia who unintentionally made mistakes in their tax return forms
(Marti et al., 2010). This statement is supported by (Malaysian Digest, 2017) who observed that tax

compliance is significantly related to general level of education. But, the study of Tadesse &
Goitom (2014) conducted in Mekelle city showed that education level of tax payers is
insignificant for the improvement of tax compliance level of tax payers.

2.1.5.2 institutional factors

The factors included here are those which are related with tax authority and are expected to have a
relationship with taxpayers’ compliance behavior.
4. Probability of being audited
Tax audit is an exercise undertaken by tax authorities
16 to determine if a taxpayer paid the correct
amount of tax (Muoki et al., 2014). Tax audit can play a major role in improving tax
administration and overall taxpayer compliance by impacting on taxpayer behavior. The
contribution of tax audit on improving tax payer’s compliance is significant among other
measures taken by revenue authorities of the country (Agumas, 2016). Tax audit towards
achieving target revenue is that tax audit reduces the problems of tax evasion (Badra, 2012).
Tadesse & Goitom (2014), Modugu & Anyaduba (2014), Inasius (2015), Daba (2017) and Palil
& Mustapha (2011) depicted that the probability of being audited was found to be the significant
factor that positively affecting level of tax compliance. This suggests that the compliance rate
rises if the tendency of being tax-audited is high. Insufficient tax auditing is most crucial factors
associated with low level of tax compliance (Helhel & Ahmed, 2014).
5. Tax Penalties and Enforcements
A fine or penalty is money paid usually to a government authority, as a punishment for a crime
or other offence (Muoki et al., 2014). (Sawyer et al., 2014) depicted increases in tax deterrence
sanctions pertaining detection likelihood and the severity of penalties resulted in lower non-
compliance among tax payers. Fines and penalties had positive effect on level of tax
compliances; the greater the penalty and therefore the potential audit chance the higher
discouragement for potential tax evasion (Paper et al., 2016; Muoki et al., 2014)). The level
of penalty rate is statistically significant to affect tax compliance levels (Paper et al., 2016).
However, the study of Tilahun (2016), Pambudi et al., (2015), conducted on factors influencing
tax compliance attitude in Ethiopia, Bahirdar City Administration indicated that offences and
penalties are not important variables in explaining tax compliance attitude. Further, the study of
Waithira (2016) and Oladipupo& Obazee(2016)showed that there exists an insignificant
negative effect between fines and penalties and residential rental income tax compliance by
property owners. Moreover, the study of Modugu& Anyaduba (2014) in Nigeria revealed that
the tax penalties and enforcements have a tendency to Negatively and significantly influence tax
compliance. This implies that an increase in penalty will have a tendency to decrease tax
compliance.
6. Tax Rewards and Incentives
A tax incentive is a side of the tax code designed to incentivize or encourage an explicit form of
tax payers‟ compliance behavior (Muoki et al., 2014). Rewards could be an effective tool to
increase tax compliance. The study made by Ndekwa (2014) on determining the magnitude of
relationship of factors for improving tax compliance among SMEs in Tanzania using multiple
regression analysis revealed that tax reward 17
system strongly helps to improve level of tax
compliance among SMEs in Tanzania. There was also a study conducted by Daba (2017) to
assess rental income tax payer’s compliance with tax system in case of Hawassa city
administration, Ethiopia using Ordinary Least Squares (OLS) regression model and the finding
indicates that there is positive and significant relationship between government incentive and tax
compliance.

18
7. Tax Rate
Tax rate refers to the rate at which a business or person is taxed on income and it also refers to
the rate of tax on goods and services (Muoki et al., 2014). Helhel & Ahmed (2014) pointed out
that high tax rates is one of the crucial factors associated with low compliance. This implies that
high tax rate reduces taxpayer compliance level. This is confirmed with the finding of
Abdulsalam (2014), Inasius (2015) Ali (2018), Aronmwan, et al. (2015), Alstadsæter, et al.
(2013), that states there is significant negative correlation between tax rate and tax compliance.
But, the study of Mansor (2016) on the factors affecting tax evasion in Gombe state, Nigeria
showed that tax rate positively but not significantly influences tax evasion. This is similar with
the finding of Agbadi (2011) that tax rate was not significantly correlated with tax compliance
8. Complexity of the tax system
Tax complexity can be defined from different angles by different peoples (Evans & Tran-
Nam, 2013). According to Evans and Tran-Nam (2013) three different definitions were
given to tax complexity from the perspectives of of tax accountants, tax lawyers, and
taxpayers. To tax accountant, tax complexity refers to as the time it takes to prepare income
tax returns, planning, tax advices and consultancies. To a tax lawyer, tax complexity can be
viewed from the point of difficulty in reading, understanding, and interpreting tax laws for
their application in tax compliance. To a taxpayer, tax complexity is viewed from the point
of time taken and cost incurred in complying with the relevant tax legislations. Thus, this
study will view tax complexity from the difficulties of the tax procedures to tax payers to
comply with it.
Chau and Leung (2009), assert that the tax system should be simple, expressed in simple and
clear tax laws and procedures. A simple tax system and legal procedure enhance compliance by
allowing taxpayers to more easily understand their tax obligations and calculate the amount of
tax they need to pay (Evans & Tran-Nam, 2013).

19
9. Tax fairness
Wenzel (2003) describes fairness as distributive (fair distribution of costs and benefits in tax
payment), procedural (fair tax collection among groups of taxpayers) and retributive (fair
treatment of taxpayers in the use of coercive power in punishments and audits). A study in
Malaysia finds that procedural fairness has a positive impact on compliance behavior (Faizal
& Palil,2015). Geberegbe, Idornigie, and Nkanbia-Davies (2015) investigate perceptions of
fairness in Nigeria and find a significant relationship between personal income tax compliance and
tax fairness.

2.1.5.3 psychological factors

10. Peer Influence
peers refer to taxpayers’ associates who could be relatives, friends, co-workers as well as
contemporaries. Peer effects may work through psychology, sociology, or economics behavior
if the tax payers gate information (alm and mckee, 2016). many preceding literatures found
peer influence as having a significant impact in the determination of compliance decision
(Blanthorne & Kaplan, 2008; Bobek, et al., 2007). Furthermore, Wenzel (2002) argued that peer
influence has „significant effect‟ on tax compliance behavior. Hence, Lefebvre et al. (2015)
reported the significance of not ignoring the presence of peer impact when examining the tax
compliance behavior. Therefore, this study defines peer influence as the effect of people who
are significant for the business owners and managers on their tax compliance decision, thus
contributing in shaping their attitude towards tax compliance.
11. Perception of Corruption
Perception of corruption is one of the variables which is selected to be investigated in this
study. The problem of corruption is probably as old as government itself (Campbell,2013).
Corruption is an intricate socio-political and economic issue that is widespread in all nations
to a differing degree (Rohwer, 2009). Perceptions of corruption and tax non-compliance
behavior are key challenges to state-building in developing countries, Arifin et al., (2018).
Corruption can be termed as gross abuse of power for personal benefit (Aguilera & Vadera,
2008). Alm et al. (2016) state that the relationship between corruption and tax compliance is not
new, but both are significant problems facing today’s economies. Akdede (2011) posited that the
magnitude of corruption among tax officials intensifies the scale of tax noncompliance among
taxpayers. Similarly, Okpala (2013) studied factors that lead to tax evasion and avoidance in
Nigeria. Finding of the study shows that the level of corruption among tax officials has a positive
and significant relationship with tax evasion.

20
12. Ethics/norms
Ethics/norms are important determinants of tax compliance. Norms are behavioral standards
on three different levels: the individual level (internalized standards on how to behave), the social
level (behavior of reference groups, for example friends, acquaintances or vocational group), and
the national level (norms become cultural standards, often mirrored in the actual law) (Kirchler et
al., 2008). There is considerable overlap between individual norms, values and tax
ethics: the more developed the moral reasoning or tax ethics, the more likely is voluntary
compliance (Trivedi et al., 2003). In general, if the norms held by taxpayers’ favor tax compliance,
voluntary tax compliance will result. Thus, norms encompass both power and trust. First,
national norms find their expression in tax laws and the role given to tax authorities, having a
direct influence on their power. Second, social norms such as the belief that tax evasion is a petty
crime and widespread hinder the work of tax authorities (Kirchler et al., 2008).

21
2.2. Review of Empirical studies
Most studies in ethiopia and the world indicate taxpayers’ voluntary tax compliance is
influenced by so many factors. As dereje (2020) hs explaind in his study tax compliance
determinants are classified in to three categories. The three categories are 1) individual factors
(age, gender, and tax knowledge and awareness), 2) institutional factors (probability of being
audited, tax penalties and enforcements, tax rewards and incentives, tax rate, complexity of tax
system and tax fairness), 3) psychological factors (peer influence, perception of corruption, and
ethics/norms). According to different literatures the significant and relationship of those factors
with tax compliance of tax payers is different.

A study on “Determinants of Tax Compliance Intention: Focus on the Theory of Planned

Behavior, in Phnom Penh, Cambodia” by Taing and Chang (2020) concludes that tax morale, tax
fairness, and tax complexity have a statistically significant influence on the tax compliance
intention of the citizens, while the power of authority, trust in government, tax information, and
tax awareness did not show a statistically significant relation to tax compliance intention.
However, Sandy and Harnovinsah (2019) 0n their study of Analysis of Factors Affecting
Individual
Taxpayer’s Compliance in KPP Pratama Jakarta Cengkareng concludes that Tax Knowledge,
Perception of Tax Fairness and Tax Audit have a positive and significant impact on Taxpayer’s
Compliance.
A study on “An Investigation of the Determinants of Tax Compliance Among Yemeni
Manufacturing SMEs Using the Fisher Model” by Obaid et al, (2020) shows that tax fairness and
peer influences are positively and significantly related to SMEs tax compliance behavior.
However, perception of corruption has an insignificant impact on tax compliance among Yemeni
SMEs.

Maseko (2014) has conducted a study on determinants of tax compliance in small and medium
enterprises (SMEs)‟ Zimbabwe, the results indicated that the perceptions of SME operators
about tax fairness, tax service quality and government spending priorities greatly affect their tax
compliance decisions. Tax knowledge was discovered to have no correlation with tax registration

22
compliance but weak negative correlations with filing compliance. Lastly the results show
compliance costs were discovered to have negative correlations with tax compliance. Also a study
byMisu(2011) in Romanian identifies economic factors like the level of income, audit
probabilities, tax audit, tax rate, tax benefits, penalties, fines and other social and national
norms, and perceived fairness.
a study entitled as “Determinants of Voluntary Tax Compliance Behavior in Self-Assessment
System: Evidence from SNNPRS, Ethiopia” was conducted by Niway & Wondwossen (2016).
Its conclusion indicates that tax compliance is significantly influenced by tax knowledge,
perception of tax payers towards government spending, tax rates, tax equity and fairness,
educational level of tax payers, tax penalty and the role of tax authority. They also evidenced
that, variables such as penalty, role and efficiency of tax authority, tax rates, respondents’
financial constraint, age and gender of respondents were not significant determinants of tax
compliance behavior in their study. On the other hand, a study conducted by Dereje (2020) on
“determinants of tax compliance in a case of category “C” business profit taxpayers in
Nekemte town, Ethiopia” shows that tax knowledge and awareness and tax penalty and fines
has a significant positive influence over the level of tax compliance. On the other hand, the
assessed amount of tax, probability of auditing and attitudes towards equity and fairness are
insignificant factors in determining the compliance behavior of taxpayer.
Tilahun et al (2014) attempted to reveal factors that determine tax compliance behavior in
Ethiopia particularly in Bahirdar city administration. The results of the study revealed that
perception on government spending; perception on equity and fairness of the tax system;
penalties; personal financial constraint; changes on current government policies; and referral
group (friends, relatives etc.) are factors that significantly affect tax compliance behavior.
However, gender and probability of being audited have no significant impact on tax compliance
behavior. Also, he has indicated in his study older people are more sensitive to equity and
fairness in the tax system.
Abdu and Wendmu (2019) were conducted a study with a title „Analysis of Tax Compliance and
Its Determinants: Evidence from Kaffa, Bench Maji and Sheka Zones Category B Tax Payers,
SNNPR, Ethiopia‟ and they conclude that, among different variables tested, tax compliance was
positively affected by education level of tax payers, tax knowledge and awareness of tax payers,
simplicity of the tax system, attitude of tax payers towards tax, perceived role of government
expenditure, and rewarding scheme for loyal tax payers. But they also revealed that age, sex of
23
respondents, tax penalties and enforcements, organizational strength of the tax authority, fairness
of the tax system, tax rate and tax audit were not statistically significant factors influencing
compliance behavior of tax payers.
Haile and Destaw (2020) were studied “Determinants of tax compliance behavior in Ethiopia:
evidence, from South Gondar zone”. Their study found that audit rate, attitude of tax payers,
perception on equity of the tax system and benefit from the government as well as education are
found to have statistically significant positive impact on the tax compliance behavior of
category” A” and “B” tax payers in South Goder Zone. On the contrary, tax rate, audit
probability, social norm, compliance cost and sex are identified as statistically significant
negative determinants of tax compliance behavior in the study area. But, Penalty rate, Perception
of government Spending, training to enhance tax knowledge and age of the respondent are found
to have statistically insignificant effects on compliance behavior of category “A” and “B” tax
payers in South Gondar zone.
An empirical study made by Tadesse Getacher, and Goitom Abera (2014) in Mekelle city,
Ethiopia to examine the determinants of taxpayers’ compliance with the tax system and revealed
that nine tax compliance determinants were recognized: probability of being audited; perception
of government spending; perception of equity and fairness; penalty, financial constraint; changes
to current government policies; referral group; the role of the tax authority; and tax knowledge.
The study results from the survey conducted in Mekelle using 102 respondents indicate that tax
compliance was influenced by the probability of being audited, financial constraints, and changes
in government policy.
Teklemariam Girma (2017) studied determinants of business taxpayers’ tax compliance in Addis
Ababa city Administration. The result indicated that knowledge of taxpayer, quality service of
tax authority and transparency of tax system had influence on tax compliance of taxpayer and
they have positive and significant relationship with tax compliance of large business taxpayer.

Geletaw Tsegaw(2015) made research on determinants of taxpayers tax compliance

behavior, with six tax compliance determinants. The results of the research suggest that tax
knowledge; feeling of fairness; the influence of peer groups; income level of taxpayers and
detection & punishments have significantly affected on Addis Ababa City Business Profit
taxpayers’ tax compliance behavior. On the other hand, he concludes confidence in
government spending doesn’t have as such significant impact on tax compliance behavior of
businesses.
24
Deyganto (2018) examined in his study the factors influencing tax voluntary compliance attitude
with tax system in Gedeo Zone of Southern Ethiopia. He concludes that variables such as gender,
age, lack of tax knowledge, simplicity of tax system, awareness on penalty, probability of being
audited, and perception on tax rate were found to be key factors influencing taxpayers’ voluntary
compliance attitude with tax system in the study area. On the other hand, variables such as
education level, tax authority efficiency, peer influence, occupation, income level of taxpayers,
perception on government spending, and perception on fairness and equity have no significant
influence on tax voluntary compliance attitude.
Odd Helge Fjeldstad and Merima Ali, (2013) were try to explore factors
that determine citizens’ tax compliance behavior in Kenya, Tanzania, Uganda and South Africa
using attitude and perception data. They found those individuals who perceive that their ethnic
group is treated unfairly are less likely to have a tax compliant attitude in Tanzania and South
Africa. Tax knowledge is also significantly correlated with tax compliant attitude in Tanzania and
South Africa. These findings are robust for different econometric specifications.
Aff (2018) attempted to examine the impact of audit productivity and tax investigation on
improving voluntary taxpayers’ compliance using multiple regression models and the result shows
that the level of voluntary tax compliance is significantly related with audit productivity. In
contrary, a conducted by Tilahun & Yidersal (2014) revealed that the chance of being audited does
not have any important impact on tax compliance behavior. Other studies conducted by Ahmed &
Kedir (2015) and Ahmed (2013) Revealed that audit has negative and significant effect on tax
payers’ compliance behavior. The findings of the study show that the higher the probability of
detection, the lower the tax compliance level. If the tax payers are informed that their fillings will
be closely examined, there is a tendency for the tax payer’s behavior to change in response to an
increased probability of tax audited.

25
Another study by Akalu Kibret(2016), discovered that audit rates and profit performance had a
positive and significant impact on tax compliance. In his study he assures no significant
relationships were found between tax compliance and true income, marginal tax rates,
probability of detection, penalties and other socio-economic factors. The author suggested that
greater audit coverage could act as an effective deterrent to corporate non-compliance, resulting in
a substantial rise in tax revenues.
Sapiei et al., (2014) was examined the corporate tax non-compliance using a
survey approach in Malaysia. given the limitations and confidentiality issues associated with
using government data They conclude that factors such as tax complexity, tax deterrence,
fairness in the tax rate/ tax system and perceived level of psychological costs consistently
influence the likelihood of tax non-compliance behavior, while the reverse was true for tax
compliance costs.
Amina & Saniya (2014), as cited by Alemayehu yilma (2020), made a study on tax compliance
and its determinants in Ethiopia, with the aim of investigating the determinants of tax
compliance. The findings show that age, sex, penalty, audit, simplicity, fairness and perception on
government were found to affect tax compliance. They recommended that the tax authority has to
work on educating the society, making the tax system fair, strengthen the audit system and
reducing complexity of the tax system.

As it is indicated in the empirical studies discussed earlier studies on determinants of tax

compliance around the world and in Ethiopia show that tax compliance has been influenced by
different factors such as complexity of the tax system, probability of being audited, perceptions of
government spending, penalties, rewarding faithful taxpayers, perception of corruption, personal
financial constraints, Ethics and attitude toward tax compliance…

2.2.1. Conclusions of the empirical review and knowledge gaps

Most of the empirical studies on tax compliance have been concerned with individual taxpayers
while large and corporate businesses entities have not been studied properly. The empirical
studies that have been reviewed in the preceding section focused on the different factors that
affect tax compliance behavior and findings are still debatable among different researchers.
Some variables are Significant in one study but insignificant in another study and have been
found to differ between different countries.
Therefore, to the knowledge of the researcher, although there have been a number of studies on
26
tax compliance factors of medium and small taxpayers, particularly in Ethiopia, there are no
much studies that exhaustively examined tax compliance factors at large taxpayers’ level except
the one which is by Alemayehu yilma. Even in those middle and small taxpayers the results of
different researchers are different for the same independent variable. Also, variables like
perception of corruption are unstudied in any of those studies. Moreover, despite the contribution
of large taxpayers to the tax revenue in Ethiopia there are no sufficient studies in that
department of taxpayers. Hence, this research have aimed at filling the research gap on tax
compliance factors in Ethiopian ministry of revenue (Jimma branch) and contribute to the body
of knowledge.

2.2.3. Research Hypothesis

In many quantitative studies, writers used research questions. However, a more formal statement
of research employs hypotheses. These hypotheses are predictions about the outcome of the
results, and they may be written as alternative hypotheses specifying the exact results to be
expected (more or less, higher or lower of something). They may also be stated in the null form,
indicating no expected difference or no relationship between groups on a dependent variable
(Creswell, 2009).
After careful review of empirical studies presented in the literature review section on how
taxpayer’s compliance behavior is influenced, I have developed the following general
hypotheses.
H1: Being female has positive and significant effect on tax compliance.
H2: Fairness of the tax system affects positively and significantly the tax compliance behavior
of tax payers.
H3: High Probability of being audited has positive and significant impact on tax compliance
behavior of taxpayers.

27
H4: Tax penalties and enforcements have a positive and significant influence on tax compliance
behavior of taxpayers.
H5: Perception of corruption has a negative and significant impact on tax compliance behavior of
taxpayers.
H6: Peer influence (assume peer groups with good tax compliance behavior) has a positive
significant impact on tax compliance behavior of taxpayers.
H7: Tax rewards and incentives have a positive and significant impact on tax compliance.
H8: Complexity of the tax system has negative impact on the tax compliance behavior of tax
payers.
H9: Tax knowledge and awareness has a positive and significant effect on tax compliance
behavior of taxpayers.
H10: Ethics/norms have positive and significant impact on tax compliance behavior of taxpayers.
H11: Tax rate has a negative and significant impact on tax compliance behavior of taxpayers.
H12: Age has a positive and significant impact on tax compliance behavior of tax payers.

28
2.2.4 conceptual frame work

Independent variables Dependent variable

Individual factors
1) Age
2) Gender
3) Tax knowledge awareness
Institutional factors
4) Probability of being audited
Tax compliance behavior
5) Tax penalties and enforcements
6) Tax rewards and incentives
7) Tax rate
8) Complexity of tax system
9) Tax fairness

Psychological factors
10) Peer influence
11) Perception of corruption
12) Ethics/norms

29
 Chapter Three

Research Methods and Methodology

Introduction
This chapter presents the underlying principles of research methodology and the choice of the
appropriate research method for the thesis. It involves the general research design, population of
study, Sample size and sampling technique, Sources of data, research instrument and methods of
data analysis and presentation.

3.1 background of the study area

As amina (2013) was explained in her research in a good manner Jimma was founded by Aba
Jifar, who was the descendant of one of the five kings in the former Gibe Kingdom. Herbert S.
Lewis states that in the early 1960s it was "the greatest market in all of southwestern Ethiopia. Its
northern suburb of Jiren was the capital of a large Oromo kingdom until the late nineteenth century.
Originally named Hirmata, the city owed its importance in the 19th century to being located on the
caravan route between Shewa and the Kingdom of Kaffa, as well as being only six miles from the
palace of the king of Jimma. According to Donald Levine, in the early 1800s the market attracted
thousands of people from neighboring regions. The present town was developed on the Awetu
River by Italian colonialists in the 1930s Jimma is the largest town in southwestern Ethiopia.
Located in the Jimma Zone of the Oromia Region, this town has a latitude and longitude of 7°40'N
36°50'E / 7.667°N 36.833°E / 7.667;36.833.

3.2 Research Design

The research design refers to the overall strategy that you choose to integrate the different
components of the study in a coherent and logical way, thereby, ensuring you will effectively
address the research problem; it constitutes the blueprint for the collection, measurement, and
analysis of data De Vaus (2006). Note that the research problem determines the type of design
you should use, not the other way around!
The function of a research design is to ensure that the evidence obtained enables us to answer
the initial question as unambiguously as possible. It must ensure that the information collected is
30
appropriate for solving a problem (White, 2007). This study will apply explanatory type of
research design. This is because in almost all social researches the researcher has no any control
and he/she can only explain what does happen. In addition, this type of research design is the best
one in conducting cause-effect type of research, as it helps the researcher in trying to identify the
causes and effects of whatever phenomenon they are studying (wordpress.com).

3.3 target population

The target population for this research will be tax payers registered in Ethiopian Ministry of
Revenue, Jimma branch.

3.4 data type and source

This study will use primary data which will be collected through self-administered questionnaire
with closed ended questions that provides less effort by respondents to complete the
questionnaire and easy for analysis. It will also include opinions and recommendations collected
using interviews. The survey questionnaire will be prepared both in Amharic and English version
to reduce the impact of language barriers. The close ended questions will be designed based on a
Likert type-scale with a 5-point scale choice from Strongly Disagree to Strongly Agree. The
questionnaires will be distributed to business owners, managers, and employees to measure
their views about the compliance factors given.
Clarification about the purpose of the survey will be given in the questionnaire. The researcher
will involve only when respondents need clarification. The questionnaires will be personally
distributed to ascertain the respondent’s willingness to participate in this study. This arrangement
will also provide the opportunity for researchers to explain verbally and respectfully on the
importance of the study. The questionnaire will comprise three parts. The first part will about
demographic information of the respondents. The second part will comprise questions related to
factors influencing taxpayers’ tax compliance behavior and the last part will contain comments
and recommendations given by taxpayers for making conclusions. Secondary data such as annual
tax revenue and annual GDP were collected from published books, relevant documents and
annual reports to support statement of the problem. Due considerations will be given to the
time period, reliability, and relevance of the data for the purpose of the study.

31
3.5 sample size and techniques
Ethiopian Ministry of Revenue has many branch offices located in the capital city and across
regional states. Among these branches the researcher selects Jimma branch office, which is the
taxpayers’ branch office in the Ministry of Revenue, located in Jimma city.
There are about 1479 taxpayers registered at Federal taxpayers, Jimma branch office as at 08
July, 2021; among them the researcher will select 315 taxpayers of the universe by using Kotters
(2008) formula.
n=N/1+N (e) 2 where: N- total population
n - Sample size
e= 0.05 error term,
n=1479/1+1479(0.05)2 =approximately 315
Where level of significant is 95% In order to get sufficient and competent data, 315 taxpayers
will be selected using stratified sampling first to allocate the sample among
businesses(manufacturing, service and merchandize). Then after I will use simple random
sampling with in each business group to select the actual sample. This will help me to make the
sample size determination more representative.

3.6 method of data collections

Research method is a systematic plan for conducting research. There are different types of
research methods which use different tools for data collection. It includes both qualitative
and quantitative research methods, including experiments, survey research, and participant
observation. The objective of this study is to examine the factors that influence tax compliance
behavior. Thus, the research will be carried out using both qualitative and quantitative (mixed)
aspects of research method in order to reduce weaknesses inherent in any single approach.
Qualitative approach will be used to gather additional comments and opinions of respondents to
increase the reality of the information investigated in the quantitative approach. On the other hand,
self- administered questionnaire will be used in the quantitative approach for the reason of its
simplicity in obtaining response and its evaluation of the responses.

3.7 methods of data analysis

In this study the researcher will use linear regression model in order to model the linear
relationship between the dependent and independent variables. Dependent variable is the
32
variable that changes as a result of change in the independent variable. It is the ‘result’ we
are interested in measuring and it ‘depends’ on the independent variables. In this study the
dependent variable is tax compliance. Here existence of tax compliance can be explained
both as dichotomous (based on time period delayed or on time) and continuous variables
(with regard to amount of money paid). On the other hand independent variable is the variable
we manipulate to see its effect on the dependent variable. This variable didn’t depend on any
variable in the study. Thus, to measure the influence of the independent variables on the dependent
variable I will employ linear regression analysis which is used to predict the value of a
variable based on the value of another variable. In specific I will employ multiple linear
regression models. Multiple linear regression (MLR), also known simply as multiple
regression, is a statistical technique that uses several explanatory variables to predict the
outcome of a response variable. The goal of multiple linear regressions is to model the linear
relationship between the explanatory (independent) variables and response (dependent)
variables. In essence, multiple regressions is the extension of ordinary least-squares (OLS)
regression because it involves more than one explanatory variable. Thus since in this there
are more than two exogenous variables multiple regressions is the appropriate to model the
relationship between the dependent and independent variables.
The questionnaire will be distributed to the respondents like business owners, general managers,
senior employees and tax managers to measure their view about each provided compliance
factor. Statistical packages STATA (version 16.0) software together with excel spreadsheet will
be applied by the researcher to process quantitative data that will be obtained from the structured
questionnaire. Descriptive and inferential statistics will be used to investigate the importance
of determinant factors (independent variables) that helps to establish the tax compliance
variables. The descriptive interpretation will use the mean as a base and inferential interpretation
will use the p-value, the coefficients β of the independent variables, and necessary regression
analysis.

3.7.1 Model specification

The research model will use 12 independent variables that are deemed appropriate to all types of
taxpayers namely fairness on the tax system, complexity of tax structure, probability of being
audited, tax rate, penalty, peer Influence, tax knowledge, ethics/norms, demographic
variables (age and sex), rewarding faithful taxpayer, and perception of corruption. The
dependent variable is tax compliance (TC) which is influenced by the above independent
variables.
33
TC = α0+ β1FTS+β2CTS+β3PA+ β4EN+ β5TR+ β6PR+ β7PI+ β8TK+ β9GEN + β10AGE +
β11RF+ β12PC+ Ɛ
Where;
TC - Tax Compliance
α0 - Constant (tax compliance level in the absence of all tax compliance factors)
β1 - The partial change in the tax compliance due to one unit change in the fairness of tax
system while other things remain constant,
β2 - The partial change in the tax compliance due to one unit change in the complexity of tax
system while other things remain constant,
β3 - The partial change in the tax compliance due to one unit change in the probability of being
audited while other things remain constant,
β4 - The partial change in the tax compliance due to one unit change in ethics/norms while other
things remain constant,
β5 - The partial change in the tax compliance due to one unit change in the tax rate while other
things remain constant,
β6 - The partial change in the tax compliance due to one unit change in penalty rate while other
things remain constant,
β7 - The partial change in the tax compliance due to one unit change in the peer influence while
other things remain constant,
β8 - The partial change in the tax compliance due to one unit change in the tax knowledge while
other things remain constant,
β9 - The partial change in the tax compliance due to one unit change in gender while other
things remain constant,
β10 - The partial change in the tax compliance due to one unit change in age factor while other
things remain constant,
β11 - The partial change in the tax compliance due to one unit change in rewarding faithful
taxpayer factor while other things remain constant,
β12 - The partial change in the tax compliance due to one unit change in perception of
corruption factor while other things remain constant,
The corresponding variables are represented by: TC- Tax compliance
FTS- Fairness of Tax System, PR- Penalty Rate
CTS- Complexity of the Tax System, PI- Peer Influence
34
PA- Probability of being Audited TK- Tax Knowledge and awareness,
EN- ethics/norms, GEN-Gender
TR- Tax Rate level, AGE-Age,
RF-rewarding faithful taxpayers,PC-perception of corruption, and
Ɛ-refers error term
Error term is the methods to check residual how the value of each sample far from the predicted
value (ɛ=Yi-Yhat). Statistical tests will be analyzed using STATA 16.0 software. Two types of
variables will be considered in this research, namely dependent, & independent variable.

35
 WORK PLAN AND COST BREAKDOWN
4.1 Time Schedule or Work Plan
Table 1: Work plan for conducting study on the determinant factors of tax compliance behavior
among taxpayers, in Ethiopian Ministry of Revenue- Jimma branch

Activities/ 2022
task

Ma June July Aug Sep Oct Nov

t

Submit thesis topic

Searching References/ Bibliographic

Reading

Contacting advisors

Writing background of the study

Writing literature

Preparing methodology

Submission of thesis proposal

Data collection

Data analysis and interpretation

Writing final Thesis

Revision and Editing

Submission of final thesis

Prepare for thesis defense (make slides,

etc.) 36
Defense

4.2. Budget Breakdown

Table 2: Budget or cost breakdown for conducting research on the determinant factors of tax
compliance behavior among taxpayers, in Ethiopian Ministry of Revenue- Jimma branch

No. Item Quantity Unit Cost (birr) Total cost (Birr)

1 Stationary

Writing pad 5 50 250

Pencil 7 3.5 24.5

Pen 12 15 180

Printing 1500 pages 3 4,500

Duplicating paper 2 150 300

2. Transport cost for the Unlimited 500

researcher
Trips

3. Personnel cost

Telephone card 11 50 550

Internet 700 700

Tea and coffee 1,000 1.000

4. Allowance for Data collector 20 Days 300 6,000

5. Contingency 1000 1000

Total 15,000.50

37
38
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