Research Idea: Surveying Taxpayers in Addis Ababa - ICTD

Dr. Wollela Abehodie Yesegat (AAU)andProf. Odd-Helge Fjeldstad (CMI)ICTD Annual Meeting 2012Institute for Security Studies (ISS)Cape Town, South Africa

Background of the proposed study A review of business taxation in Ethiopia Problem statement Objectives and research questions Methods Significance of the study Organization of the research paper

Tax compliance is a complex behavioral issue Fjeldstad, Herzenberg and Sjursen(2012) suggest that models and theories oftaxpayer behavior tend to reflect one of fiveschools of thought:• economic deterrence• fiscal exchange• social influences• comparative treatment• political legitimacy

Three categories of businesses:◦ Category A: Paying mainly VAT, BPT, employmentrelated taxes◦ Category B: Paying mainly BPT, turnover tax (TOT),employment related taxes◦ Category C: Paying both BPT and TOT under thestandard assessment scheme (presumptive taxation) Incorporated businesses are required to withholdincome tax◦ and their receipts are subjected to withholding incometax on payments

Recently, the government has attempted tomodernize the tax system; Some measures include: Implementation ofTIN requirement together with theintroduction of biometrics; The introduction of electronic sales registermachine (required to be used by Categories Aand B taxpayers);

The government has established a satellitetax office in "Merkato", in an effort toclosely follow up taxpayers who are said tobe mostly noncompliant with the taxsystem; The government has also piloted electronicfiling system with selected taxpayers andintroduced VAT withholding system byfederal government institutions

Problem statement Poor tax revenue performance in Ethiopia:Fiscal Year2003/04 12.62004/05 11.62008/09 8.62009/10 11.32012 (estimate) 11.62013 (est.) 11.82014/15 (est.) 15.3Tax to GDPSource: Asmelash and Fekadu 2009; MOFED2009/10, African Economic Outlook (2012),

To assess business taxpayers’ views ofpaying taxes and tax compliance in Ethiopia To examine problems with the tax regime asexperienced by tax taxpayers and identifytaxpayers’ priorities for tax reform Based on the above objectives and researchquestions that derive from theory, a set ofhypotheses for testing have been developed◦ summary research questions and hypotheses.doc

Combination of qualitative and quantitativemethods: Qualitative aspect In-depth interviews of selected businessesand tax advisors

Quantitative aspect Business survey

‣ Sampling design• List of registered business taxpayers residingin Addis Ababa, Oromia, Amhara, and SPNNregional states Sample size: 300 businesses residing in thoseselected regions Sample selection technique: stratified randomsampling Stratification by size, sector and tax type

‣ Assist tax administration to identify aspectsor areas where taxpayers experiencechallenges‣ Identify areas and priorities for reform‣ Relevant for further and future researcher Relevant for tax advocacy groups in identifyingareas that need attitudinal change Relevant for taxpayers interested in the taxsystem

Five sections:◦ Background and motivation◦ Theoretical foundation and hypotheses◦ Research methodology◦ Results and discussion◦ Conclusions and policy implications

Thank You