ASSESSMENT OF TAX COLLECTION PROBLEMS

(A CASE OF SEKOTA WOREDA)

ARESEARCH
PAPER SUBMITED TO DEPARTMENT OF
ACCOUNTING AND FINANCE FOR PARTIAL
FULFILMENT OF BACHLER ART DEGREE (B.A)IN
ACCOUNTING AND FINANCE

MADDA WALABU UNIVERSITY

COLLEGE OF BUSINESS AND ECONOMICS

DEPARTMENT OF ACCOUNTING AND FINANC

PREPARED BY.AYENE DESSIE

A
DVISORE FASIL. E(MSC)
January,2019

1
BALE ROBE, ETHIOPIA

2
 ABSTRACT
This study will be conducted on the problems related with tax
collection in Sekota woreda. It is known that the existence of state
without tax is unthinkable because, government raises fund from tax
collection. So the study will be focused on the problems associated
with tax collection and finding appropriate solution may help to
contend with development constraints success fully through detailed
investigation, because of this, this study would be designed and looked
at the problems related with tax collection in Sekota woreda. With the
key objective of assessing problems related with tax collection. To
achieve the research objective the data will be collected from both
primary and secondary sources. Primary data will be collected using
questionnaires and interview. Secondary data will be collected from
different documents, and annual report of the bureau. Descriptive
method will be used to analyze the data and to interpret the result.
The major findings of the study were poor knowledge of tax payers
concerning tax, over taxation due to over estimation of daily or annual
income of tax payers, lack of adequate training and education that
improve knowledge of employees, tax aviation and avoidance, and
weakness in tax collection and poor service delivery due to unsatisfied
employees on their position and their working environment. The
researcher recommended that it advisable for revenue authority to
educate communities as well as taxpayers, to revise their system and
to make sure that each taxpayer is paying according to his/her ability
to pay, to review and evaluate the assessment and collection
procedures so as to encourage compliance by the tax payers and to
close those holes that expand tax aviation and avoidance, to provide
adequate training for employees, and in order to improve service
delivery it is advisable to recruit qualified manpower, computerize its
operations and devote additional resources.

I
TABLE OF CONTENTS
Contents page
Abstract…………………………………………………………………..I
Table of content ...................................................................II
CHAPTER ONE
Introduction ..........................................................................1
1.1Background of the study .................................................1
1.2 Statement of the problem ..............................................3
1.3 Objective of the study ....................................................4
1.3.1 General objective .................................................4
1.3.2 Specific objective .................................................4
1.4 Research question…………………………………………………..4
1.5 Significance of the study ................................................5
1.6 Scope of the study…………………………………………………..5
1.7 Limitation of study………………………………………………….5
1. 8 Organization of the study .............................................6
CHAPTER TWO
2. Literature review ..............................................................7
2.1 Introduction ...................................................................7
2.2 Role of Taxation in development strategy.......................8
2.3 Characters of good tax system ......................................10
2.4 Taxation principles ........................................................11
2.5 Canon of Taxation ......................................................... 12
2.6 Major types of taxes in Ethiopia ....................................14
2.7 Classification of taxes based on their effect on income .18
2.7.1 Progressive Taxes ...............................................18
2.7.2 Proportional Taxes ..............................................19

II
 2.7.3 Regressive Taxes ................................................ 19
2.8 Categories of tax payers......................................21
2.9 Procedures of tax collection .........................................21
CHAPTER THREE
3. Research Design and Methodology ………………………………….22
3.1 Description of the study………………………………………….22
3.2 Research design ...........................................................22
3.3 Types and source of data ………………………………………..22
3.4 Data collection techniques……………………………………….22
3.5 Data sampling………………………………………………………22
3.6 Data analysis and interpretation……………………………….23
3.7 Time and budget schedule…………………………………………23
CHAPTER FOUR……………………………………………………… 24
4.1 Time schedule…………………………………………………….24
4.2 Budget schedule……………………………………………………..24
REFERANCE…………………………………………………………….25

III
 CHAPTER ONE
1. INTRODUCTION
1.1. Back Ground of the Study

Typically taxes are the primary source of government revenues.

Taxation policies depend of the socio economic and political structure
of a country. In Ethiopia though taxation came into being with the
emergence of state and government, but, there is no reliable
documentary evidence exists as to when exactly taxation was
introduced.

In the 15th century written stories of Atse Zera Yacob indicates that
taxation was introduced previously in Ethiopia. In these era tax was
paid by different social groups to government, feudal lords and priests.
Besides, these documents approve that Atse Zera Yacob had for the
first time enacted regulation can be taken as an evidence for the
presence of taxation system before and on Zera Yacob government.

In general a kind of traditional tax system was practiced on those days

this traditional tax system was expresses in two forms of payment in
kind and unstructured tax system. In traditional tax system, much
burden was laid on farmers. Though such burden was tried to lessen by
emperor Tewodrosse’s government, strong change had been taken
place by emperor Menilik.

Towards the end of the Imperial period the majority of the population
living at subsistence level. There was limited opportunity to increase

1
taxes on personal or agricultural income. Consequently, the imperial
government relied on individual taxes (customs, excise and sales to
generate revenue for instance in the early 1970s taxes on foreign
trade accounts for close to 2/5th of the tax revenue, and one third of all
government revenues. At the same time, direct taxes accounted for
less than one third of tax revenue. During the “Dergue” regime the
taxes were similar to those imposed during Haileseassie regime except
that wider tax base and increased tax rates.

The “Dergue” regime partially alleviated the tax collection problems

that existed during the imperial period by delegating the responsibility
for collecting the fee and tax on agriculture to peasant association
which received a small percentage of revenue as payments.

The main purpose of generating revenue from various sources is to

finance public expenditures. The governments generate are revenue
from tax and other non sustainable sources. The collection of money
from available sources of revenue by government needs the
availability of democratic government, foreign and domestic creditors
and donors, efficient tax system and awareness of the society
regarding the use of tax payment for government and its contribution
for the development of the country’s economy.
In our country payment of tax is considered by the society as a debt
imposed by government to increase the wealth of the government
officials. To avoid the negative attitude of the taxpayer a well designed
tax system is necessary. In addition educate the society regarding its
obligation and the purpose of tax collection minimizes the wrong
attitude of the taxpayer. So, this study is designed to minimize
problems that face during assessment and collection and to minimize
wrong attitudes of tax payers.

2
1.2 Statement of the Problem

The role of taxation in well functioning governmental operation is so

high Development of infrastructures, basic social services institution
are apparently build by government. Moreover, the public servants,
defiance forces and police forces are employee of the state, to cover
these and other developmental costs the states uses tax as principal
source of revenue.

The need to build speedy economic progresses and overall

developmental activities call for strong tax revenue. If no arguments in
the above assertion therefore the Ethiopia government ought to adopt
sound taxation policy on collection system and in making awareness
on tax payer societies.

No doubt that the existence of better tax collection system is decisive

for the existence of well developed and economically strong states. If
no complain that better tax collection system is decisive in one
Country’s overall capacity, that is the main reason motivate the
researcher will be to study the factors of tax collection system with
title “assessment of problem related with tax collection in Sekota
woreda in wag Hemra zone

1.3. Objectives of the Study

The objectives of study will be classified into general and specific
objectives:
1.3.1 General Objective
The general objective of this study will be to find out the major
factors that affecting the tax collection system in the Sekota
Woreda.
1.4.2. Specific Objectives.
Specific objective of this study will be focused on assessment of ;

3
  To assess internal factors affecting tax collection system.
 To evaluate environmental (external) factors that
influencing tax collection system.

1.4 Research Question

In the researcher will be study area there are some problems of
tax collection for instance in 2011 E.C the proposed amount of
tax was greater than the amount that actually collected and also
some problems related with awareness and willingness of
taxpayers. So in this paper the researcher will be to answer the
following basic questions of tax collection problems of;

1. What are the major factors affecting tax collection system in

the woreda?
2.How to evaluate the environmental (external) that
influencing the tax collection system?

1.5 Significance of the Study

The researcher will be believe that the followings is the
significance of the study;
 To Proved the way for improvement of tax collection
system.
 To encourage compliance of tax payers
 To create fairly clear image how the tax collection and
problems with tax collection is taking place.
 To enable revenue bureau to find out whether its strategy is
effective or not.
4
  The result of this study will be serve as a reference for
further investigation

1.6. Scope of the study

Though tax is very vast and curial issue, standing its nature of
study the tax policy at a higher level is time consuming and need
long term study. This study will be restricted only in problems of
tax collection in Sekota woreda.

1.7. Limitation of the study

The researcher will be study major limitation of factors of the
study;.
 No sufficient secondary data
 Failure of respondents to return the questionnaires
 My research is focused only on Sekota woreda


1.8. Organization of the study

The paper will have been organized into four chapters. The first
chapter deals with the introduction about topic which includes:
background of the study, statement of the problem, objective of
the study, Research of the questions, significance of the study,
scope of the study, and limitation of the study, the second
chapter consist the literature review.
The third chapter includes the term research methodology,
description of study, research design, Types and Sources of data,
data collection techniques, Sampling techniques, Data analysis

5
and interpretation, The fiveth chapter is about time schedule and
budget schedule

CHAPTER TWO

2. LITERATURE REVIEW

2.1 Introduction
Taxation is a means by which governments finance their
expenditure by imposing charges on citizens and corporate
entities. Government uses taxation to encourage or discourage
certain economic decisions.

6
Tax is a fee charged (levied) by a government on product,
income, or activity tax is levied directly on personal or corporate
income, then it is a direct tax. If tax is levied on the price of a
good or services, then it is named an indirect tax. One of the
most important uses of taxes is to finance public goods and
services since public goods and services don’t’ allow a non payer
to be excluded, or allow exclusion by a consumer, there cannot
be a market in the good or services and so they need to be
provided by the government or quasi government agencies,
which tend to finance themselves largely through taxes. (WWW.
Investor words.com)

Meaning of Tax
Taxes are burdensome thus reduce the economic welfare of
individuals and businesses (public) organization. But activities
that are financed from taxes will bring benefits to individuals or
organizations, the net burden of tax then, must take the nature of
government expenditures in to account. (WWW. Business
dictionary.Com)

Purpose of Taxation
According to American economist Richard Musgrave.A purpose of
tax action is to distinguish between objectives of resource
allocation income redistribution and economic stability (economic
growth) or development and competitiveness listed as separate
goals, but they can generally be subsumed under the other three.
The other main function of taxation is to permit the state to

7
provide services for the population. Infra structure and services
are what we expects from taxation(WWW.Yahoo Answers.Com).

2.2 Role of Taxation in Development Strategy

The role of taxation in fiscal policy and the development strategy
has to be viewed in the back ground of the function which a
taxation system performs, its main function in relation to
economic development are as follows. The primary function of
tax system is to raise revenue for the government for its public
expenditure. So the first foal in the development strategy as
regards taxation policy is to ensure that this function is
discharged adequately.

The second function of taxation is to reduce inequalities through

a policy of redistribution of income and wealth. Higher rate of
income taxes, capital transfer taxes and wealth tax are some
means adopted for achieving these ends.
The 3rd role of taxation is for the social purposes such as
discouraging certain activities which are considered undesirable.
The excise taxes on liquor and tobacco. The special excises
duties on luxury goods. Betting and gamming levy are example of
such taxes. Which apart from being lucrative revenue sources
have also goals.

The 4th is to ensure economic goals through the ability of the

taxation system to influence the allocation of resources. This
includes.
A. Transferring resource from the private sector to the
government to finance the public investment program.
B. To distribute the direction of private investment in to
desired channels through such measures as regulation or

8
 tax rates and the grant of tax incentives etc. this insides in
investment incentive to attract foreign direct investment
(FDI) into the country.
C. Influencing relative factor prices for enhanced use of labor
and economic use of the capital and foreign exchange.
The fifth function of tax action on is to increase saving and capital
formation in private sector party for borrowing by the
government and partially for enhancing investment resources
within the private sector for economic development. (B.P
herber,1999)

2.3 Characters of Good Tax System

1. Tax is compulsory contribution:-it is a compulsory payment
from the person to the government without expectation of
any direct returns from it.
2. Taxes are levied by the government:-no one has the right to
imposes taxes except the government. Only the
9
 government has the right to impose taxes and collect tax
proceeds from the people.
3. Common benefit to all:- the tax collected by the
government is spend for the common benefits of all people.
4. No direct benefit:- the government compulsorily collects all
types of taxes and does not give any direct benefits to the
tax payers for the taxes paid and the tax payers cannot
demand any direct benefits against the payment of taxes.
5. Certain taxes levied for specific objectives:- though taxes
are imposed for collecting revenue for the government to
meet its expenditure on social wants and merit wants for
example heavy taxes are levied on luxury goods to reduce
their consumption.
6. Attitude of the taxpayers:- the attitude of the tax payers is
an important variable determining the contents of good tax
system.
7. Good tax system should be in harmony with national
objectives:- a good tax system should run in the same
direction with important national objectives.
8. Tax system recognizes basic report of tax payers:-a good
tax system recognizes the basic rights of tax payers. The
tax payer is exacted to pay the tax but not undergo the
harassment. (Tax system manual by Addis chamber 2004)

2.4 Taxation Principles

Taxation principles are basic concepts by witch government is
meant to be guided in designing and implementing all equitable
taxation regime these includes.
1. Adequacy:-taxes should be just enough to generate revenue
required for provision of essential public services.

10
2. Broad basing:- taxes should be spread over as wide as
possible section of the population or sector of economy to
minimize the individual tax burden.
3. Compatibility- taxes should be coordinated to ensure tax
neutrality and over all objectives of good governance.
4. Convenience:- taxes should be enforced in a manner that
facilitates voluntary compliance to the maximum extent
possible.
5. Ear marking:- tax revenue from specific source should be
dedicated to a specific purpose only when there is a direct
cost and benefit like between the tax sources and
expenditures such as use of motor fuel tax for road
maintenance.
6. Efficiency:-tax collection efforts should not cost an
inordinately high percentage of tax revenues.
7. Neutrality taxes should not favor only one group or sector
over another and shouldn’t’ be designed to
interfere with or influence individual
decision making.
8. Equity:-taxes should equally burden all individuals or
entities in similar economic circumstances.
9. Predictability:-collection of taxes should reinforce their
inevitability and regularity.
10. Restricted exemptions: tax exemptions must only be for
specific purpose (such as to encourage investment) and for
limited period.
11. Simplicity:-tax assessments determination should be easy
to
Under stand by an average tax payers.(www.Taxation
dictionary.com)

11
2.5 Canons of Taxation
Canons of taxation are the main basic principles (i.e rules) set to
build a “Good tax system”
canon of taxation were first originally laid down by economist
Adam smith in his famous book “ the wealth of nations” in this
book, Adam smith only gave four canons of taxation. These
original four canons are now known as the “original main canons
of taxation”.
As the time changed, governance expanded and became much
more complex than what it was at the Adam Smith’s time soon a
need was felt by a modern economists to expand smith’s
principles of taxation and as a response they put forward some
additional modern canons of taxation.
Adam smith gave the following four important canon of taxation
1. Canon of equity:- the principles aim at providing economic
justice and social justice to the society. According to this every
person should pay depending on the ability to pay. The rich
should pay higher taxes to the government, because without the
protection of the government a authorities (police, defense etc).
They could not have earned and enjoyed their income. A. smith
argued that tax should be proportional to income.
2. Canon of certainty: - according to Adam smith the tax w/c an
individual has to pay should be certain, not arbitrary. The tax
payer should know in advance how much, at what time and in
what form the tax to be paid to the government. at the same
time a good tax system also ensure that the government is also
certain about the amount that will be collected by way of tax.
3. Canon of convenience: the mode and timing of tax payment
should be as far as possible, convenient to the tax payers for
example and revenue is convenient tax located at time of harvest

12
income tax is deducted at source. System will encourage people
to pay tax and will increase tax revenue.
4.canon of economy:- this canon implies that the administration
cost of tax collection should be minimum, i.e. the difference
between the money, which out of the pockets of people and that
which is deposited in the public treasury should be as small as
possible. (H. (Gebrie worku mengesha,2008)
Additional canons of taxation by other.
1. Canon of productivity:- it is also known as the canon of fiscal
adequacy according to this principle, the tax system should be
able to yield enough revenue for the treasury and the
government should have no need to resort to deficit financing.
This is a good principle to fellow in developing country
(economy).
2. Canon of elasticity:- according to this country, every tax
imposed by the government should be elastic in nature. In other
words the income from tax should be capable of increasing or
decreasing according to the requirement of the canary. For
example, if the government needs more income at time of crises,
the tax should be capable of yielding more income through
increase in its rate.
3. Canon of flexibility:- it showed be easily possible for the
authorities to revise the tax structure both with respect to its
coverage and rates , to suit the changing requirements of the
economy with changing time and conditions the tax system
needs to be engaged without much difficulty. The tax system
must be flexible and not rigid.
4. Canon of simplicity:- the tax system should be complicated .
that makes it difficult to understand and administer and results in
problems of interpretation and disputes.

13
5. Canon of diversity:- this principle states that the government
should collect taxes from different sources rather than
concentrating on assignee source of tax . it is not advisable for
the government to depend up on single source of tax . It may
result inequality to certain section of the society, and uncertainty
for the government to raise nudes. If the tax revenue comes from
diversified source then any rendition in tax revenue on account of
any one cause is bound to be small. (IBID).

2.6 Major Types of Taxes in Ethiopia

1. Direct taxes:- direct taxes are those which are paid entirely by
those person whom they are imposed. A direct tax is one paid
directly to the government by the persons on whom it is imposed.
Examples include some income taxes, some corporate taxes and
transfer taxes such as estate (inheritance) tax and gift tax.
2. Indirect taxes are computed indirectly in the cost of goods or
service you purchase such as taxes imposed on companies for
doing business. A good example of indirect tax would be shipping
cost which are included in the cost of merchandise you buy at the
store. Cost on commodities like custom duties, sale taxes, excise
taxes etc included in types of in direct taxes.(Gebrie worku
mengesha,2004).

1. Types of Indirect Tax

14
A. Employment Personal Income Tax: every person deriving
income from employment is liable to pay tax on that income at
the rate specified in schedule. Employment income shall be
includes any payment origins in cash or in kind received from
employment by an individual. Employees have an obligation to
with hold the tax from cash payment to an employee, and pay
the tax authority the amount with hold during cash calendar
month in applying the procedure , income attributable to the
month of Nehassie and Pagume shall be aggregated and treated
as the income of one month If the tax on income from
employment, instead of being deducted from the salary or wage
of the employee is paid the employer in whole or in part, the
amount so paid shall be added to the taxable income and shall be
considered as part there of
( Gebrie worku Mengesha ,2008)

B. Business Profit Tax

This is the tax imposed on the taxable business income /net profit
realized from enterprenurial activity. Taxable business income
would be determined per tax period on the basis of the profit and
loss accounting standard corporate business are required to pay
30% of fiat rate of business income tax. For with incorporated or
an individual business are taxed in accordance with the
determined schedule and rate. In the determination of business
income subject tax in Ethiopia, deductions would be allowed for
expense incurred for the purpose of earning, securing and
maintaining that business income to the extent that the tax payer
can prove the expenses.

15
The following expenses calculating shall be deductible from gross
income in calculating taxable income.
 The direct cost of producing the income such as the direct cost
manufacturing, purchasing, importation, saving and such other
similar cost.
 General and administrative expense connected with the
business activity.
 Premium payable on insurance directly connected with the
business activity.
 Expenses incurred on connection with the promotion of the
business inside and outside the country. Subject to the limits get
by the directive issued by the minister of revenue.(IBID)
2. Types of Indirect Taxes
A. Turn over Tax
The turn over tax would persons not registered for value
added tax render payable on good sold and services. The rate
of turn of over tax is
 2% on good sold locally.
 For service rendered locally.
 2% on contractors, grain mills, tractors and combine
harvesters.
 0-50% on other.
B. Value Added Tax
Value added tax is tax on consumer expenditure: it is
collected on business transactions and imports. A taxable person
can be an individual firms company, as long as such a person is
required to be registered for VAT most of transactions, inviolable
supplies of goods or services, VAT is payable if they are:

16
 - Supplies made in Ethiopia.
- Made by a taxable person
- Made in the course or further once of business.
- Every import of goods, other than an example import and import
of service.
The registered person is required to issue the VAT invoices to the
purchaser of goods or services up on the supply or rendering, but not
later than 5 days after the transaction. (Tax system Manual by Addis
Chamber, 2004)
C. Excise Tax
Excise tax in Ethiopia is imposed and payable on selected goods,
such as luxury goods and on goods that are hazardous to health
watch are a cause social problems, so excise tax will reduce the
consumption of such goods.
Rate of excise tax
The excise tax shall be paid on goods mentioned under the
schedule of the proclamation
1. when it is imported and
2. when produced locally at prescribed in the schedule
Base o computation of exercise tax
1. In respect of goods, produced locally the cost of production.
2. In respect of goods imported cost of insurance and freight
(CIF)
Payment of excise tax
The excise tax shall be paid whith the time pres cribbed
according to proclamation no 307 sub article 12)
1. In respect of goods produced locally, by the producer.
2. In respect of goods imported by the importer(www.Addis
chamber.eom).

17
Time of payment
According to the proclamation, excise tax on goods shall be paid
under the schedule.
1. When imported at the time of clearing the goods from
customs
area.
2. When produced locally, not late than 30 days from the date of
production.
2.7 Classification of taxes based on their effect on
income
Taxes, based on their impact on income can be classified as
progressive proportional and regressive.
2.7.1 progressive Taxes
If the tax system is progressive , the proportion of income taken
in tax (the tax rate) rises with income or spending power, here as
the income or spending incase, the marginal rate of tax for the
increased income or spending also rises.

It is also possible to have a progressive expenditure tax where

the rate of tax rises with increment to consumption expenditure.
There is some empirical evidence that the UK Value Added Tax
(VAT) is actually progressive: people with higher incomes tend to
increase their spending on items subject to the tax to such an
extent that the payment becomes a bigger proportion of income
(W.pearce;1984, 358)

In developed countries they use a progressive income tax, for

example the USA income tax is the most progressive tax in the
world Progressive taxes the most equitable than repressive or

18
proportional taxes in the sense that they are lived according to
the ability to pay. Some criticize progressive taxes that too much
degree of progression discourages work effort and risk taking,
but some egalitarian economists and politicians tend to favors
progressive taxes.

In Ethiopia some of the progressive taxes are personal income

taxes of proclamation 30/1992 and 107/1994 and the rental
income taxes of proclamation 64/1993. The income level will be
categorized in different income brackets and taxed by
progressive rate

2.7.2 Proportional Taxes

This kind of tax is a tax whose rate remains constant as the size
of the base increases. A proportional tax rate is usually stared as
a flat percentage of the base regardless of its size. For example,
the property tax usually operates with proportional rates, and
the tax might be expressed as 1% of the assessed property.
Sales and excise taxes, payroll taxes, and most customs duties
are also levied on the basis of proportional rates (Douglas and
Green wald; 1983;275).

These kinds of taxes in Ethiopia are seen in the mining income

tax proclamation 23/1996, which states that both large and small
– scale miners shall pay 35% of their mining income.

2.7.3. Regressive Taxes

In these kinds of taxes the marginal rate of tax decreased, as the

income or consumption increases. This tax a larger share of
income from the low –income tax payer than from the high
income tax payer.

19
 A tax which is technically proportional in terms of the tax base,
can often be Considered regressive in teams of tax payers
income. Common examples of such regressive taxes are sales
taxes, excise taxes and property taxes. For example an excise
tax on cigarettes is based on the number of cigarettes sold and
thus by definition is proportional since the number of cigarettes
consume may rise as income rises, as income rises, however, the
rate of the tax decreases with increasing income and thus can be
called regressive. The effect of regressive tax is to increase
inequalities of income, by placing a larger burden on the poor
than of the rich. (Green wald; 1983,1127)

Most of the indirect taxes are regressive, for example excises

and sales taxes, the same amount of tax is paid per unit
purchases. This amount of tax represents a higher proportional
of income to the poor. Some people argue that regressive taxes
encourage people to work harder to be elevated above the lower
income group.

As stated in the above illustration taxes can be progressive,

proportional or regressive.

They can be used for different objectives, to achieve their own

goals. As Green Wald put as a diagram the relationship between
tax rates and tax base as follows.

Progressive

Proportional
The rate

20
Regressive

Tax base
2.8 CATEGORIES OF TAX PAYERS
Tax payers are classified in to three major categories;
1. category “A” tax payers:- this category tax payers are
include
A/ any company incorporated under the laws of
Ethiopia or in a foreign country.
B/any other business having an annual turnover of
birr 500,000 or above.
These category tax payers are required to submit to the tax
authority, at the end of the year.
2. Category “B” payers unless already classified in category
‘A’ any business having on annual turnover of birr 100,000
would be classified under category “B” tax payers. This
category of tax payers should submit to the tax authority
profit and loss statement at the end of the year.
3. Category “C” tax payers: unless classified in category “A”
and ‘B’ those businesses as whose annual turnover is
estimated up to birr 100,000 are classified in category “C”
of tax payers. (IBID)

2.9 Procedures of Tax Collection

Tax from category “A” and “B”, tax payer is collected based on tax
payers declaration of the annual, sales / income to the tax authority.
Based on this the authorized official approves the declaration.
Following this the approved, tax is collected from tax payers and they
will be delivered receipt and clearance letter. The tax assessment for

21
category “C” tax payers is made based on the subjective estimation of daily
sales by district assessment committee. After the assessment was made,
the committee will decide on the daily or annual sales of the taxes payers
while considering different factors which will inters provide a basic in
determining the amount to be paid by the tax payer. (Ministry of finance and
economic development Addis Ababa 1996)

CHAPTER THREE
3. Research Methodology
3.1 Description of the study
This research will be conduct in bureau of tax collection in sekota woreda in wag hemra
sekota town. In order to differentiate it from other towns in Ethiopia which are also called
wag hmera sekota , is a town which separate woreda in Northern Ethiopia located in
wag hemra Zone in Amhara Region. This town located around 720 kms from Addis
Ababa to North west direction which found at latitude and longitud 12.633*N 39.033*E
with an elevation of 2266 meters above sea level. The 2007 national census reported a
total population for sekota of 22346 of whom 10,760 were men and 11,586 were
women. The majority of the inhabitants Ethiopian orthodox Christianity , with 95.98% of
the population. Which 3.8% of the population. Were followers of Ethiopian Muslim and
0.22% were protestant(CSA 2007) .

3.2 . Research Design

The research will be designed to answer the research question and attain the general and
specific objective of the research. The researcher will use descriptive research method
because descriptive research helps to go further and draw conclusion from data.

3.3 Types and Source of data

The researcher will use two types of data. These are primary and secondary data.

3.3.1The Primary data

The primary data will be collected by using questionnaires from tax payers, employees of tax
collector in sekota bureau, and personal interview with the manager of the sekota bureau

22
3.3.2 The secondary Data
The secondary data will be collected from the previous year reports of sekota from different
books, magazine, and related published materials.

3.4. Data Collection techniques

In the data collection stage, primary and secondary data collection method will be used in
the study. From the primary data source, the researcher will collect data using
questionnaire .on the other hand, the secondary data source will be obtained from Sekota
woreda tax collect report and by reviewing different related literatures on the same topic.

3.5. Sampling techniques

The researcher will use non-probabilistic purposive or judgmental sampling for
employees because it is important for researcher to choose and pick only those who best
meet the purposes of the study. Total employees of the Bureau are 18 from this the
researcher will select 8 employees as a sample from the Bureau those who have close
related to collection of tax. For the customer the researcher will use non-probability
convenience sampling technique because to obtain those people or units who are
conveniently available.

3.6. Data Analysis and Interpretation

The collected data will be analyzed by using descriptive analysis method. That is further
process and analysis by using editing which means identify error and omission, tabulation

23
 and percentage to interpret information that are gathered from respondents. Finally
conclusion and recommendation will be given.

CHAPTER FOUR
4.1 Time and budget schedule
4.2 Time schedule

No Activity Oct Nov Dec Jan Feb Mar Apr May June

1 Topic selection 5

2 Preparation of proposal 18

3 Collection of useful material 19

4 Data collection 26,25

5 Data Analysis and writing of final research 10

6 Submission research Xx

7 Presentation of final research xx

4.3 Budget schedule

The study will contain the following different types of expenditures that will incur in the
whole course of research.
Item Quantity Per unit (Birr) Total Cost (Birr)

Paper 1 35.00 35.00

Pen 2 6 12.00

24
 Pencil 0 0 0

and
Binder 1 23.00 23.00
Equipment Flash 1 120 120
stationary
Miscellaneous 60
Total Cost - - 250.00
Transportation 300.00
Internet 40 min. 0.30 12.00
Printer 52 pages 0.90 47
Typist 52 pages 5.00 260
Personal cost

Total cost - - 619

Contingency - - 500.00(30%)
Overall total cost - - 591.50

REFERENCES
Ministry of finance and economic development Addis Ababa
1996.
 Gebrie Worku Mengesha (Tax accounting in Ethiopia context
2008. second edition.)
 Ministry of revenue Addis Ababa. Dec 2003
 Ethiopia chamber of commerce. HWK partnership. Addis
Ababa 8/2004.
 Encyclopedia of Americana 1997.
 Sisay (Addis Abeba 1985) .
 WWW. Business Dictionary. Com
 WWW. Online dictionary. Com.
 www.Addis chamber.com
 Sisay Ayalew (training manual on economics of taxation,
Addis Abeba, 1985)

25
 QUESTIONNAIRE
First of all I would like to thank for your willingness to respond
this questionnaire form for study of assessment of tax collection
problems in case study of Sekota woreda.
- Dear respondent you are not required to write your name to
give you freedom, to respond confidently and to keep your
secret safely.
- Please put √ mark in the place provided for you in box for
both open and close questions.
Appendix I
Questionnaires related to tax payers
1.personal information
Age A. 20-30  B. 31-40 C. 41-50  D. above 50
2.Sex
A. Male  B. Female
3.Education background:
A. (diploma)  Master and above
B. (degree) 
2. Types of business:
26
 1. How do you feel about taxation ?
A. as an obligation 
B. as debt  c. as useful 
2. Is the tax payment period enough? A. yes B. No 
3. When do you pay tax?
A. when I receive assessment notification 
B. before due data C. after due date 
4. Is your annual tax liability based on your in come?
A. yes  B. No 
5. Do you face any problem when you pay tax liability?
A. yes  B. No 
6. If your answer is “yes” for question number 5 what is your possible
reason?
A. Problem of procedure of tax collection system
B. Weakness among tax collector
C. The existence of over taxation
D. If any other specify ________________________________
7. How do you see present tax system? A. Good  B. Not bad 
C. Need restatement 
8. Do you know why tax is compulsory? A. Yes  B. No 
9. If your answer is “no” for question no 8 what is your reason?
 No awareness creation by concerned body
 Because tax is not so far contribute for one’s country’s
development
 I am not obliged to pay tax because it is not my responsibility.
 If any other specify ________________________________
10. Are you satisfied with the method of assessment? A. Yes  B. No 
11. If your answer is “no” for question no10 because of what?
A. Power to collect tax is not delegated on the woreda
B. Tax collection system is not modernized one
C. Appointed tax collectors are not feel responsible

27
 D. If any other specify ________________________________
12. Does the tax rate imposed by government is fair? A. Yes  B. No

Appendix II
Questionnaires related to revenues bureau employees
personal information
4.personal information
5.Age A. 20-30  B. 31-40 C. 41-50  D. above 50
6.Sex A. Male  B. Female
7. Education Qualification:
A. Technical school  C. College (degree) 
B. College (diploma)  D. MA/MSC 
1. Who is responsible for tax collection and assessment?
A. the policy  B. Tax payer 
C. Tax office  D. All 
2. How do you evaluate the coordination of your office with the
other office? A. Excellent  B. very good 
C. Good  D. Less 
3. How do you feel about the position you have assigned?
A. is the right position  B. beyond my
capacity 
C. Under may capacity 
4. What do you think about the bureau’s structural adjustment?
28
 A. will complete the work quickly  B. will work
excessively  C. will work moderately 
5. What is your idea about the present tax collection and
assessment? A. Effective  B. show discrimination 
C. Have in sufficient man power 
6. How do you evaluate the knowledge tax payer about
taxation?
A. High  B. Low  C. Medium 
7. Do most tax payer pay their tax liability on time?
A. Yes  B. No 

29