practices and challenges of vat administration in yeka sub-city of addis ababa city administration

65 Pages·2016·0.37 MB·English

ST. MARY’S UNIVERSITY
SCHOOL OF GRADUATE STUDIES
PRACTICES AND CHALLENGES OF VAT ADMINISTRATION
IN YEKA SUB-CITY OF ADDIS ABABA CITY
ADMINISTRATION: THE CASE OF CATEGORY “A” TAX
PAYERS
BY
MISGANAW SINOR
JUNE 2016
ADDIS ABABA, ETHIOPIA
PRACTICES AND CHALLENGES OF VAT ADMINISTRATION IN YEKA
SUB-CITY OF ADDIS ABABA CITY ADMINISTRATION: THE CASE OF
CATEGORY “A” TAX PAYERS
BY
MISGANAW SINOR
A THESIS SUBMITTED TO ST.MARY’S UNIVERSITY, SCHOOL OF GRADUATE
STUDIES IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FORTHE
DEGREE OF MASTER OF BUSINESS ADMINISTRATION (ACCOUNTING AND
FINANCE CONCENTRATION)
JUNE 2016
ADDIS ABABA, ETHIOPIA
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ST. MARY’S UNIVERSITY
SCHOOL OF GRADUATE STUDIES
FACULTY OF BUSINESS
PRACTICES AND CHALLENGES OF VAT ADMINISTRATION IN YEKA
SUB-CITY OF ADDIS ABABA CITY ADMINISTRATION: THE CASE OF
CATEGORY “A” TAX PAYERS
BY
MISGANAW SINOR
APPROVED BY BOARD OF EXAMINERS
________________________ __________________
Dean, Graduate Studies Signature
______________________________ _____________________
Advisor Signature
______________________________ _____________________
External Examiner Signature
______________________________ _____________________
Internal Examiner Signature
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DECLARATION
I, the undersigned, declare that this thesis is my original work, prepared under the
guidance of theresearch advisor. All sources of materials used for the thesis have
been duly acknowledged. I further confirm that the thesis has not been submitted
either in part or in full to any other higher learning institution for the purpose of
earning any degree.
_________________________ ______________________
Name Signature
St. Mary’s University, Addis Ababa June, 2016
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ENDORSEMENT
This thesis has been submitted to St. Mary’s University, School of Graduate
Studies for examination with my approval as a university advisor.
_________________________ ______________________
Advisor Signature
St. Mary’s University, Addis Ababa June, 2016
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ACKNOWLEDGMENTS
First, I would like to express my praise to the almighty Lord, the most merciful and the most
compassionate, who has granted me the potential to start and complete this study. I would like to
extend my heartfelt appreciation and deepest gratitude to my principal advisor, Alem Hagos
(PhD) for his intellectual advice, guidance, and patience in course of my study at the Department
of Accounting and Finance at St.Mary’s University, I am deeply thankful of his time dedication,
and encouragement that he has significantly contributed to the completion of my thesis. It was
indeed fortunate for me to work under his supervision. My thanks also go to Yeka Sub city
business taxpayers who participated in this study. Their enthusiasm to take part in both the
surveys and interviews contributed significantly to the success of this study.
My gratitude is also extended to the following that have helped me in finalizing this study and
data search: Yeka Sub city Tax Administration office. From Yeka Sub city tax administration
office customer service Coordinator, from Yeka Sub city tax administration office tax
assessment and collection core process Coordinator. I am also very grateful to Yeka Sub city tax
administration revenue Office Manager.
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TABLE OF CONTENT
ACKNOWLEDGMENTS.....................................................................................................................i
TABLE OF CONTENT.........................................................................................................................ii
LIST OF TABLES................................................................................................................................v
LIST OF FIGURES.............................................................................................................................vi
LIST OF ACRONYMS.......................................................................................................................vii
ABSTRACT.......................................................................................................................................ix
CHAPTER ONE.................................................................................................................................1
INTRODUCTION..............................................................................................................................1
1.1. Background of the study........................................................................................... 1
1.2. Statement of the Problem......................................................................................... 3
1.3. Research questions.................................................................................................. 5
1.4. Objective of the study.............................................................................................. 5
1.4.1. GENERAL OBJECTIVE....................................................................................................................5
1.4.2. SPECIFIC OBJECTIVE......................................................................................................................6
1.5. Significance of the study.......................................................................................... 6
1.6. Scope and limitation of the study............................................................................... 6
CHAPTER TWO................................................................................................................................7
LITRETURE REVIEW.........................................................................................................................7
2.1. Introduction............................................................................................................ 7
2.2. Theoretical view of Taxation.................................................................................... 7
2.2.1. Tax assessment and collection practice in other developing countries................................................7
2.2.2. Tax assessment and collection practice in Ethiopia.............................................................................8
2.3. The legal framework of taxation in Addis Ababa city .................................................. 9
2.4. Powers and Duties of the Addis Ababa Revenue Authority;.......................................... 9
2.5. Tax Administration.................................................................................................11
2.6. Value Added Tax (VAT) Administration Practice......................................................12
2.6.1. Types of VAT........................................................................................................13
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2.6.2. Advantage of VAT.................................................................................................13
2.6.3. Criticism onVAT...................................................................................................15
2.6.4. Registration Procedure:.....................................................................................................................16
2.6.5. Record Keeping Requirement...........................................................................................................17
2.6.6. Tax payable and Tax Credits....................................................................................17
2.6.7. Reverse Taxation/Reverse Charge)...........................................................................18
2.6.8. Powers of Levying and Collection Enforcement for VAT............................................19
2.6.9. Appeals.................................................................................................................20
2.7. Empirical view on tax assessment and collection practice............................................21
2.7.1. Empirical review on VAT administration in Ethiopia.......................................................................21
2.8. Conclusions to the literature review and knowledge gape............................................24
CHAPTER THREE............................................................................................................................25
RESEARCH DESIGN OR METHODOLOGY......................................................................................25
3.1 Introduction..............................................................................................................25
3.2 Description of the study area.......................................................................................25
3.3 Research Design and Analysis.....................................................................................26
3.4 Data type and Data Sources.........................................................................................27
3.5 Sampling Design and Techniques................................................................................27
3.6 Sample Size..............................................................................................................28
3.7 Data Collection Instruments........................................................................................29
3.8 Data Processing, Analysis and Presentation...................................................................29
3.9 Questionnaire Design.................................................................................................29
3.10 Ethical considerations.............................................................................................30
CHAPTER FOUR.............................................................................................................................31
RESULTS AND DISCUSSION..........................................................................................................31
4.1. Characteristics of respondents..................................................................................31
Graph 1 Data of Employees.................................................................................................35
Graph 2 Data of Duration....................................................................................................36
4.2. Reliability Test......................................................................................................36
4.3. VAT registration practice........................................................................................37
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4.4. VAT assessment practice........................................................................................38
4.5. VAT collection practice..........................................................................................40
4.6. Correlations...........................................................................................................41
4.7. Interview result......................................................................................................42
CHAPTER FIVE...............................................................................................................................43
CONCLUSIONS AND RECOMMENDATIONS.................................................................................43
5.1 SUMMARY OF FINDINGS AND CONCLUSION.......................................................43
5.2 RECOMMENDATION..............................................................................................44
REFERENCES..................................................................................................................................46
Appendix 1-Practice and challenges of VAT administration survey instrument......................48
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LIST OF TABLES
Table 1: Distribution of the Gender, Age and Education group of respondents --------------------31
Table 2: Distribution of the type of business, Sales, VAT and Capital-------------------------------33
Table 2.1: Result of Reliability Test ----------------------------------------------------------------------37
Table 3: The mean and standard deviation of vat registration-----------------------------------------37
Table 4: Themean and standard deviation of vat assessment-----------------------------------------38
Table 5: Mean and standard deviation of vat collection------------------------------------------------40
Table 6: Correlations----------------------------------------------------------------------------------------41
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