The Influence of Tax Education on Obeying Tax Liability: A Statistical Methods and Results

Main Article Content

Tizazu Toma Shamana
Woldeselassie Azige Alito

Abstract

Backgrounds: In Ethiopia, taxpayers are categorized as small, medium or large depending on their business turnover or levels of income. Irrespective of one's category, taxpayers in Ethiopia, particularly Wolaita Sodo town are required to comply with VAT, TOT, Income Tax, Withholding Taxes and Customs duties in equal measure. Taxpayers will readily accept any new system introduced if they have ample knowledge to understand the system. Thus, education programs organized by custom and duty authority or public education institutions are required to enhance taxpayers' ability to understand the importance of tax on country's economic development and to increase their confidence in fulfilling their responsibilities as taxpayers. By considering the above issues, the researcher interested to investigate the influence of tax education on tax compliance attitude of taxpayers by conducting an experiment on the taxpayer in Wolaita Sodo town. The general objective of the study was to investigate the influence of tax education on tax compliance in Wolaita Sodo town.

Methods: The target population for the survey study was actual taxpayers who are subject for business income tax. Only unincorporated business taxpayers in Wolaiata Sodo town are used as participants in the survey study. The target total population is 11,278 business income taxpayers as of July 2017 which is categorized under A, B and C. Only 160 taxpayers were selected by using simple random sampling from Wolaiata Sodo town. Questions regarding employment income, business income, turn over tax, and excise and value-added taxes are asked. Respondents are also asked to state whether the direct cost of producing the income, such as the direct cost of manufacturing, purchasing and selling costs shall be deductible from gross income in calculating taxable business income. Before and after the experiment (tax education) respondents were asked to check whether they know basic taxation rules. And their marks scored for the 7 basic questions after and before tax education out of 50 marks are recorded.

Results: Majority of the respondents after attending the tax course scored high value regarding the tax knowledge. There is a great difference between the tax compliance attitude of these respondents before and after attending the tax course. Before attending the tax course, majority of respondents showed the plan of not complying with tax laws. But after attending the tax course, the majority of the respondents proves the identification of taxable and non-taxable income types. Generally, it resulted that the tax knowledge of respondents is improved after attending the tax course.

Keywords:
Tax liabilit, statistical results, wolaita Sodo, Ethiopia.

Article Details

How to Cite
Shamana, T. T., & Alito, W. A. (2020). The Influence of Tax Education on Obeying Tax Liability: A Statistical Methods and Results. Journal of Economics, Management and Trade, 26(7), 38-52. https://doi.org/10.9734/jemt/2020/v26i730273
Section
Original Research Article

References

Fjeldstad O, Ranker L. Taxation and Tax Reforms in Developing Countries: Illustration from Sub-Saharan Africa. Bergen, Norway: Chr. Michelsen Institute; 2003.

Lymer and Oats. Law of Tax Administration and Procedure, in Victor ed., Tax Law Design and Drafting, (Washington: International Monetary Fund); 2009.

Andreoni, Erard, Jonathan. Tax Compliance, Journal of Economic Literature. 1998;818-860.

Kirchler E. The Economic Psychology of Tax Behaviour, Cambridge University Press, Cambridge. KRA Domestic Taxes department; Income Tax at a glance; 2007.

Allingham MG, Sandmo A. Income tax evasion: A theoretical analysis, Journal of Public Economics. 1972;1(3-4):323-38.

Kimungu H, Kileva EL Challenges of Administering Small and Medium Taxpayers: Tanzania experience. Presented at the International Tax Dialogue Conference. Buenos Aires, Argentina.

Cummings RG. Effects of Tax Morale on Tax Compliance. Experimental and Survey Evidence; 2007.

Aksnes F. Tax Compliance, Enforcement and Taxpayer Education. Paper Presented at a Workshop organised by International Centre for Tax and Development, in Maputo; 2014.

Misra R. The Impact of Taxpayer Education on Tax Compliance in South-Africa; 2004.

Mohd R. Tax Knowledge and Tax Compliance Determinants in Self-Assessment System, A Thesis submitted to the University of Birmingham for the degree of Doctor of Philosophy, available at http://www.acta.uob.edu.au/asfc.html, accessed in March 2011. Patton, M. (2002), Qualitative research & evaluation methods (3rd ed.); 2010.

Wenzel M. Tax Compliance and the Psychology of Justice: Mapping the field. In V.Braith-waite (ed.). Taxing Democracy: Understanding Tax Avoidance and Tax Evasion. Hants, UK: Ashgate; 2003.

Kristina Murphy. Nurturing regulatory compliance: Is procedural justice effective when people question the legitimacy of the law? Alfred Deakin Institute, Deakin University, Gheringhap Street Australia; 2008.

Kasipillai J, Norhani A, Noor Afza A. The influence of education on tax avoidance and evasion', eJournal of Tax Research. 2003;1(2). Available:http://www.atax.unsw.edu.au/ejtr. html (Accessed in March, 2011)

Creswell JW. Research design: Qualitative, Quantitative, and Mixed Methods Approaches, (2nd ed.), Sage Publications, Thousand Oaks; 2003.

Wholey J, Hatry H, Newcomer K. The practice of social research (10th ed.). Belmont,CA: Wadsworth; 2004.

Patton M. Qualitative research & evaluation methods (3rd ed.). Thousand Oaks, CA. Sage.; 2002.

Gall MD, Borg WR, Gall JP. Educational Research: An Introduction (6th ed.). White Plains, NY: Longman; 1996.

Mohamad Ali R, Mohd. Hanefah B, Mohd Noor A. The Effects Of Knowledge on Tax Compliance Behaviour', Faculty of Business And Economics, University Utaramalaysia, International Journal of Business and Social Science 2011;2(7). [Special Issue –April 2011].

Cooper DR, Schindler PS. Business Research Methods (9th ed.). The McGraw Hill Companies, New Delhi. 2006;121.

Babbie E. Survey Research Methods Belmont, CA: Wadsworth; 1990.

Lewis A. An Empirical Assessment of Tax Mentality, Public Finance, Vol. 2, pp. 245- 257 Lewis, W. 1982, The economic psychology of value added tax compliance. Journal of Economic Psychology. 1979;5(2):187-211. Available:http://www.ctsi.anu.edu.au/ publications/inx.html

Eriksen K, Fallan L. Tax Knowledge and Attitude towards Taxation, Journal of Economic Psychology. 1996;17(3):387-402.

Demissie A. Assessment of the Status of Voluntary Income Tax Compliance: In the case of Addis Ababa, Master thesis, Addis Ababa University; 2008.

Bătrâncea Larissa-Margareta, Nichita Ramona-Anca, Bătrâncea Ioan, Moldovan Bogdan Andrei. Tax Compliance Models: From Economic to Behavioral Approaches, Transylvanian Review of Administrative Sciences in 32012 Issue 36E, pp.13-26, ISSN:1842-2845, WOS:000305444900002, Publisher: Babes-Bolyai University, Faculty Political, Administrative & Communication Sciences, Public Administration Department; 2012.

Anca Nichita, Larissa Batrancea, Ciprian Marcel Pop, Ioan Batrancea, Ioan Dan Morar, Ema Masca, Ana Maria Roux-Cesar, Denis Forte, Henrique Formigoni & Adilson Aderito da Silva. We Learn Not for School but for Life: Empirical Evidence of the Impact of Tax Literacy on Tax Compliance, Eastern European Economics; 2019.

Ayee JR. Building Tax Compliance through Reciprocity with Government. Enterprise Formalization in Africa (pp. 6 7). Accra: Foreign Investment Advisory Service of the World Bank; 2007.