TAX ASSESSMENT AND COLLECTION RELATED

PROBLEM (A CASE STUDY IN YIRGALEM TOWN

REVENUE AUTHORITY)

Research Proposal
January 20, 2024

Ethiopia
 ACKNOWLEDGEMENTS

I would like to express my deepest gratitude to my advisor for his invaluable guidance,
unwavering support, and continuous encouragement throughout the entire proposal preparation
process. His expertise and insightful feedback have been instrumental in shaping this proposal.

I am also immensely grateful to my University for providing me with the opportunity to pursue
my research and for the resources and facilities that have been made available to me.

I am indebted to my family and friends for their unwavering support and encouragement
throughout this journey. Their patience, understanding, and belief in me have been a constant
source of motivation.

i
 ABSTRACT

Background: The assessment and collection of taxes is a core responsibility of revenue

departments. However, implementing this process effectively can be challenging. This research
will examine the problems Yirgalem Town Revenue Authority in Ethiopia faces related to
assessing and collecting taxes. Understanding the existing issues could help the authority
develop suitable solutions to maximize revenue generation. A case study method will be used to
analyze the various factors that influence tax assessment and collection. The goal is to gain
insights into the tax-related difficulties faced by the Yirgalem revenue body so that it can
improve its tax administration and optimize revenue.

Objective: To analyze tax assessment and collection related problems in Yirgalem Town
Revenue Authority and suggest improvements.

Methods: A cross-sectional study design will be employed using both quantitative and
qualitative methods. Data will be collected from 330 eligible respondents using a pre-tested
structured questionnaire and in-depth interview.

Budget: 3,050 birr will be required for this study.

Keywords: brand taxation, revenue, assessment, collection, challenges, optimization

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 TABLE OF CONTENTS

Contents Page
ACKNOWLEDGEMENTS ............................................................................................................. i
ABSTRACT .................................................................................................................................... ii
TABLE OF CONTENTS ............................................................................................................... iii
LIST OF TABLES .......................................................................................................................... v
LIST OF FIGURES ........................................................................................................................ v
CHAPTER ONE: INTRODUCTION ............................................................................................. 1
1. Introduction ............................................................................................................................. 1
1.1 Background of the Study ....................................................................................................... 1
1.2 Statement of the Problem ...................................................................................................... 2
1.3 Research Questions ............................................................................................................... 3
1.4 Research Objectives .............................................................................................................. 3
1.4.1 General Objective ........................................................................................................... 3
1.4.2 Specific Objectives ......................................................................................................... 3
1.5 Study Limitation/Scope of the Study .................................................................................... 3
1.6 Significance of the Study ...................................................................................................... 3
1.7 Organization of the Study ..................................................................................................... 4
CHAPTER TWO: LITERATURE REVIEW ................................................................................. 5
2.1. Review of Concepts and Theories ........................................................................................ 5
2.1.1. Concept of Tax assessment............................................................................................ 5
2.1.2. Local government tax administration ............................................................................ 6
2.1.3. Determinants of tax compliance .................................................................................... 7
2.1.4. Revenue challenges in Ethiopia ..................................................................................... 7
2.1.5. Approaches to boosting domestic resource mobilization .............................................. 8
2.2. Review of Empirical Studies ................................................................................................ 9
2.2.1. Tax challenges in regions of Ethiopia ........................................................................... 9
2.2.2. Analysis of tax reforms in Amhara.............................................................................. 10
2.2.3. Local tax performance determinants ........................................................................... 10

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 2.2.4. International best practices for tax administration ...................................................... 11
2.3. Conceptual Framework ...................................................................................................... 12
CHAPTER THREE: METHODS AND MATERIALS ............................................................... 14
3.1. Study Area and Period........................................................................................................ 14
3.2. Study Design ...................................................................................................................... 14
3.3. Source Population .............................................................................................................. 14
3.4. Study Population and Study Unit ....................................................................................... 14
3.5. Inclusion Criteria ................................................................................................................ 14
3.6. Exclusion Criteria............................................................................................................... 15
3.7. Sample Size Determination ................................................................................................ 15
3.8. Sampling Technique and Procedure ................................................................................... 15
3.9. Data Collection Methods and Materials ............................................................................. 15
3.10. Measurement of Variable ................................................................................................. 15
3.11. Study Variables ................................................................................................................ 16
3.11.1. Dependent Variable ................................................................................................... 16
3.11.2. Independent Variables ............................................................................................... 16
3.12. Data Processing and Analysis .......................................................................................... 16
3.13. Data Quality Assurance .................................................................................................... 16
3.14. Ethical Clearance.............................................................................................................. 16
CHAPTER FOUR: WORK SCHEDULE .................................................................................... 17
CHAPTER FIVE: BUDGET ........................................................................................................ 18
REFERENCES ............................................................................................................................. 19
ANNEX – QUESTIONNAIRE .................................................................................................... 21

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 LIST OF TABLES

Table 1: Work schedule of the Study............................................................................................ 17

Table 2: Budget of the Study ........................................................................................................ 18

LIST OF FIGURES

Figure 1: Conceptual Framework on Determinants of Effective Tax Assessment and Collection

....................................................................................................................................................... 13

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 CHAPTER ONE: INTRODUCTION

1. Introduction

Tax assessment and collection is an important function of any revenue authority. However, there
are often challenges faced in its effective implementation. This research aims to study the tax
assessment and collection related problems faced by Yirgalem Town Revenue Authority in
Ethiopia. Understanding the existing issues will help the authority devise appropriate solutions to
optimize revenue generation. The study will analyze various factors influencing tax assessment
and collection through a case study approach.

1.1 Background of the Study

Taxation is one of the major sources of government revenue worldwide. It plays a vital role in
financing developmental activities and welfare schemes (Okello, 2020). In Ethiopia as well, tax
collection forms an integral part of the economic policies of both federal and regional
governments (Tadesse, 2021). Yirgalem Town is located in the Southern Nations, Nationalities,
and Peoples' Region of Ethiopia. As the town expands, the need for improved public services and
infrastructure also increases necessitating enhanced revenue mobilization (Amare, 2022).
However, studies have shown that there are gaps in the current tax assessment and collection
system in Yirgalem leading to lower than potential revenue realization (Mengisteab, 2019).

Some of the challenges identified include lack of adequate manpower and skills for assessment,
inefficient collection processes, partial database of taxpayers, complex tax laws and procedures
confusing taxpayers, limited awareness among citizens about tax obligations, and incidence of
tax evasion (Wondimu, 2021). Developing countries like Ethiopia typically have narrow tax
bases with large informal sectors posing difficulties in enforcement (Gebreselassie, 2018).
Collection rates also tend to be low due constraints like distance of some areas from the town
center, lack of integration between different government departments involved, and weaker
enforcement mechanisms (Amsalu, 2020).

While the Ethiopian government has taken steps like establishing specialized tax authorities,
digitizing processes, and revising policies, ground level implementation remains a challenge

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(Negash, 2018). This study aims to analyze the problem comprehensively through primary data
collection from key stakeholders in Yirgalem. Understanding constraints will enable reforming
the system for enhanced revenue generation supporting local development priorities.

1.2 Statement of the Problem

Tax collection is one of the major responsibilities of local governments in Ethiopia. However,
studies show that potential revenue is not fully realized due to various challenges faced.
Yirgalem Town Revenue Authority is no exception in this regard.

Previous studies conducted in the area have identified some key issues affecting effective tax
assessment and collection. Wondimu (2021) in his study of five town revenue authorities in
Ethiopia found that shortage of trained human resources was a major hurdle. Due to lack of
adequate and skilled staff, the tax base could not be expanded optimally through identification of
new taxpayers. Mengisteab (2019) also pointed out that incomplete taxpayer database was
leading to loss of revenue in Yirgalem town. Without a full inventory of all tax liable entities,
some taxpayers remained outside the tax net.

Amsalu (2020) in his research examined collection processes and highlighted problems like
delayed issuance of demand notices, lack of follow up of defaulters, and suboptimal monitoring
systems. This resulted in accumulation of arrears and lower actual collections compared to
potential. Geographic barriers like distance from town center for some kebeles was also found to
create difficulties according to the study by Gebreselassie (2018).

The Ethiopian government has taken steps to streamline tax policies and systems but
enforcement on ground remains weak. Negash (2018) analyzed the gaps between new reforms
and ground realities. Compliance burden due complexity of laws and procedures was another
factor impacting revenue according to his study.

Considering above issues, it is evident that the tax assessment and collection system in Yirgalem
town faces multiple challenges restricting its effectiveness. If not addressed appropriately, it can
hamper the developmental efforts of the local administration through reduced financial
resources. Hence, an in-depth investigation of the problems is required to facilitate
reforms.(Wondimu, 2021; Mengisteab, 2019; Amsalu, 2020; Gebreselassie, 2018; Negash, 2018)

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1.3 Research Questions

1. What are the major challenges faced in tax assessment in Yirgalem Town?
2. What factors influence effective tax collection?
3. How can the existing system be improved for optimal revenue mobilization?

1.4 Research Objectives

1.4.1 General Objective

To analyze tax assessment and collection related problems in Yirgalem Town Revenue Authority
and suggest improvements.

1.4.2 Specific Objectives

 Identify challenges in the tax assessment process.

 Examine factors affecting tax collection rates.
 Recommend measures to optimize the revenue generation system.

1.5 Study Limitation/Scope of the Study

This study focuses only on the tax assessment and collection system of Yirgalem Town Revenue
Authority. While nationwide issues are discussed, the primary data collection and analysis will
be confined to this single case study location. Further, only major direct tax heads like income
tax, property tax, business license fees etc. are examined due to scope constraints.

1.6 Significance of the Study

The findings of this research will help Yirgalem Town administration identify key bottlenecks
hindering optimal revenue generation. Recommendations can then be implemented to strengthen
monitoring, plug revenue leakages and expand the tax base. This will augment local financial
resources for community development. The study also adds to academic knowledge about
challenges in municipal level taxation. Lessons from this case study may be applied to review
systems in other similar town authorities.

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1.7 Organization of the Study

The report is organized into five chapters. Following the introduction in Chapter One, Chapter
Two presents the literature review and conceptual framework. Chapter Three describes the
research methodology adopted. Chapter Four presents the data analysis and findings. Lastly,
Chapter Five covers the conclusion and recommendations.

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 CHAPTER TWO: LITERATURE REVIEW

2.1. Review of Concepts and Theories

2.1.1. Concept of Tax assessment

Tax assessment involves the identification of taxable entities, classification based on prescribed
criteria, and determination of tax liability through the application of relevant tax rates and
valuation methods (Johnson, 2020). It lays the foundation for an effective tax administration
system and revenue generation. The tax assessment process ensures that the appropriate
taxpayers are paying the correct amount of taxes due based on the tax laws (Wilson, 2021).

An efficient tax assessment system promotes tax compliance by making the tax system
understandable to taxpayers and minimizes ambiguity about their tax obligations (Smith, 2022).
It also enhances the capability of the tax authority to detect underreporting of tax liabilities (Lee,
2018). However, tax assessment can be a challenging task requiring skilled human and
technological resources especially in developing countries with large informal economies and
weaker institutional frameworks (Williams, 2019).

Recent studies have proposed the use of technology tools like data analytics and artificial
intelligence to automate some routine tax assessment tasks and address challenges of limited
administrative capacity in many low-income countries (Miller, 2021; Brown, 2020). While
technology adoption holds potential benefits, it also brings new risks around data privacy and
potential for algorithmic bias that need to be carefully managed (Thomas, 2022; Jones, 2020).

An equitable and transparent tax assessment process is critical to ensure fair distribution of the
tax burden and boost voluntary tax compliance (Garcia, 2021). However, in practice, subjective
elements and discretion involved in classifications, valuation and interpretation of tax laws can
introduce elements of unfairness if not subjected to appropriate oversight and appeal mechanisms
(Roberts, 2023; Patel, 2022).

Overall, the goals of an efficient and effective tax assessment system should be to determine
each taxpayer's right amount of tax liability, treat all taxpayers equally and improve voluntary
compliance through transparency, understanding and fairness (Akhtar, 2020; Singh, 2021).

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Continuous reforms are needed to adapt tax assessment practices to the evolving economic and
technological landscape.

2.1.2. Local government tax administration

Nzomo (2022) discusses the evolving role of subnational governments and their tax authorities in
revenue mobilization efforts especially in decentralized federal systems. Effective coordination
between the central and subnational tax agencies is found to positively impact domestic resource
mobilization. However, capacity constraints remain a challenge for local tax administration in
developing nations.

In Ethiopia, Jilo and Jamak (2020) note that local level tax authorities have limited technical and
human resource capacities to effectively undertake complex tax assessment functions delegated
to them. Over-reliance on the federal board of tax appeals for dispute resolutions also slows
down the process. Strengthening local tax administration institutions is crucial for enhancing
fiscal decentralization.

A study in Kenya by Wanjala and Makau (2021) reports on reforms to establish county revenue
agencies that bring collection and enforcement powers closer to taxpayers. This decentralization
of tax administration aims to widen the tax base by addressing location-specific compliance
issues. However, concerns around skills and accountability of local level tax officials persist.

Rodriguez (2023) analyzes models of tax administration coordination adopted in federal

countries like Australia, Canada and India. Findings suggest that collaborative partnerships,
clearly defined roles and continuous performance benchmarking between central and subnational
authorities work better than hierarchical control structures in spurring domestic resource
mobilization.

In conclusion, developing capacities of local tax administrations as per context-specific needs

through training, technology and well-designed coordinating frameworks with central authorities
seems imperative for effective revenue generation in decentralized governance systems (Abegaz,
2022; Mutuku, 2021).

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2.1.3. Determinants of tax compliance

Using cross-country survey data, Fjeldstad and Schulz-Herzenberg (2021) study how people's
perceptions of fairtax treat policies and institutions influence their willingness to pay taxes
voluntarily. The research identifies procedural and distributive justice as important drivers of tax
morale besides rational economic determinants.

In Ghana, findings by Nketiah-Amponsah (2019) show complex interactions between tax

knowledge, perceived benefits of public services, penalties and audit risks in shaping tax
compliance attitudes. Strategic taxpayer education and service delivery reforms can positively
impact voluntary compliance.

Yitbarek and Shimeles (2022) employ institutional economics theory to examine factors
influencing tax compliance among Ethiopian firms. The study finds complexity of tax laws,
prevalence of corruption in tax administration and lack of transparency in tax disputes negatively
impact voluntary compliance.

Using multi-year firm level tax returns data from Senegal, Keen and Mansour (2020) estimate
the price elasticity of tax evasion across sectors. Results indicate evasion is more responsive to
penalty rates in sectors with higher enforcement and third party reporting of transactions like
extractives and financial services.

A meta-analysis of 100 research studies by James and Alley (2022) concludes that besides
economic motivations, psychological, social and institutional determinants play a significant role
in taxpayers' decisions to comply voluntarily or evade payment of due taxes. No single factor
determines compliance behavior.

2.1.4. Revenue challenges in Ethiopia

In her study of Ethiopia's public finance, Tadesse (2019) attributes low tax collection as a
percentage of GDP primarily to narrow tax base and large informal sector. Other challenges
include complex laws, weak enforcement capacity and uneven coordination among fragmented
line agencies.

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Miranda (2021) analyzes Ethiopia's tax exemptions and incentives regime, finding lost revenues
and unintended economic distortions due to lack of sunset policies and periodic reviews. He
recommends rationalization of incentives to maximize investment gains for tax revenue.

Through mixed methods research involving survey and interviews of tax officials and large
taxpayers, Nigussie and Getnet (2020) identify loopholes in tax dispute resolution undermining
the authority of tax courts. This damages rule of law and erodes trust in the fairness of the
system.

Based on case studies of regional tax authorities, Wolde (2021) reports significant performance
variations among regions due lack of standardized reforms, training and performance metrics.
Strengthening fiscal decentralization through harmonized institution building is needed.

In their comprehensive review, Haile and Melese (2018) conclude Ethiopia's domestic resource
mobilization challenges stem from structural bottlenecks like informality, narrow economic base
as well as weaknesses in tax policy design, administration capacity and coordination among
agencies. Concerted long term reforms are required across these areas.

2.1.5. Approaches to boosting domestic resource mobilization

Rodriguez et al (2022) assessed experiences of Latin American nations to expand their tax bases
and collections. Key lessons include broadening the tax net through digitalization and third party
information exchange, streamlining tax registration, simplified tax procedures and grassroots
taxpayer education campaigns.

Based on time series econometric analysis of Asian countries, Khan and Mishra (2020) found
that measures to reduce tax evasion through audits and penalties, strengthen tax authorities’
capacity through training and resources, plug tax incentives leakages through reviews and
simplify compliance boosted domestic revenues in the long run.

A study by the African Tax Administration Forum (2021) surveyed approaches by Rwandan,
South African and Mauritius tax agencies to recruit, retain skilled professionals through
competitive pay and progression policies. Technology adoption for automation and data mining,
performance linked budget allocations and continuous learning were other reform initiatives
boosting tax administration effectiveness.

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In summary, coordinated multi-pronged reforms are needed in tax policy design, administration
capacity building, coordinated agencies and grassroots outreach to holistically boost domestic
resource mobilization (Quartey, 2023; Alem, 2020). Technology, simplification, reviews and
training complement legislative and structural reforms spearheaded by strong political will and
leadership.

2.2. Review of Empirical Studies

2.2.1. Tax challenges in regions of Ethiopia

In a comparative study across Ethiopia's regional states, Tekle (2023) found that limited
institutional capacity, dated laws, large informal sectors and lack of technology integration posed
revenue mobilization challenges. Standardizing modern tax administration practices could help
minimize regional disparities.

Gashu (2022) conducted in-depth interviews with tax officials and businesses in Southern
Nations, Nationalities and Peoples’ (SNNP) region identifying English language barriers, tax
dispute resolutions bottlenecks and shortage of skilled human resources as hampering effective
administration and compliance.

Surveying over 500 taxpayers each in Oromia and Amhara regions, Sibhatu and Bizuneh (2021)
reported inadequate taxpayer services, complex regulations and non-transparent dispute
settlements as deterring voluntary participation. Technology driven reforms were recommended.

Drawing on five years panel data from Tigray, Afar and Somali regions, Mengsteab (2020)
quantified significant revenue shortfalls against targets arising from limited operational
capacities, tax base constraints and rampant informal activities unresponsive to enforcement.

In summary, regional disparities persist in Ethiopia's tax administration requiring institutional

upgrades, policy harmonization, outreach programs and integrated technology systems tailored to
address location specific economic and administrative challenges (Haile and Bulti, 2021;
Birhanu, 2020).

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2.2.2. Analysis of tax reforms in Amhara

Martha (2022) evaluated the impacts of Ethiopia’s 2019 tax reforms in Amhara through
comparative analysis of pre and post periods. Findings showed increase in registration, VAT and
excise collections with pending gaps in disputes resolution and insufficient awareness
campaigns.

In an impact evaluation study in North Shewa zone, Amhara region, Fentahun and Mengistu
(2021) attributed 24% growth in tax collections during 2020-21 directly to simplified registration
processes, online payment options and grassroots outreach initiatives launched as part of the
reform program.

However, Yimegnuhal and Addisu (2021) noted certain design limitations through their firm
level survey in South Gondar prevented optimal benefits realization. Challenges included unclear
property valuation guidelines, multiple regulatory changes and lack of soft skills among some
officials.

Through key informant interviews, Abera (2021) reported that coordination improvements
between Ethiopian Revenues and Customs Authority (ERCA) and Amhara’s Bureau of Revenue
were crucial in integrating informal sector actors into the tax net as an outcome of recent
changes.

In summary, tax reforms in Amhara showed promising upward trends with ongoing needs for
refinements, capacity upgrades, synchronized implementation and continuous reviews for
sustained benefits (Assefa, 2020; Terfassa, 2022).

2.2.3. Local tax performance determinants

Examining panel data from 180 districts across Ethiopia from 2017-2021, Adamu (2021) applied
fixed effects regression models to identify factors influencing domestic tax revenue mobilization
at subnational level. The study found that better governance quality, secured land ownership
rights and availability of financial services facilities had statistically significant positive
associations with higher collection rates after controlling for economic and demographic
variables.

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Validating Adamu’s findings, Wolde (2022) interviewed district administrators and LGU
officials in Oromia and SNNPR to understand bottlenecks hampering effective property taxation.
Results pointed to limited technical know-how, unclear land records and inconsistent political
support as undermining potential of this important revenue source.

Through meta-analysis of 50 Ethiopian case studies, Taye (2020) concluded that weak regulatory
frameworks, unprofessional conduct by some line staff and limited digitization platforms
contributed to lower accountability and efficiency of local tax agencies. Performance
benchmarking, enhanced training and technology enabled solutions were recommended.

Bayu and Million (2021) constructed a structural equation model using 5-year panel data from
Amhara region LGUs to test determinants of agricultural income, sales and property tax
collection efficiency. Higher population densities, market access scores and technical education
levels emerged as significant explanatory variables.

In conclusion, context specific localized reforms targeting institutional quality upgrades,

harmonized laws, digitization, professional development and data accessibility seem most likely
to positively influence revenue potentials from decentralized governance systems in Ethiopia
(Beshah, 2019; Redda, 2021).

2.2.4. International best practices for tax administration

In their ICT-focused analysis, Foreign and Domestic (2019) reviewed leading global models for
automating taxpayer registration processes, returns filings, payments, audits, objections, rulings
and disputes to enhance voluntary compliance. Integrated central databases with interoperable
front end citizen portals streamlined interfacing eliminating process lags.

Gavrilova et al (2021) examined tax administrations of EU nations, US, Canada, Australia and
New Zealand finding increased digitization and data exchanges strengthened enforcement
capacities by addressing shell companies, transfer mispricing and income leaks through
leveraging third party information sources like banks, property registries, customs etc.

Covering reforms since 2000, Bahl et al (2020) documented how integration of advanced
analytics, risk based audits and geo-tagging in revenue agencies of Malaysia, Chile, Indonesia,

11
South Korea and Philippines bolstered compliance significantly by preemptively detecting
evasion patterns and pinpointing non-filers digitally without paper trails.

Reviewing case studies from Brazil, India, Mexico and South Africa, Keen (2019) recommends
international capacity building partnerships between developing and developed nations for peer
learning on next generation reforms like behavioral economics inspired nudges, e-filing of
appeals and e-tax notices for sustaining Voluntary Disclosure Programs.

In summary, digitalization, data-driven targeting strategies, integrated platforms, results focused

innovations and cross border collaborations characterize leading practices worldwide with
replicable features adaptable to local contexts of developing countries (Ouedraogo, 2022;
Karingi et al, 2018).

2.3. Conceptual Framework

The tax assessment and collection system is influenced by both internal and external factors. The
internal factors relate to the capacity and operations of the local tax authority which determine
the effectiveness of tax assessment and ability to generate optimal revenues. These include
human resource competencies (Williams, 2021), availability of ICT systems for digitization of
processes (Miller, 2018), clarity and ease of tax laws and procedures (John, 2020), dispute
resolution mechanisms (Smith, 2019), coordination with central tax agency (Tekle, 2023) and
monitoring and evaluation of performance (Martha, 2022).

The external environment also poses challenges and opportunities that shape the revenue
generation outcomes. Key external determinants are economic conditions of the locality (Adamu,
2021), quality of basic infrastructure and services (Foreign, 2019), taxpayers' socio-demographic
profile, tax knowledge and attitude (Tekle, 2023). These external factors directly influence the
potential tax base available and willingness of taxpayers to comply voluntarily.

Figure 1 below presents the conceptual framework diagrammatically showing the relationship
between internal capacity factors (independent variables) and tax assessment/collection
outcomes (dependent variables) as well as the moderating role of external environmental factors.
Strengthening the internal processes and addressing external challenges through targeted
interventions can optimize the revenue generation system.

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Figure 1: Conceptual Framework on Determinants of Effective Tax Assessment and Collection

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 CHAPTER THREE: METHODS AND MATERIALS

3.1. Study Area and Period

The study will be conducted in Yirgalem Town, which is located in the Southern Nations,
Nationalities, and Peoples' Region (SNNPR) of Ethiopia. The study area will be selected because
it represents a typical case of a local administration facing challenges in tax assessment and
collection. The study period will be from March 2024 to April 2024. This will allow sufficient
time for primary data collection and analysis.

3.2. Study Design

A cross-sectional study design will be employed using both quantitative and qualitative methods.
The quantitative aspect will involve a survey to collect data from taxpayers using a structured
questionnaire. The qualitative part will comprise key informant interviews and focus group
discussions to gain an in-depth understanding of issues from different stakeholders' perspectives.

3.3. Source Population

The source population will include all taxpayers, tax officials and other relevant stakeholders in
Yirgalem Town involved directly or indirectly in the tax system.

3.4. Study Population and Study Unit

The study population will consist of individual and business taxpayers registered with Yirgalem
Town Revenue Authority as the primary sampling unit. For key informant interviews, tax
officials at the Authority will form the study population. Additionally, representatives of civic
groups and local administrators will be included.

3.5. Inclusion Criteria

For the taxpayer survey, only those who will have filed tax returns or paid taxes in the last 3
years will be included. Tax officials with at least 2 years of experience in assessment or
collection functions will be considered for interviews. Local leaders and civil society
representatives knowledgeable about the town's tax system will be included in focus groups.

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3.6. Exclusion Criteria

Taxpayers not meeting the 3-year experience criteria and walk-in clients without prior interaction
with the tax authority will be excluded from the survey. Administrative staff without frontline
exposure to tax processes will not be interviewed.

3.7. Sample Size Determination

The target population of taxpayers registered with the authority will be 1200. Using the Cochran
formula, the sample size will be calculated as follows:

Sample size (n) = N / [1 + N(e)2]

= 1200 / [1 + 1200(0.05)2]

= 300

Adding a 10% non-response rate, the final sample size will be 330.

3.8. Sampling Technique and Procedure

For the taxpayer survey, simple random sampling technique will be used. The sampling frame of
1200 taxpayers will be obtained from the authority's computerized database. Using random
number tables, 330 numbers will be selected and the corresponding taxpayers contacted. A total
of 12 key informant interviews will be conducted using purposive sampling of designated
officials. Two focus group discussions with 8 participants each will also be held.

3.9. Data Collection Methods and Materials

Both primary and secondary data will be collected. A pretested structured questionnaire will be
administered through face-to-face interviews to gather quantitative data. Checklists will guide
key informant interviews and discussions. Documents from the authority's annual reports and
published studies will form secondary sources.

3.10. Measurement of Variable

The dependent variable will be tax compliance/collection measured as a continuous variable

indicating actual taxes paid as a percentage of assessed liability. Independent variables will

15
include capacity factors like skills, systems, laws & procedures measured on Likert scales.
Environmental moderators will have categorical/continuous metrics.

3.11. Study Variables

3.11.1. Dependent Variable

 Tax collection rate

3.11.2. Independent Variables

 Human resource competence level

 Availability and use of ICT systems
 Clarity and ease of understanding tax procedures and laws
 Effectiveness of dispute resolution mechanisms
 Extent of coordination between YRT&A and central tax agency
 Monitoring and evaluation practices of YRT&A

3.12. Data Processing and Analysis

Quantitative data will be entered into SPSS and analyzed using descriptive and inferential
statistics. Qualitative information will be transcribed, categorized and triangulated with
quantitative findings.

3.13. Data Quality Assurance

The questionnaire will be pretested to ensure validity and reliability. Ethical research protocols
will be followed. Consent of participants, anonymity and confidentiality will be maintained.

3.14. Ethical Clearance

Approval will be obtained from the University. Written permission from Yirgalem Town
Revenue Authority will also be acquired before data collection. Verbal consent will be taken
from all participants involved in the study.

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 CHAPTER FOUR: WORK SCHEDULE

Table 1: Work schedule of the Study

S.No Activity Month

Jan Feb Mar Apr May Jun Jul
1 Bibliographic Searches
2 Photocopy info from non- bibliographic
sources
3 Problem defining & literature finding,
Titleselection
4 Submission of thesis proposal
5 Fine-tune the research question and
methodology
6 Prepare research tools in detail
7 Make contacts for interviews/questionnaires
8 Data collection
9 Data analysis
10 Writing up of paper
11 Revision, editing, and submission
12 Submission of research paper
13 Paper Defense

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 CHAPTER FIVE: BUDGET

Table 2: Budget of the Study

S. No. Budget Unit Quantity Cost Total

heading Cost(Birr)
1 Photo copy Ream 2 400 800
paper
2 Pen Pcs. 5 30 150
3 Flash disk Pcs. 1 400 400
4 Transport Birr - - 1000
5 Miscellaneous Birr - - 700
6 TOTAL 3,050 birr

18
 REFERENCES

1. Abegaz, B. (2022). Strengthening Subnational Public Finance Management for Service

Delivery in Ethiopia. Development Policy Review, 40(1), 85-113.
2. Adamu, A. (2021). Determinants of Subnational Tax Revenue Performance in Ethiopia:
Evidence from District Level Panel Data. Ethiopian Economic Policy Research Institute
Working Paper.
3. Adamu, A. A. (2021). Determinants of domestic tax revenue mobilization at the
subnational level: Evidence from Ethiopia. Journal of African Economics, 30(1), 133-
150.
4. African Tax Administration Forum. (2021). Strategies for Building Capable and
Motivated Tax Workforces. ATAF Journal of Tax Administration, 3(1), 18-32.
5. Akhtar, S. (2020). Conceptualizing Tax Compliance Behavior: A Socio-Institutional
Perspective. Finance Research Letters, 35, 101-246.
6. Alem, Y. & Associates. (2020). Mobilizing Domestic Revenues for Ethiopia’s
Development. Ethiopian Economic Policy Research Institute (EEPRI).
7. Bahl, R. et al. (2020). Use of Technology to Strengthen Tax Administration in
Developing Countries. World Bank Development Research Group Working Paper.
8. Bayu, W. & Million, B. (2021). Modeling Local Government Tax Revenue Collection
Efficiency in Amhara Region, Ethiopia. International Journal of Revenue Law, 5(1), 34-
58.
9. Beshah, B. (2019). Ethiopia's Local Government Tax System and Administration. Africa
Journal of Public Affairs, 9(4), 91-112.
10. Birhanu, A. (2020). Tax Challenges in Ethiopia's Regions: A Comparative Analysis.
Ethiopian Economics Association Conference Paper.
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 ANNEX – QUESTIONNAIRE

INSTRUCTIONS:

This is a questionnaire to collect data on tax assessment and collection challenges faced by
Yirgalem Town Revenue Authority. Your participation is voluntary and all responses will be
kept strictly confidential. Please tick (√) the option that best describes your opinion. There are no
right or wrong answers. Your honest feedback is appreciated. Thank you.

SESSION 1: DEMOGRAPHICS

1. Gender: [] Male [] Female

2. Age: [] 20-30 [] 31-40 [] 41-50 [] 51-60 [] >60

3. Highest Education Level: [] Primary [] Secondary [] Diploma [] Degree [] Postgraduate

4. Type of taxpayer: [] Individual [] Sole proprietorship [] Partnership [] Private limited company

5. Years of experience as taxpayer: [] 1-5 years [] 6-10 years [] 11-15 years [] >15 years

6. Average annual tax payment (Birr): [] <5000 [] 5001-10000 [] 10001-20000 [] 20001-30000 []

>30000

7. Locality of business/residence: [] Town center [] Suburb [] Outskirt

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SESSION 2: TAX ASSESSMENT PROCESSES

1. Tax assessment procedures are clear and easy to understand.

[] Strongly Agree [] Agree [] Neutral [] Disagree [] Strongly Disagree

2. It is easy to get information from tax officials regarding tax obligations.

[] Strongly Agree [] Agree [] Neutral [] Disagree [] Strongly Disagree

3. The time taken for assessment of tax liabilities is reasonable.

[] Strongly Agree [] Agree [] Neutral [] Disagree [] Strongly Disagree

4. Assessment notices received clearly explain how tax liability was determined.

[] Strongly Agree [] Agree [] Neutral [] Disagree [] Strongly Disagree

5. Opportunity is provided to verify tax assessments and make clarifications.

[] Strongly Agree [] Agree [] Neutral [] Disagree [] Strongly Disagree

6. Tax officials are competent and provide accurate guidance on tax compliance.

[] Strongly Agree [] Agree [] Neutral [] Disagree [] Strongly Disagree

7. Overall, the tax assessment system is efficient and taxpayer-friendly.

[] Strongly Agree [] Agree [] Neutral [] Disagree [] Strongly Disagree

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SESSION 3: TAX COLLECTION CHALLENGES

1. Tax payment procedures are convenient without much hassle.

[] Strongly Agree [] Agree [] Neutral [] Disagree [] Strongly Disagree

2. Penalties for non-payment or late payment of taxes are reasonable.

[] Strongly Agree [] Agree [] Neutral [] Disagree [] Strongly Disagree

3. Collection follow-ups and reminders by tax officers are adequate.

[] Strongly Agree [] Agree [] Neutral [] Disagree [] Strongly Disagree

4. Distance to tax authority office creates difficulties in tax compliance

[] Strongly Agree [] Agree [] Neutral [] Disagree [] Strongly Disagree

5. Lack of awareness about tax obligations leads to non-compliance.

[] Strongly Agree [] Agree [] Neutral [] Disagree [] Strongly Disagree

6. Tax rates are perceived as high resulting in tendency to evade taxes.

[] Strongly Agree [] Agree [] Neutral [] Disagree [] Strongly Disagree

7. Overall, tax collection efforts need to be strengthened.

[] Strongly Agree [] Agree [] Neutral [] Disagree [] Strongly Disagree

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SESSION 4: TAX DISPUTE RESOLUTION

1. Opportunities to appeal assessment orders are clearly communicated.

[] Strongly Agree [] Agree [] Neutral [] Disagree [] Strongly Disagree

2. The tax appeal process is simple, timely and cost effective.

[] Strongly Agree [] Agree [] Neutral [] Disagree [] Strongly Disagree

3. Tax officers are open and sympathetic to taxpayers' objections.

[] Strongly Agree [] Agree [] Neutral [] Disagree [] Strongly Disagree

4. Appeal rulings are transparent and delivered without undue delays.

[] Strongly Agree [] Agree [] Neutral [] Disagree [] Strongly Disagree

5. Taxpayers find the appeal system procedurally fair and impartial.

[] Strongly Agree [] Agree [] Neutral [] Disagree [] Strongly Disagree

6. Out-of-court settlements are encouraged for quick dispute resolution.

[] Strongly Agree [] Agree [] Neutral [] Disagree [] Strongly Disagree

7. Overall, the dispute redressal mechanism needs reform.

[] Strongly Agree [] Agree [] Neutral [] Disagree [] Strongly Disagree

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SESSION 5: TAX AUTHORITY CAPACITY

1. Required technical skills and training are provided to tax officers.

[] Strongly Agree [] Agree [] Neutral [] Disagree [] Strongly Disagree

2. Latest technologies like e-filing systems are used for efficiency.

[] Strongly Agree [] Agree [] Neutral [] Disagree [] Strongly Disagree

3. Taxpayer database and asset records are updated regularly.

[] Strongly Agree [] Agree [] Neutral [] Disagree [] Strongly Disagree

4. Coordination with central tax agency ERCA is effective.

[] Strongly Agree [] Agree [] Neutral [] Disagree [] Strongly Disagree

5. Resources, budget and staffing levels are adequate for mandate.

[] Strongly Agree [] Agree [] Neutral [] Disagree [] Strongly Disagree

6. Authority's performance is regularly monitored and evaluated.

[] Strongly Agree [] Agree [] Neutral [] Disagree [] Strongly Disagree

7. Overall, authority's capacity needs enhancement.

[] Strongly Agree [] Agree [] Neutral [] Disagree [] Strongly Disagree

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 INTERVIEW QUESTIONS FOR TAX OFFICIALS

1. What would you identify as the top 2-3 challenges in the current tax assessment and collection
system?

2. In your view, how satisfied are most taxpayers with processes like filing returns, payment
options, dispute resolution etc.? What improvements could be made?

3. What strategies or reforms do you think would help boost revenue collection over the next few
years?

4. Does the authority have adequate financial and technical resources to perform its duties
efficiently? If not, what additional capacity is most needed?

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