DAMBIDOLLO UNIVERSITY COLLEGE OF BUSINESS AND

ECONOMICS

DEPARTMENT OF ACCOUNTING AND FINANCE

ASSESSMENT FACTORS AFFECTING CHALLENGS OF VALUE-

ADDED TAX (VAT) (A CASE OF DAMBI DOLLO TOWN REVENUE
AUTHORITY OFFICE)

SUBMITTED TO DAMBII DOLLO UNIVERSITY COLLEGE OF

BUSINESS AND ECNOMICS

DEPARTMENT OF ACCOUNTING AND FINANCE FOR THE PARTIAL

FULFILLMENT OF MA IN ACCOUNTING AND FINANCE.

PREPARED BY: ADDISU TOLINA

ID No:

ADVISOR:-[Link].T

FEBRUARY, 2023

DAMBII DOLLO,ETHIOPIA
ABSTRACT
These Research proposals investigate and analyze the factors affecting and Challenges of VAT
registration the case of Dambi Dollo revenue Authority. To achieve the objective of study, the
researcher will adopts descriptive method of research approach. The sample of VAT Registrants
taxpayers and Tax officials of the Authority were selected using simple random method
and judgmental sampling method respectively. The study will be using both quantitative and
qualitative data. For the quantitative data, the questionnaire for VAT register and tax officials.

Key word; Value added tax, Value added taxrevenue

LIST OF ACRONYMS
ERCA Ethiopian Revenue and Customs Authority

ETB Ethiopian Birr

GDP Growth Domestic Product

GST Goods and Service Tax

IMF International Monetary Fund

Proc. No. Proclamation Number

SIGTAS Standards Integrated Government Tax Administration System

VAT value added tax

ii
CHAPTER ONE........................................................................................................1
1.1 Background of the study...................................................................................................1
1.2 Statement of the problems.................................................................................................2
1.3 Objective of the Study.......................................................................................................3
1.3.1 General objective.......................................................................................................3
1.4 Significance of the study...................................................................................................3
1.5 Scope of the study.............................................................................................................3
1.6 Limitation of the study......................................................................................................4
1.7 Organization of the paper..................................................................................................4
CHAPTER TWO.......................................................................................................6
2. LITRATURE REVIEW...........................................................................................................6
2.1 Concept of VAT...................................................................................................................6
2.3 Empirical Review...................................................................................................................7
2.4 Factors affecting challenges of relating to the value added tax registration....................8
2.4.1 Application of Tax Principles during VAT Collection.......................................................8
2.4.2Compliance of the Taxpayer.............................................................................................8
2.4.3 Awareness of Taxpayers................................................................................................10
2.4.4 Problems face in side tax authority...............................................................................11
CHAPTER THREE.................................................................................................14
3. Research Methodology..........................................................................................................14
3.1. Research approach..............................................................................................................14
3.2. Research design...................................................................................................................14
3.3. Types of data.......................................................................................................................14
3.4. Methods data collection......................................................................................................14
3.5. Target population................................................................................................................15
3.6. Sampling design..................................................................................................................15
3.7. Sampling technique.............................................................................................................15
3.7.1. Sample size determination...........................................................................................15
3.8. Methods of data analysis and Interpretation.......................................................................16
CHAPTER FOUR...................................................................................................17
[Link] Breakdown......................................................................................................................17
4.1Time table and Cost Breakdown...........................................................................................17
ii
CHAPTER ONE

1.1 BACKGROUND OF THE STUDY

Value Added Tax (VAT) is an indirect tax because it is collected from someone other than the
person who actually bears the cost of the tax directly, as it is a tax on the supply of goods and
services that is ultimately borne by the final consumer, but collected at each stage of production
and distribution chain, it is a tax on what people buy rather than their savings or earnings or
investments (Olatunji, 2009). It was first introduced in France in 1954 with the replacement of
turnover tax with the intention to satisfy high demand of revenue on the part of the government
in order to rebuild France from the civil of WWII Bogale et al. (2009).

Cote d’Ivore was the first African country to implement VAT in 1960 (Jaleta, 2014). Ethiopia
adopted New Zealand’s model of VAT which is a standard rate of 15 % broad based and
minimum exemption on January 1st, 2003 by replacing the outdated sales tax. Bogale et al.
(2009) stated the major reasons behind introducing VAT in Ethiopia was because it is more
advantageous than sales tax in that:- it allows collection on the added value created wherever
sales transaction is conducted, it also permits refund on tax that businesses paid for inputs (raw
materials) which decreases evasion that is not true in sales tax as it is collected only at one stage,
it increases saving and investment by changing the extravagant way of life imposed form custom
on the part of final consumers and the incapability of sales tax in generating adequate revenue
(James, 2011) stated because of being the best method of taxing the general consumption, its
neutral treatment of exports, and its revenue-raising capacity currently VAT become popular and
acceptable by many countries (Le, 2003) also underlined the usefulness of VAT in that the
presence of VAT has been associated with a higher ratio of general government revenue
compared with alternatives in indirect taxation; the VAT has more revenue potential: it is
generally more broad-based and entails a trail of invoices that helps improve tax compliance and
enforcement. In many countries, it is regarded as one of the main source of government revenue.
Value added tax is an indirect tax levied on domestic consumption of goods and service as well
as on imported goods. It can be considered as the most important tax innovation of the second
half of the twentieth centuries.

1
Now a day, many countries in the world have made value added tax part of their tax system,
where Ethiopia standard value added tax rate is 15%, Nigeria and Algeria have the minimum and
maximum standard value added tax in Arica with 5% and 21% respectively(Misrak,2008). Value
added tax is a recent issue in our countries. It was started in 2002 by proclamation 285/2002.

All government requires payment at money tax from people. The government uses the tax
revenue to build dams, to operate schools and Hospitals to provide food and medical care for the
poor and also for other purposes. Value added tax is modified sale tax based on the net value
added at each stage rather than gross receipts it is principle means of the indirect [Link]
output tax minus input tax. Output tax is a tax collected when firm sell its product whereas input
tax is tax paid when the firm buys goods from registered one can collect value added tax without
registration for value added tax (Misrak Tesfaye,2008,Ethiopia tax accounting: theory and
practice). Generally, value added tax practice in Dambi Dollo town is one activities from tax
administration.

1.2 STATEMENT OF THE PROBLEMS

Value added tax is the principal source of revenue for the Ethiopian government (Yesegat, 2008).
Ebrill et al. (2002) stated that VAT is a good means to raise government revenue

2
and they found that countries that have adopted VAT revenue from this source accounted on
average 27 percent of the total tax revenue or 5 percent of the GDP. Moreover, 70 percent of the
world’s populations now live in countries with a VAT. This implies that it is a key source of
government revenue in more than 126 nations. Generating revenue from VAT in Ethiopia is
frequently lower than expected. So, the government resolves to increase VAT revenue and to
improve tax administration system on one side and taxpayer compliance on the other side. This
creates problems on the business sectors. The annually report of Dambi Dollo Town revenue
office shows from 2009-2011 is that the budgeted amount from this category was 7014333,
11,200,915.17 and, 13,147,189 respectively. Some studies which have been undertaken in other
places of the country (have indicated that: lack of awareness by the side of the VAT payers
while fulfilling their obligations, ineffectiveness and inefficiency of the Tax Authority,
poor service delivery, total distrust between the Tax Administration and taxpayers, lack of
simplified procedures, lack of the enforcement capacity of the Tax Administration,
resistance against registrations for VAT by some traders and weak culture of taxpayers are
some of the major problems in VAT Administration (Markos,2010;Dheressa et
al.2015;Bizualem,2015).
Unfortunately, there is no recorded study that has been conducted in the city to explore reason
behind VAT administration regarding VAT assessment and collection. Therefore, in addition to
examining the above already identified gaps, this study will be designed to examine factors
affecting challenges of value added tax registration regarding current problems of value added
tax assessment and collection process at Dambi Dollo town Revenue Authority.
Basic Research Questions
The researcher raises the following questions that will be answered in this course of study:-
1. Do the taxpayers have knowledge of VAT to register with current tax law in the study
area?
2. To extent of awareness of tax payers towards value added tax in the study area?
3. What are the major challenges in side of taxpayers in the study area?
4. What is the relationship between value added tax registration and its factors

3
1.3 OBJECTIVE OF THE STUDY

1.3.1 General objective

The general objective of this study is to know the main factors affecting challenges of relating to
the value added tax registration a case of Dambi Dollo Town Revenue Authority.

1.3.2. Specific objectives

The specific objective of the study is:
 To analysis the taxpayers knowledge of VAT to register with current tax law in the study
area
 To evaluate the extent of awareness of tax payers towards value added tax in the study area.
 To assess the major challenges in side of tax Authority in the study area.
 To analysis relationship between value added tax registration and its factors

1.4 SIGNIFICANCE OF THE STUDY

This study may be help the value added tax administration bureau to know the problem of VAT
administration that is known and individual living condition with in the countries. In addition to
this the study may be used for the administrator, give a way it will raise the employees’
awareness towards value added tax and show them the role they have to play. For the society, to
effectively collect and administer value added tax and satisfy the community social wants. For
the researcher it is an opportunity of relating to academic knowledge with that of what is practice
with real world. It may be help other researcher and contribute some to those tax want to make
further research and necessary for the identification of the obstacle at the collection of value
added tax.

1.5 SCOPE OF THE STUDY

The study will be cover the assessment of factors affecting challenges of value added tax the case
of Dambi Dollo Town revenue Authority. This study is restrict on Dambi Dollo Town value
added tax registration business those who have annual sales turnover of birr 1,000,000 and
above. The study is mainly focuses to identify the value added tax registration that cover from
the year 2011-2014/15 in order to assess whether the office fully collect the expected amount of
value added tax or not.

4
1.6 LIMITATION OF THE STUDY
This study faces the following Limitations like the study focus on only VAT Registration
problems that means the does not contain other indirect tax and the result of the study depends
on the responses of the respondents.

1.7 ORGANIZATION OF THE PAPER

This paper includes four chapters. The first chapter present the introduction part which
reflecting the background, statement of the problem objective of the study, significance of the
study, scope of the study, limitation of the study and organization of the paper. The second
chapter deals with literature review. The third chapter deals with methodology of the study. The
fourth chapter deals with budgets break down

CHAPTER TWO

2. LITRATURE REVIEW

2.1 CONCEPT OF VAT

Value Added Tax (VAT) is a tax levied on the increase in value of commodity that has been
created by the taxpayer’s stage of the production or distribution cycle. It is a sales tax based on
the increase in value or price or price of the product at each stage in its manufacture and
distribution. ((Byrd et al (1996/97).) (The cost of the tax is added to the final price and is
eventually paid by the consumer)

VAT is a general consumption tax assessed on the value added to goods and services. It is a
broad based tax because it is charged in different stage of the production and distribution of
goods and the provision of services. It is a consumption tax because it is borne ultimately by the
final consumer. It is charged as a percentage of prices, which means that the actual tax burden is
visible at each stage in the production and distribution chain. It is collected fractionally, via a
system of deductions whereby taxable persons (i.e., VAT-registered businesses) can deduct from

5
their VAT liability the amount of tax they have paid to other taxable persons on purchases for
their business activities.

2.2 THEORETICAL REVIEW

2.2.1 TYPES OF VAT

There are several bases for classifying value added taxes of particular importance are the extent
of vertical coverage through production and distribution stages; the treatment of amounts paid
for producers’ goods, particularly durable capital equipment and the method used for calculating
tax liability. Conceptually, there are two types of VATs: consumption and the income ((Rob
Cape hart, 1999)., 1999)

The tax base of a consumption type VAT is the value of goods and services sold or transferred
for personal consumption. For example, in consumption, credit- subtraction VAT, a taxpayer
typically claims an input credit for VAT paid on purchases of capital goods, as well as on
inventory and intermediate goods and services used in his business. A consumption VAT is
calculating by adding together the amount of a firm spends on consumption, interest, dividends
and expended capital during the year (Alan and Oliver, 2001). ( Inc, Ardsley, New York.)

(Bhatia 2003)also states about the types of VAT, if a firm is allowed to deduct the entire credit
when the capital equipment is purchased, the system is termed as consumption VAT. Thus the
tax actually applies only to purchase for personal household use, with all purchases for use in
production by taxpaying firm being excluded from tax. Thus the term consumption type is used
the tax is limited to purchase to personal consumption purpose.

A purchase of an investment good is treated like any other material input. Its full value is
subtracted from sales in the consumption, despite the fact that it is durable. This is referred to as
a consumption type of VAT because the tax base excludes investment and involves only
consumption (Harvey S. Rosen, 1995)

2.2.2 Registration

Under the VAT law any person who carries on a taxable activity and at the end of any period of
12 calendar months has made, during that period, taxable transactions the total value of which
exceeds 500,000 Birr or at the beginning of any period of 12 calendar months there are

6
reasonable grounds to expect that the total value of taxable transactions to be made by the person
during the period will exceed 500,000 Birr, has the obligation to register for VAT. (Article 16(1)
(a) and (b)) According to Article 17, a person who carries on taxable activity and is not required
to be registered for VAT may voluntarily apply to the Tax Authority for such registration, if he
regularly is supplying or rendering at least 75% of his goods and services to registered persons.

2.3 EMPIRICAL REVIEW

The study conducted by Bird (2005), (Bird, R., Martinez Vazquez, J. and Torgler . B.( 2005).
Value-added taxes in developing and transitional countries: lessons and questions)reveals VAT
as the ‘money machine’ tax which necessarily adopted by both developed and developing
countries that allow the government to collect sufficient amount of revenue. Hence, the majority
of economists as well as experts of political scientists think that VAT is the best preferable
general consumption tax recently available that enhances economic growth.

According to tax reform looks to balance economic, compliance and administrative cost when
raising adequate revenue. Different consumption taxes have significantly different economic
impacts and administrative costs. Within this first group, a VAT is considered to be the most
economically efficient consumption tax. Tax administration refers to the identification of tax
liability based on the existing tax law, the assessment of this liability, and the collection,
prosecution and penalties imposed on recalcitrant taxpayers. Tax administration, therefore,
covers a wide area of study, encompassing aspects such as registration of taxpayers, assessments,
returns processing, collection, and audits (Kangave, 2005).

In Ethiopia revenues raised by VAT are usually gathered at the expense of erosion in its main
features. So, this is due to VAT administration problems particularly for key VAT administrative
functions like VAT assessment and collection. In order to make up sufficient revenue from VAT
it needs efficient and effective tax administration. However, developing countries like Ethiopia,
there would be several challenges that hinder effective VAT collection and assessment (Yesegat,
2008).

7
2.4 FACTORS AFFECTING CHALLENGES OF RELATING TO THE VALUE ADDED
TAX REGISTRATION.

2.4.1 APPLICATION OF TAX PRINCIPLES DURING VAT COLLECTION

According to Makedonskiy (2005), the ability of the tax system to adequately perform its
functions is to a large extent determined by its correspondence to the economic environment
along with certain principles and requirements. Specifically, tax burden should be fairly
distributed among all the economic entities depending on their taxable capacity. For example,
the role of VAT within broader strategies will have for alleviating poverty and achieving fairness
(Keen, 2005) (Keen .M. (2005). The VAT experience. In Presentation to the International Tax
Dialogue VAT Conference).However, the implementation of this principle is hampered by the
informal (unregistered) economic activity and active tax evasion by a significant part of the
taxpayers.

2.4.2 COMPLIANCE OF THE TAXPAYER

According to (Shahroodi , 2010)stated that for a tax system to be efficient, the tax policy needs
to be designed such that the tax rates are appropriate and rational, the exemptions are lower in
amount, the tax collection organization are more efficient, the tax burden of the indigent people
should be lighter and the fight against corruption and tax evasion should be much more intense.

Pro-business Tax regimes and enforcement should be simple, consistent and predictable should
to lower compliance and administrative costs, and hence reduce uncertainty faced by taxpayers
as well as improve the levels of voluntary compliance. Even though VAT is less vulnerable than
other form of taxations, like any other tax, it is vulnerable to evasion and fraud (Keen and Smith)
It is widely accepted that the goal of an efficient tax administration is to foster voluntary tax
compliance using all possible methods including penalties.

Penalizing tax evaders or going after delinquent taxpayers are not in themselves the object of tax
administration, although it would serve to encourage voluntary compliance if the taxpayers
believe that the tax administration can effectively detect and punish noncompliance. It is
difficult to get an accurate picture; it is clear from the few studies that, VAT evasion is
widespread and involves significant revenue losses, though the extent varies considerably across

8
countries For instance, a study on VAT Compliance in the United Kingdom identifies four forms
of noncompliance: -

According to (Atawodi and Ojeka 2012) various opinions exist about the best ways to improve
tax compliance. Given the chance, a lot of businesses will not pay taxes unless there is a
motivation to do so. Some believe that the best way is to increase incentives others believe the
best way is to increase penalties. Tax compliance theories can be broadly classified into two.
They are; economics based theories and psychology based theories. Economic based theories are
also known as deterrence theory and they place emphasis on incentives. The theory suggests that
taxpayers are amoral utility maximizes. They are influenced by economic motives such as profit
maximization and probability of detection. As such they analyze alternative compliance paths for
instance whether or not to evade tax, the likelihood of being detected and the resulting effect and
then select the alternative that maximizes their expected after tax returns after adjusting for risk.
Therefore, according to the theory, in order to improve compliance, audits and penalties for non-
compliance should be increased.

Psychology theories on the other hand posit that taxpayers are influenced to comply with their
tax obligations by psychological factors. They focus on the taxpayers’ morals and ethics. The
theories suggest that a taxpayer may comply even when the probability of detection is low. As
opposed to the economic theories that emphasize increased audits and penalties as solutions to
compliance issues, psychology theories lay emphasis on changing individual attitudes towards
tax systems.

As (Ebrill [Link] 2002) the introduction of a VAT can facilitate substantial improvements in
overall tax administration, particularly the establishment of more integrated tax administration
organizations and the development of modern procedures based on voluntary compliance. But
there have been some significant weaknesses in the VAT's implementation in developing and
transition countries. Some of these are the difficulty of implementing workable self-assessment
systems, under which taxpayers declare and pay taxes on the basis of their own calculations,
subject to the possibility of later audit by the tax Authorities.

According to (Keen 2005)a review of experience in 31 developing countries found that VAT
administration is based on the concept of self-assessment in 26 of them. But further analysis of

9
the data indicated that there has been less progress than would appear. Under a system of
voluntary compliance (meaning that taxpayers comply with their basic tax obligations without
the intervention of a tax official) taxpayers self-assess: that is, they calculate and pay their own
tax liabilities. They must complete their returns and submit them with their payments to the tax
administration. One way to appreciate why self-assessment is important to an effective VAT
administration is to consider the impact of not having self-assessment.

2.4.3 AWARENESS OF TAXPAYERS

According to (Dekan 2003)the tax assessment sometimes can be unclear to the tax payers.
Regarding to the complexity of tax assessment system (not simple and clear) may result in
unintentional non-compliance if taxpayers have problems with filling the tax form. Furthermore,
such noncompliance differs from other crimes. Because, it can be concluding that the errors
occurred unintentionally due to the misinterpretation of the rules. Results from a survey shown
that only 55% of the taxpayers were certain, that they had neither overstated a deduction nor
understated taxable income on their return. Thus, by enhancing complexity, it is difficult to
distinguish honest from dishonest taxpayers. By this virtue, tax examiners in the tax
administration will have greater problems to identify a case of noncompliance and comparing
whether the violation was deliberate or unintentional. And this can be increased tax collection
costs.

According to (Hastuti 2014)self-assessment system requires taxpayers to calculate, pay, and

report their own tax payable. Having full understanding of this kind of obligation helps the
government indeed to have complied taxpayers. The complied taxpayers pay tax with the right
amount with the right procedure. This is good since government revenue will be earned. For the
potential taxpayers, it is also good to be informed with his kind of obligation. Tax is something
unquestionable for every citizen, their awareness of taxation will be important in pursuing tax
compliance.

(Asamenew 2012) found that the major causes are there exist inefficiency and insufficient number
of tax assessment and collection officers, most taxpayers lack sufficient knowledge of tax
assessment and collection Procedures. Thus, most of taxpayers do not know why they are paying
taxes; what types of taxes are expected from them; and the applicable rules and regulations. Due

10
to this he recommends that negligence, delay in tax payment and evasion are taken by taxpayers
as solution to escape from payment of taxes.

According to (Hagos.G, 2011) awareness creation by the authority on taxpayers were rated about
87.8% and 74% of the respondents responded that below enough and poor and this shows that
the awareness creation activities of the tax authority were ineffective and inefficient in according
to awareness creation. Therefore, they established that the awareness creation problem was a
series and the root cause of all problems relating to the tax collection and assessment. Due to
this, the authority may not achieve the expected future voluntary compliance in the absence of
services along with the taxpayer’s lack of tax awareness. Without educating taxpayers and
creating tax awareness, making power visible to the community might detect the deliberate
evasions and frauds but not be a solution to create a compliant taxpayer those does not comply
unknowingly (Mihret, 2011) found that different problems were observed, the main one is being
attitudinal problem of the tax payers and implementation capacity of the government employees.
As a result, the data show that there are many business men and companies that should be
registered for VAT but are not. As a result, the branch office is losing millions of birr per year.
And he recommended changing the attitude of the taxpayers and building the implementation
capacity of the employees.

2.4.4 PROBLEMS FACE IN SIDE TAX AUTHORITY

(Dheressa [Link], 2015)the study was particularly focused on challenges of VAT Administration
regarding the assessment, collection and implementation of VAT Their survey result showed
that, most of the business entities have not comply with the laws and regulations of VAT and
they committed illegal activities by preparing fake invoices and they remitted the tax income for
themselves rather than to pay the government. Concerning the side of the Authority, it is
incapable to identify and control business enterprises that are noncompliance with the laws and
regulations of VAT. They recommended in their study that the Authority should strengthen its
follow-up, appraise the performance of existing, recruit qualified new employees, strengthen its
controlling mechanisms, improve its administrative systems and prepare programs to provide
intensive education to the society about the benefits, rules and regulations of taxes specifically
VAT.

11
(Bizualem 2015), indicated that the major challenges delay ERCA from generating what was
initially planned are: lack of sufficient number of skilled personnel, limited staff capacity, non-
responsiveness by the management, limited awareness creation, problems related with invoicing,
unfair competition, and control centered management tendency. And he recommended that the
need to strengthen the administration capacity in general and the VAT collection system in
particular as efficiently as possible.

According to (Jebessa 2005) many business owners do not keep their books properly, which
invited to general estimations, which are often arbitrary. So training is necessary on the one hand
and on the other hand, national standards for bookkeeping, which would be respected in all
taxation offices nationwide, need to be defined and introduced.

To summarize, the empirical findings found that the determinants of the VAT administration
problems were limited awareness creation, lack of equity and fairness of the tax system,
ineffectiveness and inefficiency of the Tax Authority, problems related with invoicing, total
distrust between the tax administration and tax payers and lack of simplified procedures.

2.5 CONCEPTUAL FRAME WORK

. However, the implementation of this principle is hampered by the informal (unregistered)
economic activity and active tax evasion by a significant part of the taxpayers. According to
Shahroodi (2010), stated that for a tax system to be efficient, the tax policy needs to be designed
such that the tax rates are appropriate and rational, the exemptions are lower in amount, the tax
collection organization are more efficient, the tax burden of the indigent people should be lighter
and the fight against corruption and tax evasion should be much more intense. Even though VAT
is less vulnerable than other form of taxations, like any other tax, it is vulnerable to evasion and
fraud (Keen and Smith, 2007).

It is difficult to get an accurate picture; it is clear from the few studies that, VAT evasion is
widespread and involves significant revenue losses, though the extent varies considerably across
countries (Webley et al., 2002:1). According to Dekan (2003), the tax assessment sometimes can
be unclear to the tax payers. Regarding to the complexity of tax assessment system (not simple
and clear) may result in unintentional non-compliance if taxpayers have problems with filling the

12
tax form. Furthermore, such noncompliance differs from other crimes. Thus, by enhancing
complexity, it is difficult to distinguish honest from dishonest taxpayers. By this virtue, tax
examiners in the tax administration will have greater problems to identify a case of
noncompliance and comparing whether the violation was deliberate or unintentional. And this
can be increased tax collection costs.
According to Hastuti (2014), self-assessment system requires taxpayers to calculate, pay, and
report their own tax payable. Having full understanding of this kind of obligation helps the
government indeed to have complied taxpayers. The complied taxpayers pay tax with the right
amount with the right procedure. This is good since government revenue will be earned. For the
potential taxpayers, it is also good to be informed with his kind of obligation. Tax is something
unquestionable for every citizen, their awareness of taxation will be important in pursuing tax
compliance.

Dheressa [Link], (2015), the study was particularly focused on challenges of VAT Administration
Concerning the side of the Authority, it is incapable to identify and control business enterprises
that are noncompliance with the laws and regulations of VAT. (Bizualem, 2015). To summarize,
the conceptual findings found that the determinants of the VAT registration problems were
Problems face in side tax authority; Awareness of Taxpayers, Compliance of the Taxpayer, and
application of Tax Principles during VAT Collection.
Figure of conceptual frame work

Independent variable
Dependent variable

Problems face in side tax authority

Awareness of Taxpayers
Compliance of the Taxpayer VAT Registration
Application of Tax Principles during VAT
Collection

13
Source: - Developed by by researcher based on the literature Dekan (2003), Keen and Smith,
2007). Shahroodi (2010), (Hastuti (2014), Dheressa [Link], (2015), (Bizualem, 2015).

CHAPTER THREE

3. RESEARCH METHODOLOGY

3.1. RESEARCH APPROACH

The researcher will be use both quantitative and qualitative research approach to analyze the data

3.2. RESEARCH DESIGN

To conduct the study the researcher will be use descriptive type research design in order to
undertake the study by describing the existing facts and truth. The purpose of using this method
is to describe factors affecting challenges of VAT Registration the case of Dambi Dollo Town
revenue authority office as it exists and focusing explaining the existing phenomena and state of
affairs regarding VAT administration problem.

3.3. TYPES OF DATA

The researcher use both primary and secondary data to get full information in conducting this
study. Primary data is fresh and first time information, and thus happen to be original in
character. They are name primary because they have not be manipulated by any other person.
Such data has be provide by the subjects in the sample through the scheduled interactions by
using will be prefer tools. Various tools are use to obtain primary data (Kothari, 2004).
Secondary data is second hand information obtained from the Dambi Dollo Town revenue
authority office.

14
3.4. METHODS DATA COLLECTION
The researcher will be use different methods of data collection instruments depend on the nature
of data. The primary data are collect through using closed and open ended questionnaires will be
distribute to the Value added tax registration as well as officials.

3.5. TARGET POPULATION

The researcher use as a target population that will be define as suitable for these studies is
employees of tax officials and value added tax registered taxpayers at Dambi Dollo Town to
collect different information on the factors affecting challengs of value added tax registration.

3.6. SAMPLING DESIGN

In order to select the appropriate representative of the total population and to make the research
findings more relevant and accurate, the sample design will be structured. So, the researcher will
be design the sample as follows.

3.7. SAMPLING TECHNIQUE

The researcher will use two sampling design methods: the simple random sampling and the
purposive method. For VAT registration use simple random and for tax official use purposive
sampling.

3.7.1. Sample size determination

In purposive sampling, the sample is determine in according to the knowledge of the researcher
about the group to be sample. Therefore, in Dambi Dollo town revenue Authority there are

twenty-seven employees; among these employees the researcher selects purposefully fourteen
employees.

For VAT registration, the researcher is use simple random sampling because there are two
hundred ninety (290) VAT registration.

n=N/1+N (e)2 where: n=sample size

15
N=Total population

e=Errors

Therefore, n=290/1+2.90(0.1)2

n=290/1+2.90=290/3.9

n=74

Yamane’s (1967)

3.8. METHODS OF DATA ANALYSIS AND INTERPRETATION

To conduct this study, the researcher use descriptive statistics method of data analysis. Under
this method includes tabulation and percentage.

Having this goal of the study in mind, the raw data are process by tabulating that identifying and
classifying each response of the select employees and VAT registration. The data are wiil be
analyze and interprete the finding by descriptive statistics method with table and percentage.

16
 CHAPTER FOUR

[Link] TABLE AND COST BREAKDOWN

Table: 1. Time table

weeks Remar
k
Activities 1st 2nd 3rd 4th

No

1 Collecting of literature and 5 days

materials

2 Preparing project proposal 5 days

3 Conducting preliminary 2 days

survey of the campus env.t

4 Survey (collecting 1 days

questioners)

5 Encoding the data 2 days

7 Data analysis 5 days

8 Finalizing data analysing, 5 days

organizing and finalizing
research document

9 Presentation of research result 2 days

17
Cost of the research Stationary

Table 2: Stationary purchase a nd collection items expanses

No Activities & Items Unit Qty Unity price Total price Remar
ks
/Birr/ /Birr/

I Stationery & data collection

1 Note book No 2 50 100

2 Lexy pen No 10 15 150

3 Pencil No 5 20 100

4 Paper Packet 1 500 500

5 Mobile Card No 15 100 1500

6 Photo copy/questionnaires Sheet 500 2 1000

7 Print Sheet 100 5 500

Total Birr 3850

Project cost summary

Table: [Link] overall project cost table

No Activities Unit Total Price Remark

1 Stationary Birr 3850

2 Per diem and allowance Birr -

Grand Total Birr 2000

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