ASSESSMENT OF BUSINESS INCOME TAX COLLECTION

PROBLEMS ON CATEGORY “A” TAX PAYERS (IN CASE

STUDY DURBETE TOWN REVENUE ADMINISTRATION OFFICE

DEBRE MARKOS UNIVERSITY BURIE CAMPUS

DEPARTMENT OF ACCOUNTING AND FINANCE
1. A RESEARCH PROPOSAL ON THE ASSESSMENT OF BUSINESS
INCOME TAX COLLECTION PROBLEMS ON CATEGORY ‘A’ TAX
PAYERS (IN CASE STUDY DURBETE TOWN REVENUE
ADMINISTRATION OFFICE)

PREPAIRED BY
1.TIBEBU ABEWA……………………… BER/725/11
2.BEKELE HAILU…………………………BER/698/11
3.TIRINGO DEREJE……………………….BER/726/11
BURIE, ETHIOPIA
Advisor,Abiyu Getie (Assis prof)

November, 2020
Abstract
This research will be focused on identifying the major problems of business income tax
collection in view of tax collectors from category “A” tax payers found in revenue
administration office. To conduct this, the researcher used primary source of data.. The primary
data were collected by distributing close ended questions and unstructured personal interviews.
The researcher used non-probability sampling method specifically (personal judgment or
purposive) techniques to select the respondents and use descriptive method of data analysis to
analysis the data gathered from the respondents. Based on the result of the study, the
implemented business income tax collection system affects by different problems. Such as tax
avoidance, tax evasion, tax payers are not willing to pay the tax at a specific time, and others.
Therefore to avoid these critical challenges and to achieve the desired goals, the tax authority
should use technological instruments such as computer registration, and tax payer’s training
program.

Generally the main objective of the study is evaluation of tax administration system in category
'A’ tax payers. The method of the study will be descriptive way of analysis. In this study the data
will be obtained from both primary and secondary sources. Primary source of data are
questionnaires and secondary sources are written materials such as documents, internet,
journals and magazines. To perform the study research collected data using census study using
quantitative and qualitative method. Finally the researcher tax administration office and
administration system would be stronge.to reduce the problem of attitude variation between the
tax payers
Key Words: debremarkos tax and medium business profit taxpayers, tax compliance, administration
system.
 Table content
Abstract............................................................................................................................................................. iv
Table content.......................................................................................................................................................
CHAPTER ONE: INTRODUCTION................................................................................................................ 1
1.1Background of the study........................................................................................................................... 1
1.3 Research questions................................................................................................................................... 2
1.4 Objective of the study.............................................................................................................................. 3
1.4.1General objective of the study............................................................................................................ 3
1.4.2 Specific objective of the study.......................................................................................................... 3
1.5 Significance of the study.......................................................................................................................... 3
1.6 Scope of the study.................................................................................................................................. 3
1.7 Limitation of the study......................................................................................................................... 4
1.8 Organization of the paper......................................................................................................................... 4
CHAPTER TWO: LITERATURE REVIEW..................................................................................................... 5
2.1 Theoretical review................................................................................................................................... 5
2.1.1 Purpose of taxation........................................................................................................................... 5
2.1.2 Definition of business income tax..................................................................................................... 6
2.1.3 Category of business income tax payers............................................................................................ 6
2.1.4 Tax administration............................................................................................................................ 7
2.1.4. Assessment of Income by Estimation............................................................................................... 9
2.1.5 Challenges of tax administration....................................................................................................... 9
2.1.6 Prospects (Solutions) or Remedies to the Tax Administration Challenges......................................10
2.2 Empirical reviews.................................................................................................................................. 10
2.3 RESEARCH GAP................................................................................................................................ 11
2.3.1 KNOWLEDGE GAP...................................................................................................................... 11
2.3.2 TIME GAP................................................................................................................................. 11
CHAPTER THREE: RESEARCH METHEDOLOGY.................................................................................... 13
3.RESEARCH APPROACH
3.1 RESEARCH DESIGN........................................................................................................................... 13
3.2 Source of data........................................................................................................................................ 13
3.3 Methods of Data Collection................................................................................................................. 13
3.4 Target Population and Sample Size........................................................................................................ 13
3.5 Sampling technique................................................................................................................................ 14
 3.6 Method of Data Presentation and Analysis

REFERANCE.................................................................................................................................................. 32
 CHAPTER ONE ;

1. INTRODUCTION
1.1Background of the study
Tax is a compulsory contribution levied on individual’s business firms or property, which is
designed to transfer resources from the private to the public sectors to provide merit to the
society, tax is a compulsory levy and those who are taxed have to pay the sum of the services and
goods by the government (Gupta, A,2001).

Business income tax is imposed on taxable business income profit of a business. Business is
allowed tax-deductible expenses, from their revenues to reach their taxable income. These
expenses may promotion or advertising repair and maintenance, donation depreciation of fixed
assets.(Misrak T,2011).

Tax is a financial charge or other levy imposed on individuals or legal entity by the government
so as to raise money to finance government expenditure. Taxes are the primary source of
government revenue. Government uses tax revenue to pay soldieries and polices, to build dams
and roads, to operate schools and hospitals, to provide food to the poorer and medical care to the
elders and for hundreds of other purpose, use of tax activities, Government would cease/stop/to
exist or survive(Gebrie,2006).

Tax levied by federal and state governments is classified as direct and indirect taxes. Direct
taxes include employment income tax, business income tax, and tax on royalties and chance of
winning, while indirect taxes include; value added tax (VAT), excise tax custom duty taxes.
Hence, proper assessment and collection of tax is one of the factors that enable the government
to achieve its objective or goal and programs. Besides, it reduces the country’s dependability on
the foreign loan and donation. Among the direct taxes, business income is classified in to three
major categories with respect to legal personality and annual turnover. These are category “A”,
“B” and “C”. This person and bodies under category “B” tax payers unless already classified in
category “A” business with no legal personalities and those annual turnover is between birr
100000 and 500000 (one hundred thousand and five hundred thousand)(Misrak T,2008).
Category “A” which shall include the following personnel and bodies, Any company
incorporated under the law of or in a foreign country, for example private limited companies,
share companies and any other business having an annual turnover of birr 5000000(five
hundred thousand birr)or more. Category “B” unless classified in category “A” any business
having an annual turnover of birr 100000(one hundred thousand birr category “C” unless already
classified in category “A” and “B” those annual turnover is estimated by the tax authority as
being up to birr 100000(one hundred thousand birr)and less(council of ministers income tax
regulation no 78/2002).On the bases of the above back ground, this study is initiated to identify
the problems of business income tax collection on category ’’A’’ tax payers in Durbete Town
revenue administration office.
1.2 Statements of the problem.
Most researcher conducted a research in different area on problems of the tax payers, Therefore,
this study will to identify the problems of business income tax and collection in category ’’
A’’ tax payers in Durbete Town revenue administration office. The following researches
were conducted on category 'c' tax payers. Yohanns and Zerihun (2013),study conducted on
identifying the gaps and problems that exist between the Dire dawa business community and the
tax authority results show that most of the tax players, especially those in the category "C" do not
exactly know how the tax is assessed or calculated and the procedures in the tax assessment and
computation are not objectively understand by most of the tax payers. The finding also reveal
over the taxation as a result of over estimation daily or annual income, non-transparent, on-
participatory standard assessment by the authority on the category "C" tax payers, lack of
fairness or equity of taxation among similar business of category "C" tax players poor tax laws
enforcement especially for value added Tax and large member of Tax defaulters, poor
communication and understanding between the tax authority and tax payers, weakness on tax
collection and unsatisfactory service delivery of tax authority.
Study conducted by Suresh and srinivas (2010),on major factors that influence attitudes of rental
income tax payers and their compliance behavior with tax system in Mekelle state
administration. The study indicated that there were some dishonest rental tax payers. Even there
are some individually who entirely don't report their taxable income to the concerned body. In
addition to the above, the study also that with the exception of minority of the rental tax payers
who hold certificate and diploma, majority of them were with an educational background of
elementary and high-school completed. Hence, it can be concluded that rental tax payers lack
knowledge of easily understanding the law and regulations of tax system and how their taxable
income is computed. Therefore, it can be concluded that still many respondents are not attending
or participating on the tax training session.
Emiratu (2010),investigated about the understand economy and tax evasion problem in Ethiopia.
On his study he found that the amount of tax evasion in Ethiopia reached 10% of the economy
that have great impact on the implication for tax policy.
Wellela and Helge (2011),jointly conducted study on tax payers view of business taxation in
Ethiopia. The objective of their study were to asses business peoples view of paying tax in
Ethiopia and to identify (perceived) difficulties with the tax system and priorities for tax reform.
Hence the result shows that the main reason for tax non-compliance were; lack of predictability
in the tax system forces tax payers to reduce their current tax liability, difficult to compete with
business that import goods at manipulated custom duties, it is those who are not paying tax that
are quickly growing, so why should I comply, discrimination by the tax administration forces
honest taxpayers to evade tax.
Niguss et'al(2014) conducted study on the consequences of tax assessment on tax collection of
category ‘C’ tax payers in Ethiopia; a case study in Mekelle city, Tigray. The study result show
that unless good service deliver is provided, tax related laws are enforced and implemented,
effective awareness creation is done and fair tax assessment is conducted, there may not be
efficient and effective tax collection. Even though efficient tax assessment and collection cannot
be made overnight, it is up to tax administers to efficient tax revenue. Multiple approaches are
needed to enhance tax collection efficiency. No single approach is likely to fully and effectively
address the tax collection efficiency of category ‘A’ tax payers.
Since it has multiple causes of tax related problems, the category ‘A’ tax payers needs more
attention. As per the researchers knowledge, it needs further study on factors that can be
problems for business income tax collection on category ‘C ’tax payers since there is no study
conducted by other researchers in Durbete town administration. Thus, the study will aims at
filling this gap by examining the assessment and collection problems of Durbete Town revenue
authority office in assessing and collecting taxes from category ‘A’ business income tax payers.
Because Durbete Town like any other developing city faces difficulty in raising revenue to the
level required for the promotion of economic growth and the reason why the researchers select
Debre Tabor town than other towns is due to nearness in order to get available data about the
study.

1.3 Research questions

Based on the above stated problem, the researcher will try to answer the following basic
questions

What are the main problems of the tax authority in collecting tax?
What are the strength and weakness of the tax authority in collecting tax?
What method uses by the tax authority to create awareness on tax and control tax
evasion?
What are the solutions (prospects) for the problems or the challenges collecting tax?

1.4 Objective of the study

1.4.1General objective of the study
The general objective of this study is to identify the problems of business income tax collection
in category ‘’A’’ tax payers in case of Durbete Town revenue administration office.

1.4.2 Specific objective of the study

The following are specific objectives to be achieved.
To identify the main problems of business income tax collection in category “A”
taxpayers.
To identify the strength and weakness of the tax authority in collecting tax.
To identify how the tax authority control tax evasion and avoidance.

To identify possible solution (prospects) on the problem or challenges related to business

income tax collection.
1.5 Significance of the study
By identifying the main problem of business income tax collection in category “A” tax payers;
the researcher will be create awareness of the problem for the tax authority and give possible
solution (prospects) for the problems.

It provides information for everyone who wants to know about tax collection problems on
category ''A'' tax payers, and also will help paved the way for improvement of tax collection
system and encourage compliance of tax payers and also to create fairly clear image how the tax
collection and problem with tax collection has taken place.

It is also important for the revenue office to know their strength and weakness and suggest
possible solutions for their weakness. It also hope that this study would use as ground for further
research findings in the area as reference .Finally, this study will help to have an experience for
future carrier development.

1.6 Scope of the study

The overall scope of this study will focus on the extent to which the research objectives are
concern. It is very wide ,vast and need long time to study all business income tax categories tax
payers.

This research will be conducted geographically in Durbete Town to search and solutions of
business income tax collection in category ‘’A’’ tax payers in Durbete Town revenue
administration office. The study would cover the emphasis on determining the problems and
solutions up to reach measurable or remarkable result from the study by attempting to give
solution to the problems or challenges.

1.7 Limitation of the study

The major limiting factors of the study were lack of sufficient secondary data. Shortages of time
and research fund were also other limiting factors of the findings of the study. However,
necessary precautions were made so that these limitations will be not affect the findings of the
study through taking appropriate sample size and triangulating different data collection methods.
1.8 Organization of the paper
The study will be intended to have five chapters. The first chapter contains background of the
study, statements of the problem, objective of the study, significance of the study, scope, and
limitation of the study. Chapter two and three contain, review literature and research
methodology respectively. Chapter four contains data analysis and interpretation by using tables
and percentage. Finally, the fifth chapter concerned about conclusion and recommendation.

CHAPTER TWO: LITERATURE REVIEW

2.1 Theoretical review
Tax is defined as an involuntary payment to the government by an individual or firm that does
not entitle the payer to a quid procure benefit or to un equivalent value of goods and services in
exchange (Bruce, 2001).

Tax is a compulsory charge imposed by the government without any expectation of direct return
in benefit. In other words, tax is a compulsory payment or contribution by the people to the
government for which there is no direct return to the taxpayers. The tax imposes a personal
obligation on the people to pay the tax if they are liable to pay it. The public should be taxed
according to their tax liability to pay, and the people in the same financial position should be
taxed in the same way without any discrimination (parameswarn, 2005).

Tax is a financial charge or other levy imposed on individual or legal entity by government or it
is a system of rising money to finance government expenditure. All government requires
payment of money taxes from people. Government uses tax revenue to pay soldiers and polices,
to build dames and roads, to operate schools, to provide food and medical care to the elders and
for hundreds of other purposes (Gebrie, 2005).

Taxation is a system of raising revenue by a government through tax. It is a method of collecting

funds by a government from tax source to finance its operation (Misrak, T, 2003).
Taxation issued for non-fiscal purpose such as reducing the in equalities in income distribution,
encourage a certain industries and discourage of others depending on how useful and appropriate
they are at a particular instance (Ethiopian chamber of commerce, 2005).

2.1.1 Purpose of taxation

According to chamber of commerce (2005), taxation in Ethiopia has many purposes. Among the
purposes, some of are listed below;

Promoting capital investment and trade, Ensuring equity, fairness, and consistency in the
administration of tax laws. Rising revenue to finance the country’s social and economic
development programs and to alleviate penalty. Encouraging a certain industries, which are held
important to the long run development of the country? Discourage other industries, which are
likewise not important to the long run development of the country.

2.1.2 Definition of business income tax

According to proclamation no.173/1961, imperial government “business” is any industrial,
commercially, banking, transporting, mining, or any other activities persuaded by the person
body compared to the previous promulgated income tax rate. On the other hand, it is a tax
imposed on the taxable business income/net profit realized from entrepreneurial activity. Taxable
business income would be determined per tax period on the bases of the profit and loss account
or income statement, which shall be drawn in compliance with the generally accepted accounting
principle (GAAP). Corporate businesses are required to pay 30% flat rate of business income
tax. For unincorporated or individual businesses, the business income tax ranges from10% up to
35 %( Misrak T, 2008)

2.1.3 Category of business income tax payers

According to income tax proclamation No 286/2002,article 2(16) for its efficient and effective
tax Administration purposes, the Ethiopian government classifies schedule “B” income tax
payers (rental income tax payers or rental service business )and schedule “C” income tax payers
(business income tax payers or trade business )into categories. For categorization purpose, the
Ethiopian government uses two bases: - the legal personality (legal status) of taxpayers and their
annual gross turn over (annual actual or expected gross sale revenue). Accordingly , schedule
“B” and “C” income tax payers categorized in to three, namely ,category ”A” , category ”B”
and category “C” tax payers.
2.1.3.1 Category “A” tax payers (large size tax payers)
Category “A” of schedule “B” and “C” income tax payers includes the following type of
taxpayers:-

Business income tax payers or rental income tax payers formed under the laws of Ethiopia or
Foreign laws that have separate legal personality (that is Share Company, plc, public enterprise,
public finance agency, and foreign body’s business agent residing and doing business in Ethiopia
on behalf of the principal) regardless of their annual gross turn over or revenues

Any other business income tax payers or rental income tax payers having annual gross turnover
of birr 500,000 or more (i.e. Annual gross turnover ≥ 500,000 birr).

2.1.3.2 Category “B” tax payers (medium size tax payers)

Category “B” Tax payers include, unless already in classified category “A” business income tax
payers with no legal personality and whose annual gross turnover is more than birr 100,000 but
less than 500,000(I.e. Birr 100,000 > annual gross turnover < 500,000).

All category "B” tax payers are required to prepare and submit to the concerned tax authority
only income statement (profit and loss statement) with the required details. It is not legal
requirement for category "B” tax payers to prepare and submit balance sheet to the concerned tax
authority.

2.1.3.3 Category “C” Tax payers (small size tax payers)

Category “C” income tax payers who are engaged in a business/trade (Business income tax
payers or rental income tax payers) having no legal personality and whose annual gross turnover
is estimated up to Birr 100,000(I.e. Estimated annual growth turn over≤ birr 100,000).Category
“C”taxpayers have not obligation to keep books of accounts and records, they are not prohibited
from doing so. The tax authority, even, encourage category “C” taxpayers maintain books of
accounts acceptable to the tax authority; they shall pay their tax as per the books, instead of as
per the standard assessment presumptive system.

2.1.4 Tax administration

Tax administration refers to the identification of tax liability based on the existing law. The
assessment of this liability and the collection, prosecution and penalties imposed on recalcitrant
taxpayers. Tax administration therefore, covers a wide area of study, encompassing aspects such
as; registration of taxpayers, assessments, returns processing, collection and audits (kangave,
2005).

Tax administration has to secure compliance with the laws by applying an array of registration,
assessment and collection procedures. A government can keep taxpayers from doing these
activities, and thus avoid tax evasion depends on the nature of economy’s actual tax base. Tax
administration therefore, should aim at improving on laws regarding the registration, assessment,
collection revenue, and exploiting fully taxation potential of a country (World Bank, 1999).

2.1.4.1Assessment of Business income Tax

Tax assessment or assessment of tax refers to the initial review by the tax authority of the tax
declaration and attached supplementary documents submitted by a taxpayer and a verification of
the arithmetical and technical accuracy of the declared tax liability and tax payable shortly after
the submission of the tax declaration. Hence, tax assessment is the result of the process of
ascertaining a taxpayer’s taxable income and the tax payable on that income (Misrak T, 2003).

2.1.4.2 Bases of income tax assessment

The tax authority is empowered by the income tax legislation and investigate any statement,
records and books of accounts maintained by a tax payer at any time only for the purpose of tax
assessment even through there is anything in any other law to the contrary of this power (Misrak

2.1.4.2.1Assessment of Income Tax by Books and Records

For the category “A” and ”B” rental or business income tax payers who are required by the tax
law to maintain books of accounts, the assessment of tax is based on their books of accounts and
records. As a result, the income tax declaration is prepared based on the books of account and
records maintained by the taxpayers as per the tax law requirement. However, for category “C”
rental or business income tax payers who are not required by law to maintain books of accounts,
the assessment of tax based on the standard assessment (estimation) method (Misrak .T,2003).

2.1.4.2.2 Assessment of Income Tax by Standard Assessment Method

Category ‘’C’’ business income tax payers, unlike category ‘’A’’ and ‘’B’’ tax payers, are not
required (not obligatory) to maintain books and records prepare and submit any financial
statement to the tax authority. To determine the taxable income and income tax liability of such
taxpayers, however, standard assessment presumptive taxation method is used (Misrak.T, 2003).
The schedule of presumptive tax developed by the tax expert and prescribed is schedules ‘’B’’
and ‘’C’’ of the income tax proclamation number 286/2002, article 16 are used for collecting the
tax from the category ’’C’’ tax payers of schedule B income tax payers (business income tax
payers). The following three stapes summarize the standard assessment presumptive taxation
method for business income tax payers:-

Step – 1 information on daily sales revenue (turn over)of a taxpayer is gathered by the tax
assessor taking in to account the varies relevant variables.

Step – 2 the daily estimated revenue figure is multiplied by the number of business in a
year to arrive at estimated annual revenue and taxable income.

Step – 3 the amount of income tax liability of the taxpayer is located from the
presumptive tax schedule provided in the income tax regulation number 286/2002
article 2(16).

2.1.4. Assessment of Income by Estimation

If the taxpayers keep no records, if the income tax authority does not accept submitted book, or if
the taxpayers fail to declare within the time specified the income tax authority estimate by the
use of certain indication. Category ‘’C’’ should pay tax at fixed rate on the income tax estimated
by the economic authority. Such taxation, is based on the sum estimation may continue from
year until revised by the authority. Tax assessor will be assigned by the office to estimate daily
sales will be converted to annual income using the number of working days. Tax on the annual
sales is determined on the base of perspective value assigned to each activity (ibid).

2.1.5 Challenges of tax administration

The efficiency of tax system is not determined only by appropriate legal regulation but also by
the efficiency and integrity of the tax administration. In many countries, especially in developing
countries small amount of collected public revenue can be explained by either in capability of the
tax administration in realization of its duties, or with some degree of corruption. Regardless of
how carefully tax laws have been made, they could not eliminate conflicts between tax
administration and taxpayers. Tax administrations with a skilled and responsible staff are almost
the most important precondition for realization of “tax potentials” of the state. It is generally
known that tax laws and tax policies are as good as in the tax administration that can be responds
to the demands of growing market economy and resulting increase in the number of taxpayers.
Human resources are essential on the tax administration. Trained persons are what actually most
developing countries’ lack and this forced them, for instance, to organize their activities’ under
the existing tax administration structure (Robert, 2003).
The term tax administration refers to a systematic organization and arrangement of tax collection
element (activity) and other similar activities by a tax administration and organization of a nation
or state carrying them out efficiently and effectively (Misrak, T, 2003)

2.1.6 Prospects (Solutions) or Remedies to the Tax Administration Challenges

To minimize the problem of tax administration, the following measures should be taken in to
consideration.
Identification and registration of tax payers: - In any tax system identifies, registration system,
tax assessment and collection will be difficult .thus, the use of tax payer`s identification number
to identify tax payer`s is a first step in the management of tax collection. The tax payers
identification number(TIN)system provide the foundation for the tax administration to
independently identify tax payers ,to control evasion and trait dependable data bases for efficient
and effectively tax collection.

Tax payer`s education:-Tax payer’s education and information is very essential in promoting
compliance tax payers must resave clear and concise information on what is taxable, how to
calculate their tax liability and procedures for calculation and paying taxes should be assemble as
possible.
Computerization:-As mentioned reputedly, tax collection is not functioning properly without an
effective and efficient tax administration .to change the situation a well-designed computer
system is important tools and tax administration. Computer application is equally improvement
to share taxpayer’s time and proper equity.

Thus in efficiency in the tax administration can originate from the prevailing tax law and
regulation. The tax laws are expected to be clear and simplify, when the tax administration and
the taxpayers to create in incentive for litigation differently print the tax laws.
Returns processing: - Upon resaving a tax payer`s return, the tax authority officer examine the
accuracy of the return by determine whether the return in properly completed, whether tax has
been properly computed and whether there are any penalty payment to be made by the tax payer.
The officer then allocates an assessment number to the return and issues the taxpayer with a bank
payment advice for, stating the tax payable(Misrak.T,2003).

2.2 Empirical reviews

Kussi (1994), tried to show the effect of tax reforms of 1983 on the revenue productivity of the
tax system in Ghana. To this end, two separate regressions for the pre-reform period (1970-82)
and the reform period (1983-1993) were fitted for some major tax types. It will be found out that
there will be a progress of both buoyancy and elasticity for personal income tax, company
income tax, sales tax and import tax. The study attributed the improvements to growth in GDP
and general improvement of the tax administration. This study on the other hand showed that
there will be a fall in buoyancy and elasticity for excise duty whose cause will be stated to be
abolition of all excise duties on products other than beverages and tobacco in 1987 and the
successive reduction in the duty rates of the affected goods.

The following part will be discussing the empirical review specific to Ethiopia related to tax
administration in the country. There were studies on tax components and tax systems for
different periods in different regimes in Ethiopia.

Teshome (1979) also tried to see tax elasticity in Ethiopia. The author used Built-in elasticity
method to examine the revenue effectiveness of the Ethiopia's coffee export taxes. His empirical
finding shows that revenue elasticity with respect to change in volume and value of exports is
unity i.e. the revenue will be price inelastic. He thus concluded that the present coffee tax
formula requires constant revisions of tax laws whenever significant changes in the price and /or
volume of coffee exports occur.

Wegene (1983), showed that for the period 1975-81 tax reforms had enabled an increase in tax
collection. This study employed the constant rate of adjustment method to estimate elasticity of
the tax system. Likewise, the study by Eshetu compared tax productivity in the pre
revolution,post revolution periods of Ethiopia, and found out that there will be certain
improvement in the tax collection of the government in post revolution Ethiopia.
2.3 RESEARCH GAP
2.3.1 KNOWLEDGE GAP
as we seen in the previous topic several foreign and local researchers are done the research
which is a relation to my title when we see the foreigners studies which are stated namely,
Kussi(1994)those papers can't solve the Ethiopian tax collection problem because those people
are done their research beyond their country context that is why this papers will tries to raise
unsought tax collection problems and solutions and try to solve this problems

2.3.2 TIME GAP

The other Gap is time which is the researcher are study those papers due to time and technology.
Advancement the manual Accounting system changed in to automation/computerized accounting
system starting from 2002 by using broad band network system and in 2003 it will be changed
in to local area network when we see the tax collection system it also be computerized and
advanced from time to time when there is a system change their also a problem change, even the
last year period tax collection problem may not be the current year problem when we come to
local researcher Teshome(1979) study based on the back bone of Ethiopian economy like coffee
and relating with tax, however, coffee expert are category ‘’ A’’ tax payers, he did not address
the tax collection problems, Wegene(1983) showed that for the period 1975-81tax reform had
enabled on increase tax collection. This study employed the constant rate of adjustment method
to estimate elasticity of the tax system Finally due to the above reason the study will try to fill
the above knowledge gaps as much as possible.

CHAPTER THREE: 3 RESEARCH METHEDOLOGY

3.1 Research approach

To address the objective of this study, the researchers will use mixed research approach that is
the combination of both qualitative and quantitative approaches. Qualitative approach is the
process of collecting, analyzing and interpreting non-numerical data by observing what people
do and saying in the form of word, picture or objects and also it interpret the meaning,
definitions, characteristics, symbols and descriptions of things. Quantitative approach is the
process of measuring numerical data in terms of quantity or amount by using tables, ratios and
percentage (Booth,2006). As a result, this study will conduct by using mixed approach. Because
to provide the best understanding and comprehensive analysis of the problem, to analyze and
interpret numerical and non-numerical data about the raised problem and also to obtain more
suitable and consistent result compared to what would have been achieved by using single
approach (Cresswell, 2009).

3.1 RESEARCH DESIGN

The researcher uses descriptive forms of research design. This is because the main objective of
this study is to identify and describe the major problems and solutions of business income tax
collection in category “A” taxpayers in case study of Durbete Town revenue administration
office.

3.2 Source of data

The data that acquire to achieve this study would be collected from both primary and secondary
source of data. The primary data for the study were collected from employees of the tax authority
office and The secondary data were collected from book and website For this study, primary
data will be more appropriate and the primary data that were collected by questionnaires and
personal interview from the employees of the organization.

3.3 Methods of Data Collection

To undertake this study, the researcher used different method of data collection. To collect the
primary data and secondary data. The researcher will be distributed questioners for the
employees of the revenue administration office and interview for the managers of the office,
book, website and other higher status employees of the organization. The distributed questioners
contain closed ended questions and the interview of the manager contains unstructured form of
interview. The reason for the selection of unstructured interview is the greatest value lies in the
depth and details of information that the researcher gets from personal interview. And also the
researcher is used closed ended types questioners because, the closed ended questions are
favored over open ended questions for their efficiency and specificity, they are easier to
measure ,recorded, coded and analyzed .

3.4 Target Population and Sample Size

The target population of the study will be the employees of the tax bureau that are found in
Durbete Town revenue administration office. In this area there are 74 Tax collector employees
(officers).Among these 74 tax employees, 67 are males and 7 are females. the researcher selects
44 by using his personal judgment(purposive) technique . That means personal judgment or
purposive sampling technique who expected to give good response for the research paper.

3.5 Sampling technique

To acquire relevant information, the researcher will be use non-probability sampling method
specifically purposive or personal judgment. Because this method is convenient to use, less time
consuming and as good as probability sampling. Generally, when one wishes to select a
representative group for screening purpose, this sampling method is a good choice.

3.6 Method of Data Presentation and Analysis

The researcher will be used descriptive method of data analysis to analysis the data that
gathered from different source. The data were analyze and interprets by using descriptive data
analysis such as percentages and tabulation.

Work plan

Time scheduleHer the work plan helps the researchers will be done his work in a programed
and planned manner. This work plan or time schedule directs the researcher to do each
research work sequentially on their appropriate order. This work plan for this research is
scheduled from February up to july as follows.

NO. Activity February march April May June July

1 Title Xx
selection
2 Proposal xx
writing
3 Strengthen xx
proposal
4 Preparing xx
review
literature
5 Construction xx
of
instrument
6 Data xx
collection
7 Data xx
analysis
8 Submitting xx
report
9 Editing xx
preparing
final report
10 Typing Xx

11 Paper Xx
presentation
submission

Budget break down

This cost budget helps the researcher will be knew on the necessary research material inputs
and to buy their in appropriate time. It also helps to control the cost of the materials because it
is already specified on paper each material price.

NO item Unit of Quantity Cost(unit in Total cost in

measurement innumber birr) birr

1 pepar Ream 0.5 400 200

 2 pens Price 2 12 24

3 Binding price 4 30 120

4 Typing birr 1 150 150

andprinting

5 Excerise book Price 3 20 60

6 Ruler price 1 20 30

7 Mobile card birr 3 10 30

8 Transportation birr 6 110 660

cost

9 Flash disk Birr 1 200 200

10 Copies Birr 4 45 180

11 Contingency Birr 15% 1902 248

12 T0tal 1902

REFERANCE
Council if minister income tax regulation no 78/2002

Gebrie worku(2006), tax accounting in Ethiopian context 1 edition

Gupta.A, (2001), public finance and tax planning

Income tax proclamation no 286/2002 article 18

Income tax proclamation No 286/2002, article 2(16) and (17).

Kangave (2005); improving tax administration. A case study of the Uganda revenue authority,
journal of African law.
MisrakTesfaye (2003), Ethiopian tax administration in Ethiopia, 1st edition
Misraktesfaye(2008),Ethiopian tax accounting theory and practice 1st edition
Prams warren (2005), public finance and taxation
Robert, (2003), the dynamic of interviewing(new York)
World Bank (1999, lessons of tax reform, the World Bank Washington. D.C.