Determinants of Presumptive Income Tax collection system: Evidence from Bench Sheko, Sheka and West Omo Zone Category ‘’C’’ Tax Payers

Abstract

The main objective of this study was to examine the determinant presumptive income tax collections in bench sheko, sheka and west Omo zone. In order to achieve the objective of the study the researchers used a cross sectional survey design and data were collected from various sources, the tax payers’ and employee survey were the main sources of data for the study. As result to this both quantitative and qualitative research approach were employed. A total of 364 self-administered questionnaires were gathered from the respondents. In addition, interview and focus group discussion was made to support and checkup the reliability of the data collected using survey method. From the literature, seven determinant factors are identified. Each variable were measured by using yes or no questions. The Statistical Package for Social Sciences (SPSS) version 22 was used to analyze the primary collected data’s. Descriptive and inferential statistics were used to address the research objectives comprising frequencies, percentages and binary logistic regression analysis for interpreting the output. The descriptive statistics results revealed that presumptive income tax assessment and collection was not effective, most of the taxpayers, (category “C tax payers), have been facing various problems related to the taxation system. And the binary logistic regression results show the following to be significantly associated with presumptive income tax collection with the variables examined p-value of the fairness and equity (.000), knowledge about tax rule (.011) organizational strength (0.031), daily sales estimation (0.001), Simplicity (0.023), transparency (0.006) critical factors are observed to be less than 0.05 so, these independent variables are found to be statistically significant and positive effect on the presumptive income tax collection in three selected Zone. In light of these facts, the study concluded that the tax authority is not being effective or is being reluctant in making the tax in solving the above problems. However, in order to overcome the problems of presumptive tax administration in zone level the study suggests that the authority should implement: continuous assessment and supervision, simplification of tax procedures, improvement in service delivery, and awareness creation, enforcement capacity and creation of coordination between stakeholders. Finally the results of this study also provide specific insights and allow policy makers to gain a better understanding of the key variables that are significantly associated with presumptive income tax system and enable them to implement suitable strategies to minimize potentially damaging factors, and should also allow them to improve their government’s tax revenue collections.