Publication: Tax Compliance Cost Burden and Tax Perceptions Survey in Ethiopia
Loading...
Date
2016-03
ISSN
Published
2016-03
Author(s)
Editor(s)
Abstract
This study attempts to estimate tax compliance costs and assess views of taxpayers on aspects of the tax system in Ethiopia. The study uses evidence mainly from a survey of both formal and informal businesses in Addis Ababa and four major cities (Adama, Hawassa, Mekele, and Bahir Dar) in the four largest regional states. The survey covered 1003 formal businesses and 499 informal businesses. Survey questionnaires were informed by the results of four focus group discussions conducted in Addis Ababa and Adama. The findings of the study are expected to offer tax policy makers and tax administrators an opportunity to pinpoint specific problems to help reduce the cost of complying with tax policies and procedures, thus improving the revenue performance and also the efficiency and business-friendliness of the tax system. The report is organized in four sections. The first part presents an overview of the Ethiopian tax system and recent reform initiatives; second section discusses the research objectives and the methods employed. Section three presents results of the survey while section four presents conclusions and recommendations.
Link to Data Set
Citation
“World Bank Group. 2016. Tax Compliance Cost Burden and Tax Perceptions Survey in Ethiopia. © World Bank. http://hdl.handle.net/10986/24792 License: CC BY 3.0 IGO.”
Associated URLs
Associated content
Other publications in this report series
Journal
Journal Volume
Journal Issue
Collections
Related items
Showing items related by metadata.
Publication MSME Taxation in Transition Economies(World Bank, Washington, DC, 2015-10)The paper analyzes the design of simplified small business tax regimes in Eastern Europe and Central Asia and the impact of such regimes on small business tax compliance. Although many approaches for tax simplification exist, a general trend in the region is to offer small businesses the option to be taxed based on their turnover instead of net income. The study finds that many of the regimes in place are overly simplistic and neither take into account fairness considerations nor do they facilitate business growth and migration into the standard tax regime. Although revenue generation is not a main objective of such regimes, low revenue performance and the risk of system abuse by larger businesses should be issues of concern. More attention should therefore be devoted to improving the design of simplified regimes and monitoring their application. This will require in particular a more profound analysis of the economic situation and the tax compliance challenges in the small business segment and increased efforts to improve the quality of bookkeeping.Publication Risk-Based Tax Audits : Approaches and Country Experiences(World Bank, 2011-06-08)Revenue administration is a major interface between the state and its citizens. A good revenue administration is, therefore, an important attribute of good government. As a result, in recent years, policy makers have become increasingly aware of the importance of policies that will promote business development while ensuring voluntary tax compliance. In the modern context, it is neither desirable nor feasible to examine or inspect every single taxpayer. The revenue administration, therefore, has to rely on effective management of compliance. Promoting voluntary compliance, achieved through a self-assessment system in which taxpayers comply with their tax obligations without intervention from tax officials, requires developing modern approaches to audits based on risk management. The impact of audits critically depends on a properly designed audit selection strategy focused on high-risk taxpayers to provide the most cost-effective outcome. This, in itself, contributes to promoting voluntary compliance. Risk-based country audits: approaches and country experiences are an important study of this critical revenue function of compliance management.Publication Options for Low Income Countries’ Effective and Efficient Use of Tax Incentives for Investment(World Bank, Washington, DC, 2015-10-15)This background paper describes five different tools that can be used for the assessment of tax incentives by governments in low income countries’ (LICs). The first tool (an application of cost-benefit analysis) provides an overarching framework for assessment. Evaluations of the various costs and benefits of tax incentives are vital for informed decision making, but are rarely undertaken, partly because it can be a difficult exercise that is demanding in terms of data needs. The next three tools (tax expenditure assessment, corporate micro simulation models, and effective tax rate models) can be used as part of a comprehensive cost-benefit analysis, to shed light on particular aspects. Effective tax rate models shed light on the implications of tax parameters - including targeted tax incentives - on investment returns and help understand the implications of reform for expected investment outcomes. The document presents two tools for assessing the transparency and governance of tax incentives in LICs. These discuss principles in transparency and governance of tax incentives, and allow for benchmarking existing LIC practices against better alternatives.Publication Integration of Revenue Administration : A Comparative Study of International Experience(Washington, DC, 2010)Revenue administration is a major point of contact between government and the people. Good revenue administration thus becomes an important feature of good governance. This fact has made policy makers increasingly mindful of the need to promote voluntary tax compliance by reducing the costs incurred by taxpayers to comply with their tax obligation. Promoting voluntary compliance is achieved through a set of measures that includes: (i) a self-assessment system, (ii) a well-designed compliance strategy based on risk management, (iii) good taxpayer services to help and educate taxpayers to meet their obligations, and (iv) simple and harmonized procedures for collection of different taxes and contributions. In the effort to harmonize procedures and minimize the need for citizens to respond to multiple agencies, many countries have integrated their revenue administrations, either by merging tax and customs administration, or by unifying collection of tax and social security contributions, or by both. Their experiences indicate that integrating collection also entails modernizing the revenue administration so that the contact between the tax office and the taxpayer is no longer physical but virtual, thanks to the extensive use of information and communication technology. The book focuses on how to plan and manage integration successfully and avoid the risks of failure. By examining four successful country cases in depth, and by reviewing selected themes in seven other country cases, the book has drawn attention to the need for a strong, visionary, and pragmatic leadership; a professional project team with strong skills and dedication; consensus building; and public support through effective communications.Publication A Handbook for Tax Simplification(World Bank, Washington, DC, 2009)The purpose of this handbook is to provide policy makers with a framework to assess a tax system in its entirety, measure its various parameters and how it is administered, and defines best practices for tax policy and administration that will yield a tax system that is simple and predictable and does not create an undue burden on private enterprise. This handbook is primarily designed for policy makers and tax practitioners. The goal is to analyze the impact of income tax, the value added tax (VAT), and other local taxes that are imposed on business. This handbook does not analyze the effects of trade and labor taxes such as social security. The administration of the customs duty is unique and has been addressed extensively in the literature on customs modernization. Labor taxes primarily imposed on salaried individuals are not covered by this handbook, even though their incidence affects business. VAT has been included even though it is a tax on consumption because the administrative burden to comply with it is primarily on business.
Users also downloaded
Showing related downloaded files
Publication Strategic Planning for Poverty Reduction in Vietnam : Progress and Challenges for Meeting the Localized Millennium Development Goals(World Bank, Washington, DC, 2003-01)This paper discusses the progress that Vietnam has made toward meeting a core set of development goals that the government recently adopted as part of its Comprehensive Poverty Reduction and Growth Strategy (CPRGS). These goals are strongly related to the Millennium Development Goals (MDGs), but are adapted and expanded to reflect Vietnam's national challenges and the government's ambitious development plans. For each Vietnam Development Goal, the authors describe recent trends in relation to the trajectories implied by the MDGs, outline the intermediate targets identified by the government, and discuss the challenges involved in meeting these. Relative to other countries of similar per capita expenditures, Vietnam has made rapid progress in a number of key areas. Poverty has halved over the 1990s, enrollment rates in primary education have risen to 91 percent (although there is a quality problem), indicators of gender equity have been strengthened, child mortality has been reduced, maternal health has improved, and real progress has been made in combating malaria and other communicable diseases. In contrast, Vietnam scores worse than other comparable countries in the areas of child malnutrition, access to clean water, and combating HIV/AIDS. A number of important crosscutting issues emerge from this analysis that need to be addressed. One such challenge is improving equity, both in terms of ensuring that the benefits of growth are distributed evenly across the population and in terms of access to public services. This will involve addressing the affordability of education and curative health care for poor households. Improvements in public expenditure planning are needed to align resources better to stated desired outcomes and to link nationally-defined targets to subnational planning and budgeting processes. There is also a need to address capacity and data gaps which will be crucial for effective monitoring.Publication Improving Access to Medicines in Developing Countries : Application of New Institutional Economics to the Analysis of Manufacturing and Distribution Issues(World Bank, Washington, DC, 2005-03)This paper examines alternative frameworks for empirical analysis of supply side activities, namely, the manufacture and distribution of medicine, through the application of New Institutional Economics (NIE) concepts. Attention is focused particularly upon the potential utility of ideas from agency theory, transaction cost analysis and contemporary ideas from strategy theory. The major purpose of this paper is to use these theoretical frameworks to provide insight for policy makers, when faced with specific situations, whether in an international agency, or a private company, or in defining a national strategy. The analysis attempts to show the importance of distinctions between ideas of 'make' or 'buy', between 'national self sufficiency' and 'international purchasing' strategies, the limitations of contractual agreements under market governance and the crucial linkages between strategy formulation, strategy implementation and the necessary capabilities to achieve successful performance in practice. The current international situation on the investment, location and capacity of pharmaceutical manufacturing is reviewed and likely future scenarios suggested. Correspondingly current patterns of trade in medicines and their likely development within the context of the WTO and bilateral trade agreements are discussed. Against this background the promise and the pitfalls for new forms of public-private partnerships, which may offer attractive alternatives to conventional structures are evaluated. The implications of alternative future strategic options for national governments in setting the balance between health and industrial policies are examined and in particular the extent to which a national manufacturing capability should be developed or sustained. Similarly the scope for improving low cost distribution systems for medicines, based upon a mix of public and private sector channels, is assessed. We conclude with suggestions for further development of a transaction-based framework.Publication Accessing Economic and Political Impacts of Hydrological Variability on Treaties : Case Studies on the Zambezi and Mekong Basins(2012-03-01)International river basins will likely face higher hydrologic variability due to climate change. Increased floods and droughts would have economic and political consequences. Riparians of transboundary basins governed by water treaties could experience non-compliance and inter-state tensions if flow falls below levels presumed in a treaty. Flow information is essential to cope with these challenges through water storage, allocation, and use. This paper demonstrates a simple yet robust method, which measures gauge station runoff with wetness values derived from satellite data (1988-2010), for expanding sub-basin stream flow information to the entire river basin where natural flow information is limited. It demonstrates the approach with flow level data that provide estimates of monthly runoff in near real time in two international river basins: Zambezi and Mekong. The paper includes an economic framework incorporating information on existing institutions to assess potential economic and political impacts and to inform policy on conflict and cooperation between riparians. The authors conclude that satellite data modeled with gauge station runoff reduce the uncertainty inherent in negotiating an international water agreement under increased hydrological variability, and thus can assist policy makers to devise more efficient institutional apparatus.Publication Case Study 2 - Andhra Pradesh, India : Participation in Macroeconomic Policy Making and Reform(Washington, DC, 2003-03)For the past six years, the State of Andhra Pradesh in India has been at the vanguard of efforts to modernize the economy and the state while pursuing policies to improve the lives of the poorest. The Chief Minister and head of the ruling Telugu Desam Party (TDP), Mr. Chandra Babu Naidu, is known by some as the "Laptop Minister" for his modernizing initiatives. He has reached out to international organizations and investors but has also maintained his base of support at home, in part through expanded programs in education, health, and rural development. "I have initiated so many things," Naidu said. "They are going on and will pay off after some time. But people need something today." The challenges facing the government are daunting. Andhra Pradesh (AP) is one of the largest and poorest states in India. Its population of almost 80 million approaches that of the Philippines, the 13th most populous country in the world. Even as its high-tech industries develop rapidly, AP's overall literacy rate remains a modest 44% and one-third of the population lives in poverty.Publication Rwanda Diagnostic Review of Consumer Protection and Financial Literacy(World Bank, Washington, DC, 2013-11)Although the Parliament of Rwanda has passed an impressive array of financial sector laws since 2008, the laws relevant to financial consumer protection are very limited and in some cases overlapping. Consumer protection in Rwandan banking, microfinance, and insurance sectors is fragmented because of insufficiently defined roles and responsibilities among institutions and unclear enforcement capacity. While there are some strong provisions in some areas such as electronic money transfer, electronic transmission, credit information, and market conduct regulation in the insurance industry, many other areas are lagging. Rwandan authorities recognize that a sound financial consumer protection framework is fundamental to improving usage and quality of financial services, access to them, and overall deepening of the financial sector. This World Bank diagnostic review was requested by the National Bank of Rwanda (BNR) in November 2012. Modules on banking and microfinance sectors were developed based on publicly available information and data during the World Bank mission in Rwanda, and the review of the insurance sector was conducted through a desk review using the data obtained from BNR data requests and questionnaires, and the analysis is therefore constrained by it. Volume I of the review summarizes its key findings and recommendations, and volume II provides a detailed assessment against the World Bank’s good practices on financial consumer protection.