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2.1.1.4 Personal Factors: 2.2. Empirical Literature Reviews
2.1.1.4 Personal Factors: 2.2. Empirical Literature Reviews
4 Personal Factors
Decisions either to evade or not to evade taxes are heavily reliant on taxpayers’ personal
judgment (Mohani, 2001). Personal circumstantial factors like personal financial constraints, tax
payers’ tax knowledge and awareness of penalties and offences are therefore likely to have a
significant impact on taxpayer compliance behavior as discussed as follows; People who face
personal financial problems are likely to be more prone to evade tax when compared to people in
less financial distress (Mohani, 2001). (Fjeldstad and Ranker, 2003) argue that in African
countries like Namibia and South Africa, the non- payment is due to poverty or inability to pay.
Generally when taxpayers have no enough disposable income and they used to consume the
return from sales, it is clear that tax evasion is inevitable and leads to tax arrears. Conversely,
studies by Vogel (1974) and Warneryd and Walerud (1982) as cited in Palil (2010) demonstrate
that people with no financial distress also exercise tax evasion and surprisingly, the level of
evasion they exhibit can be more serious than people in financial distress.
Most tax compliance studies to date are based on data from developed countries. There are few
studies that provide evidence from developing countries. The Factors affecting tax compliance in
Ethiopian are still under-explored area in the literature of tax compliance behavior. As per the
researcher access and knowledge, the previous study conducted in Ethiopia by Lemessa (2007)
On ‘Determinants of Taxpayers’ voluntary Compliance with Taxation: The Case Study of Dire
Dawa City, Ethiopia. The study used in methodology is descriptive statistics and the results
showed that tax fairness and equity, organizational strength of the tax authority, awareness level
of the taxpayers, socio-cultures factors, and provision of social services by the government were
the determinants of taxpayers’ voluntary tax compliance. Study made by Beza (2014) on
‘Determinants of Tax Payer’s Voluntary Compliance with Taxation in East Gojjam-Ethiopia.
The study used methodology type is descriptive statistic and Pearson correction and chi square.
The selected sample size areas are category “A”,’B” and “C” taxpayers and in his study results
showed that there is no difference in their tax compliance behavior between males and females,
As well as between category of A, B & C taxpayers and only perception of fairness and attitude
towards taxation have positive and significant correlation with tax compliance.
In addition to that, another study made by Tilahun & Yadersal (2014) on ‘Factors affecting tax
compliance behavior in Ethiopia: The Case of Bahir Dar City Taxpayers’ can be summarized as
follows. The study usedan Ordered Probit Model and focused only category ‘C’ taxpayers. The
results revealed that tax compliance influenced by the probability of audited, financial
constraints, and changes in government policy. Other variable such as perception of government
spending, perception of equity and fairness, penalties, role of the tax authority and tax
knowledge not significantly corrected with tax compliance.
Study made by Tadesse and Goitom (2014) on ‘Factors Influencing taxpayers’ compliance with
the tax system: An empirical study in Mekelle City, Ethiopia’. The study results from the survey
conducted in Mekelle using 102 respondents indicate that tax compliance was influenced by the
probability of being audited, financial constraints, and changes in government policy. The
findings indicated that tax compliance was influenced by the probability of being audited,
financial constraints and changes on current government policy. Other variables such as
perception of government spending, perception of equity and fairness, penalties, roles of the tax
authority and tax knowledge were not significantly correlated with tax compliance at the time of
this study.
Study made by Amina Ahmed and Saniya Kedir (2015) on ‘Tax compliance and its determinant:
The case of Jimma Zone, Ethiopia can be summarized as follows. The study was conducted with
the aim of investigating the Factors affecting tax compliance for the case of Jimma zone category
‘A’ taxpayers. By distributing total of 384 questionnaires to category ‘A’ sample taxpayers, the
study try to explore the main Factors affecting tax compliance. The findings show that age, sex,
penalty, audit, simplicity, fairness and government perception were found to affect tax
compliance.
Study made by Niway and Wondwossen (2015) on ‘Determinants of Voluntary Tax Compliance
Behavior in Self-Assessment System: Evidence from SNNPRS, Ethiopia can be summarizing as
follows. The study used a cross-sectional survey method of research design.
The target population of the study was category “A” tax payers and analyze and present the
results of this study, Pearson correlation matrix and logistic regression model were employed.
The result of this study revealed that tax knowledge, simplicity of tax returns and administration,
perception on fairness and equity, perception on government spending, probability of auditing,
and the influence of referral group were determinant factors that influence voluntary compliance
behavior of tax payers in SAS.
Study made by Dereje Lemma (2016) on ‘Determinates of tax compliance behavior: Among
category “A” and “B” taxpayers in Hosanna Town can be summarized as follows. The study
used Ordinary Least Square (OLS) multiple regression analysis, One-way ANOVA and one
sample t-test and Business profit taxpayer’s category ‘A” and “B”. The study results revealed
that tax compliance behavior was influenced by the tax rates; perception of government
spending; perception of equity and fairness were the major factors that positively and
significantly influenced tax compliance. However, referral groups (friends, relatives etc.)
influenced tax compliance negatively but significantly.
Wollela and Helge Fjeldstad, (2016) study on tax payers views of business taxation in Ethiopia.
The objectives of their study were to assess business peoples’ views of paying taxes in Ethiopia
and to identify (perceived) difficulties with the tax system and priorities for tax reform. Hence
the result shows that the main reasons for tax noncompliance were; lack of predictability in the
tax system forces taxpayers to reduce their current tax liability, difficult to compete with
businesses that import goods at manipulated custom duties, It is those who are not paying taxes
that are quickly growing, so why should I comply, discrimination by the tax administration
forces honest taxpayers to evade taxes.