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College of Finance, Development and ManagementDepartment of Tax AdministrationDeterminant of Tax Payers' Satisfaction Level with the Tax System: the case of Large Tax Payers Branch office (LTO), Addis AbabaBy: FikirteNegashIDNO: ECSU1500340Advisor: Dr. PankajDhaundiyal (Astt. Professor)A Thesis submitted to the Department of Tax administration in partialFulfillment of requirements for the MA in Tax Administration May, 2018Addis Ababa, EthiopiaStatement of DeclarationI, FikirteNegash, hereby declare that the research thesis entitled "Determinants of tax payers' satisfaction level with the sax system: the case of Ethiopian Revenues and customs authority LTO Branch" submitted by me, is my original work and it has not been presented for the award of another Diploma, Degree, or Master's in any University or institution and that all sources of materials Used have been acknowledged.Name of Participant———————————————–signature—————Date———-This thesis has been for the examination with my approval as college supervisorName of advisor————————————-Signature———————Date—————–ApprovalThe undersigned certify that have read and here by recommended to Ethiopian Civil Service University to accept the research submitted by FikirteNegash and entitled "Determinants of Tax Payers Satisfaction Level with the Tax system: the case of Ethiopian Revenues and Customs Authority Large Tax Payers Branch Office", in partial fulfillment of the required for the award of Masters of Art (MA) in Tax Administration.
Board of Examiners:Name of Chairperson————————————-Signature———————Date————-External Examiner's Name——————————-Signature———————Date————–Internal Examiner's Name———————————Signature———————Date————Name of Department Head———————————Signature——————-Date———-AcknowledgementThis study could not successful without continued support from many people. First and foremost, I would like to thank my advisor, Dr. Pankaj Dishaundiyal for your follow up and advise without boredom. Thank you for sharing your knowledge and continual guidance for the entire work of this thesis.Second, I would like to thank Ethiopian Revenue and Custom Authority (ERCA LTO branch) workers and tax payers that have helped me in finalizing this study throughout data collection in giving me your response. Finally I would like to thank to my families and everyone who contributed to the successful completion of this study.Table of ContentsContents pagesStatement of Declaration iiApproval iiiAcknowledgement ivTable of Content vList of tables viiiList of Figures viiiAcronyms x_Toc514246650Abstract ixCHAPTER ONE xiiINTRODUCTION xii1.
1 Back ground of the study xii1.2 Statement of the problem 141.3Objective of the study 21.
3.1General objectives 21.3.
2Specific objectives 21.4 Research Hypothesis/ Questions 31.4.1.
Research Hypothesis 31.4.2 Research Questions 31.5 Significance of the study 31.6 Scope of the study 41.
8. Description of the study area 41.9 Organization of the study 6CHAPTER TWO 8LITERATURE REVIEW 82.1Conceptual Literature Review 82.1.
2 Structure of tax administration 220.127.116.11 Principles of good tax policy 92.1. 3 Trends of tax system 102.1.3.
1Tax system of the world 102.1.3. 2. Tax system of developing countries 11Theoretical Literature Review 132.2.1 Fairness of tax system 132.
2.2 Service delivery 152.2.3 Clarity of tax system 162.3 Empirical Literature Review 182.
4. Conceptual frame work of the study 202.5 The gaps of previous related studies 212.
6 Summary of literature review 21CHAPTER THREE 23RESEARCH METHODOLOGY 233.1 Research Approach 233.2 Research Method 233.3 Sampling Design 243.
4 Sampling Techniques 243.4 Population and sampling unit 253.4.1 Population 25Sample size 253.5 Data Sources and type of data 263.5.
1Primary Sources 263.5.2 Secondary Sources 263.6 Reliability and validity test 273.6.
1 Reliability 273.7.2 Validity 273.6 Data Analysis Techniques and Interpretation 283.
7. Ethical consideration 283.8 Chapter summary 28Chapter Four 294.0 Data Presentation, Analysis and Discussion 294.1 Introduction 294.2 Analysis of Respondents' Response Rate 294.3 Demographic Information of the Respondents 304.4 Presentation of the Findings and Discussion 354.
4.1 Level of tax payers' satisfaction in terms of Fairness of the Tax System 354.4.2 Level of Tax Payers Satisfaction in terms of service delivered to them 384.
4.3 Level of Tax Payers Satisfaction in terms of clarity of the tax system 464.5 Analysis of Measures 524.5.1 Measures of Reliability 524.6 Hypothesis Testing 524.6.1 Test of the correlation between fairness of the tax system and satisfaction of tax payers 524.
6.2 Test of the correlation between service delivery and satisfaction of tax payers 544.6.3 Test of the correlation between clarity of the tax system and satisfaction of tax payers 555.1 Discussion of Major Findings 595.1.1 The relationship between of Fairness of the tax system and level of tax payers' satisfaction findings 605.1.
2 Discussion of Findings of large tax payers' satisfaction level with service delivered to them 615.1.3 Discussion of Findings of large tax payers' satisfaction with clarity of the tax system 62Chapter Five 64Conclusions and Recommendations 645.1 conclusions 645.2 Recommendation 65References 68Appendix 1 70Appendix 2 75List of tablesTable 3.1 Reliability StatisticsTable 3.2 Test for validityTable 4.
1 Age of the respondent Table 4.2 position in the business organization Table 4.3 Work experience in the company Table 4.4 Year of the customer of LTO Table 4.
5 Questions of Fairness of Tax System Table 4.6.1 Results of questions regarding level of tax payers' satisfaction in terms of service delivered to them Table 4.6.2 Results of questions regarding level of tax payers' satisfaction in terms of service delivered to themTable 4.
6.3 Results of question regarding level of tax payers satisfaction the responses of the tax authority in the tax assessment Table 4.6.5 Results of question regarding level of tax payers' satisfaction the tax authority to solve problems by using suggestion of the tax payersTable 4.7.1 Results of question regarding level of tax payers' satisfaction in terms of clarity of the tax systemTable 4.7.
2 Results of delivery of new directives to tax payersTable 4.7.3 Results of question regarding level of tax payers' satisfaction in terms of the overall tax systemList of FiguresFigure 1.1 the map of the Addis Ababa and the study Area Figure 1.2 structure of the organizationFigure2.1: Conceptual frame workFigure 4.1 below shows sex of the respondents.
Figure 4.2 Level of the Educational Respondent Figure 4.3 types of businessAcronymsERCA Ethiopian revenues and customs authorityLTO Large Tax payers Branch OfficeECSU Ethiopian Civil Service UniversityAU African UnionGDP Gross Domestic productVAT value added taxSPSS statistical package for social scienceICT Information communication technologyHO the null hypothesisHA alternative hypothesisABSTRACTThis study focused on the determinants of tax payers' satisfaction level with the tax system.
The main objective of this study is to determine tax payers' satisfaction level with the tax system. To achieve the objectives, mixed research approach was used and sample data was collected from 253 large tax payers by survey method via questionnaires interview of tax officials. Quantitative data was analyzed by using descriptive as well as inferential analysis and thus non parametric statistical test was used to test the hypothesis. The result of the study revealed that satisfaction of large tax payers depends on fairness of the tax system, service delivery and clarity of the tax system.
Generally large tax payers were satisfied with the attitude of tax officials towards solving tax payers' problem, the tax collection system, payment system, tax office location and accessibility for tax payers, filing of the declaration forms. But tax payers did not satisfied by ability to pay of tax payers, fairness in punishment of taxpayers equally, fairness of levying tax, the fairness of the tax rates, behavior of tax official, e-filing system of revenue authority, tax authority to solve tax payers complain, partiality in appeal review, simplicity to get tax refunds, the audit selection procedures, accessibility of websites of the authority, training of tax payers by the tax authority, faster service delivery for all tax payers, problem solving by using suggestion and contacting appropriate person in the tax office,declaration of tax returns, participatory of the tax laws during making, drafting and implementation, understandability and clearness of the tax laws, applicability of the tax laws, timeliness of new/new directives, solution to unclear rules, delivery of update tax information and website of the tax authority.Based on this the study concluded that there is positive and significant correlation between tax payers' satisfaction and fairness of the tax system, service delivered as well as clarity of the tax system. Finally emphasis should be given to increase large tax payers' satisfaction with the tax system in the branch office.Key words: Fair tax system, clarity, tax payer satisfaction, service delivery, LTO ?CHAPTER ONEINTRODUCTIONIn all countries, government is tried to increase collecting revenue through taxes. This is to enable government to support social development.
Domestic resource mobilization is important for developing countries financing in terms of sustainability and reliability. To enhance fiscal sustainability they have to increase domestic resource mobilization. Ethiopia also encourages mobilizing more revenues from tax revenues although the economy has been growing at remarkable rate averaging more than 10%, the slow growth in the tax collection indicating a huge untaxed potential (Haile k. and Roza M. ,2016).Ethiopia has made many tax reforms.2016 amended tax reform is among others.
According to Federal Income Tax proclamation No.979/2016 Ethiopia introduces modern and efficient tax system that supports the economic development. Making tax system is fair and brings income that is so far not subject to tax into tax net. The Authority changes the category of taxpayer based on annual growth income and introducing new schedule "E", the tax rate also changed. Even though different amendments of tax rules made in Ethiopia still there are many problems not to achieve the goal of the authority.1.1 Back ground of the studyNo single tax system can possibly meet the needs of every country. The best system for any country should be determined by its economic structure; capacity to administer taxes, its public service needs, and many other factors.
The desire to rise revenue fairly, encouraging economic growth is the objective different countries Richard M. bird and Eric M. Zolt (2003).
Many countries do tax reforms most of the time. The goal of tax reforms is raising revenue to the government, achieve various economic and social goals, and improve efficiency of the tax collection process. In developing country, however, tax reforms in general have paid little attention to improving the tax system to make it easy for business and entrepreneurs to comply (hand book for tax simplification, 2009).
In developing countries there is lack of implementation of efficient tax system. The size and structure of taxation in most countries is largely dominated by domestic factors (Richard M. bird and Eric M.
Zolt., 2003).Ethiopia is among the developing country which reforms tax system to collect revenue since the primary goal of revenue administration is to collect revenue to cover government expenditure i.e.
finances projects and poverty reduction programs in the country. The tax system in Ethiopia is also to increase the investment. Through the tax system government protects domestic industries from competing imported goods through levying high tariff. Taxation encourages certain industries and discourages others depending on how useful and appropriate they are particular economy. The purpose of taxation in Ethiopia is raising of revenue to finance the countries social and economic development and to alleviate poverty, promotion of capital investment and trade ensuring equity fairness and consistency in the administration of tax laws encouraging certain industries which are likewise not important to the long run development of the country.Proclamation NO.587/2008 provides the establishment of Ethiopian Revenues and Customs Authority (ERCA). ERCA is established by merging of three different organizations.
These are Ministry of Revenue, Ethiopian customs authority and the Federal Inland Revenue Authority that performs similar activity differently. The aim of merging was to follow similar resource utilization, organizational arrangement and to establish modern tax and customs administration system, expeditious and effective resource utilization and manner of service delivery as well as to increase the efficiency of revenue sector to a high level. The objectives of ERCA is to establish modern revenue assessment and collection system; provide customers with equitable, efficient and quality service; to have voluntary tax payers; to enforce tax customs law by preventing and controlling contrabands well as tax fraud and evasion; to collect tax revenues generated by the economy; to provide the necessary support to regions to harmonize tax administration system. The powers and duties of the Authority is establish and implement modern revenue assessment and collection system; provide transparent accountable, efficient, equitable and quality service within the sector; implement awareness creation programs to promote voluntary compliance;organize a training center for the employees to build capacity, enter in to contracts and international agreements regarding tax and customs administration is among them.There are different type of proclamation and tax reforms dealing with taxes in the country, among them income tax proclamation 979/2016,council of ministers income tax regulations no 79/2002,value added tax regulation No 285/2oo2, turn over tax proclamation No 308/2002 and excise tax proclamation No. 307/2002.
1.2 Statement of the problemStates could not exist without tax systems which generate large amount of revenues to pay for public service. Taxation is sensitive issue. For the distribution of income between citizens tax system must be modernized and well-functioning all tax payers' fairly and only a proper amount of tax (Lewis, 2006). Even though serious tax reforms are taken place to improve the understanding of tax payers' knowledge to the tax system; developing countries faces budget deficit because tax payer compliance to the tax law is serious problem (Redae B., 2016).
Tax payers are unable to evaluate the skill level of a professional competency of a tax official. With low level of service delivery, bureaucracy of tax system, willingness to give service or lack of loyalty to their job; tax payers didn't get the service they desire (Teresa S., 2006).The tax system should be structured to achieve the appropriate level of revenue as efficiently and fairly as possible.
In short, a well-designed tax system should be effective in raising revenue, efficient in its effect on resource allocation decisions of households and businesses; and equitable in its impact on different groups in society.In order to improve the investment condition of the country the tax burden imposed by tax policy and its administration has to be given attention. Complexity of tax system, in convenience tax system, complicated tax system, in efficient tax system is among the problems in the different countries tax system (hand bookfor tax simplification,).The Ethiopian tax system is designed to fulfill the singular purpose, raising revenue for the government (Tadesse, vol. 20:2). Based on this Ethiopia tax system is not focus as much as needed on the satisfaction of tax payers. To address the problem of tax system in Ethiopia, government does tax law amendments to modernize the tax system and increasing government revenue. Even though the government try to solve the problems, there has been poor tax revenue collection, poor service delivery to the tax payers', many tax payers have complain about the fairness of the tax paid and the tax payers are still low level of understanding about the tax laws and update information not delivered to the payer by the tax authority.
Increasing voluntary compliance is among the objective of Ethiopian Revenues and Customs Authority. Tax payer satisfaction is necessary for the country to collect taxes from tax payers' voluntarily. Without satisfying tax payers it become useless dream for the Tax Authority thinking to collect the needed revenue for the development of the country.There are some researches done on tax payers' satisfaction. A study by Temtim (2014) indicated that business tax payers are not satisfied with the existing tax system in Addis Ababa. The study focuses on the behavior of tax payers and how tax regimes satisfy tax payers. It has no conclusions for the future about how to improve the satisfaction of tax payers and only explanation of that research period.Haftay (2017) studies tax payers satisfaction with the service delivery is focusing on service quality and equity not included the other problems related to service delivery.
Based on the above research gap this study wants to fill the gaps that were not seen by previous researchers by looking into determinants of tax payers' satisfaction level with the tax system focusing on fairness of tax system, service delivered to them and clarity of the tax system in ERCA, LTO branch.1.3Objective of the studyTax payers satisfaction with the tax system is important role for the revenue collection effectively administer and increase the overall compliance of tax payers with tax laws. The study has the following objectives.1.3.1General objectivesThe overall General objective of the study was toanalyze determinants of Tax payers' satisfaction level with the tax system in ERCA, LTO branch.
1.3.2Specific objectivesThe specific objectives of the study were: To determine large tax payers' satisfaction level in relation to fairness of tax system To examine tax payers' satisfaction level with service delivered to them To asses tax payers' satisfaction level in relation to clarity of tax systemResearch Hypothesis/ Questions1.4.1. Research HypothesisHo: There is no relationship between tax payers' satisfaction in relation to fairness of tax systemHA: There is arelationship between tax payers' satisfaction in relation to fairness of tax system.H0: There is no relationship betweentax payers' satisfaction and service delivered to them HA: There isrelationship between tax payers' satisfaction and service delivered to them Ho: There is no relationship between tax payers' satisfaction with clarity of tax system.HA: There is a relationship between tax payers' satisfaction with clarity of tax system.
1.4.2 Research Questions1. How does the fairness of tax system affect tax payers' satisfaction?2. How is service delivery affect tax payers' satisfaction?3. How does the clarity of tax system affect tax payers' satisfaction?1.5Significance of the studyTo be effective in tax administration, need to identify appropriate administration mechanisms and transparent tax policy. To this effect as a developing nation who needs large amount of revenue to cover expenditure and budget plan understanding of tax payers satisfaction is very important.
Tax system should be given attention since it is a sensitive issue. The study was important for the tax authority to have appropriate and transparent tax system to satisfy the needs of tax payers' by filling the drawback of the organization. It was important for Ethiopian revenues and Customs Authority to understand the satisfaction level of tax payers to improve tax legislation, give solutions to collect revenues for the country from compliant tax payers economically and fairly.
In addition to increase revenue collection performance and for future policy recommendation the study was significant. The study was an input for concerned body that is working in administration controlling of tax system. It helps for other researchers for future studies similar or related with this study.1.6 Scope of the studyThe study was delimited to Ethiopian Revenue and Customs Authority Large Tax Payers Branch Office (ERCA LTO branch office) and individual tax payers of the branch. Even though many problems exist with the tax system the study covers only the analysis of tax payers' satisfaction level with the tax system and focused on fairness of the tax system, clarity of the tax system and service delivered by the tax authority.
There were various problems which was out of control in studying this research. Among them the first is problem from tax payers during the data collection to give accurate information was the one. Tax payers' willingness to give true and clear data, giving much attention and time to feel the questioner and they may fear to give correct information about problems and drawback of the organization. The second was lack of organized data and related research to tax administration and also related books to reference in ECSU Library.1.
8. Description of the Study AreaAs visited world encyclopedia on Dec, 2017 Addis Ababa, the capital city of Ethiopia, is founded by Emperor Menilik II and his wife EmpressTaytuBitulof Ethiopia in 1886. It consists of ten sub cities.
It is the largest city in the country by population, according to 2007 census 3,384,569 and it is estimated to be 4 million in 2017 census. It is the African Capital since it is thehead quarter of African Union (AU). It is 2355 m above the sea and the largest city in the world's land locked country.
Itstemperature ranges from 20°C to 12°C. There are different branches of Ethiopian revenues and customs authority is found in Addis Ababa city administration including the head office of the authority. Among them Ethiopian revenues and customs authority large tax payers' branch office (LTO);which is found at Kirkos sub city is the one.LTO is chosen for the study because the country's large tax payers are belonging to this branch as well as large amount of revenue is collected from them. Tax payers of LTO branch are Governmental organization and PLC which involves generates high returns to the economy of the country. LTOs' tax payers are the corner stone for the country revenue as well as development of the country. It shares high amount of revenue collection other than another branches of the authority.
To increase the amount of revenue collected from them knowing the satisfaction level of the tax payers' is the main idea.Figure 1.1 the map of the Addis Ababa and the study Area Organizational Structure and activities of Large Tax Payers Branch office (LTO)The organizational structure is designed on the basis of different activities performed by the organization. In Large Tax Payers branch office the highest power is delegated to branch manager who is responsible for the Overall activities of the organization and controlled by general director of the Head quarter. There are four deputy managers and one management team.
Under the deputy managers there are eleven processes. Under the process owners there are many teams and employees who are served tax payers and internal service to the authority.The organizational structure is shown below. Figure 1.2 structure of the organization1.
9 Organization of the studyThe study consists five chapters. Chapter one contains introduction, background of the study statement of the problem, objective of the study, significance of the study, scope of the study, limitation of the study and description of the study area. The second chapter contained theoretical and empirical literature review related to tax system. Chapter three focused on research design and methodology of the study, Population of the study, sample size, sampling techniques and data sources as well as data collection methods. Chapter four discussed with the presentation, interpretation and analysis of the findings of the study.
Finally chapter five discussed with conclusion and recommendation of the research that have driven from the finding of the study.CHAPTER TWOLITERATURE REVIEWThis chapter discusses a brief review of the existing theoretical, empirical and conceptual literatures related to tax payer's satisfaction and tax system. The review has three major sections. These are Conceptual literature review consists, Theoretical literature review, and empirical literature review. 2.1ConceptualLiterature ReviewDefinition of Tax SystemAs visitedWikipedia on jan5, 2018 tax is compulsory payment levied on atax payer by governmental organization in order to fund various public expenditures.
Tax is money that people have to pay to the government. A failure to pay, evasion of or resistance to taxation is punishable by law.As visited Investopedia on Jan, 5 2018Taxes are generally an involuntary fee levied on individuals or operations that is enforced by a government entity, whether local, regional or national in order to finance government activities.Taxation is a system raising revenue by a government through tax. It is a method of collecting revenue by a government from tax sources to finance its spending (Misrak, 2008)Tax is an involuntary levy and a policy tool that helps to mobilize revenue to provide public goods and services. Tax helps to redistribute income/wealth in the society that addresses inequality issues. It also encourages economic activities such as work, investment, equity and supporting economic growth (UNDP, 2016)As visitedbusiness dictionary on Jan 5, 2018System is a set of detailed methods, procedures and routines created to carry out a specific activity performed a duty, solve a problem and it is an organized, purposeful structure that consists of interrelated and interdependent elements.As visited oxford dictionaries on Jan 5, 2018a set of principles or procedures shows something to which something to be done or an organized scheme or method.
It is asset of rules used in measurement or classification and organized planning and order. Based on the above definitions a tax system is a set of detailed organized rules, principles, methods, procedures used to levy and collect taxes from an individual or corporations. According to Angar SANDMO| (1976) there are three criteria for optimal tax system. First a sound tax system should be minimizing the resource as well as cost incurred in assessing, collecting and paying the taxes. This is emphasized only costs involved by the tax collector and tend to disregard those inborn by the firms and consumer. Second is tax system in relation to fairness. Third tax systems should be economically efficient. 2.
1.2 Structure of tax administrationAccording to Maureen Kidd (2010) a function based organization is structured on the basis of activities performed not by type of business or product they produce. Based on the functions tax administrations activities are the following. Tax payer services and education Returns processing and payment- timely processing of all tax payments and returns and financial system Audit and investigations- audit strategy, types of audit Collections and enforcement- collection procedures and legal issues Tax operation system- tax payers 'appeals, legislative review and different taxation agreements. According to Christopher Heady (1993) define fairness of tax system payment in proportion to the income they earned. 2.
1.2.1 Principles of good tax policyAccording Annell Nellen, (2006) report there are many ways that tax can be structured. Tax system is the set of taxes that are used by a government. Principles are:1.
Equity and Fairness: tax payers which are on the similar situations have to be taxed similarly. But the tax payers may not have similar deductible expenses. 2. Certainty; clearly specify about the time of the tax should be paid 3.
Convenience of payment: the time or a manner of payment should be convenient to the tax payers. 4. Economy in collection: the cost to collect a tax should be at least both for the tax payers as well as the government.
5. Simplicity: the tax law should be simple for tax payers to be understood and comply in a cost efficient manner. It is the most serious problem facing tax payers today. 6.
Neutrality: Economic growth and efficiency: the tax system should not be reduce the productivity of the economy7. Transparency and visibility: it has to be open for the tax payers that paying tax, how, when to pay. 8. Minimum tax gap: structured to minimize noncompliance. 2.
1. 3 Trends of tax system2.1.3.
1Tax system of the worldCarlos Silvani and Katherine Baer, 1997 tax administration in developing developed countries faces the challenge of being a modern tax system. To be effective through the increasing global economy characterized by difficult to tax sectors and by sophisticated computer communication technology. to reform tax strategy increasing the effectiveness of the tax administrations operations and improvement to tax evasion by giving solutions. No one wants to pay taxes. Government does not want to impose taxes. But countries needs taxes both for finance desired public spending and the burden of paying for such spending is fairly distributed. The ways in which countries raise taxes differs from country to country.
There are many factors such as economic structure and location of the business of the country. Countries structured its tax system depend on many factors, such as the level of development, the increased government services, increased economic growth of the country and the capacity to levy taxes successfully (Richard M. Bird and Eric M.
Zolt ,2003).The tax system is an important task for state revenues and in the implementation of national economic policy. Tax system and taxes are in separable. Taxes are the most important of state revenue both direct and indirect taxes, which make up the tax system of the country's economy. At present time, Taxes are a combination of goods and services on consumer and taxation of institutions and entities or taxation of natural and legal persons. The effect of the tax reform of the tax system has macroeconomic and micro economic processes (Prof. ing.Viadmirmokry, 2006).
A good tax system should be structured to meet the expenditure needs of the country by reducing economic and administrative inefficiency, keeping the system simple and transparent and avoiding arbitrary taxation (James Mirrlees, 2011)2.1.3.
2. Tax system of developing countriesIn many developing countries reform tax administration to restore macroeconomic stability and restructuring tax systems to be efficient, less distortionary of market forces easier to administer. The tax system with few taxes, a limited number of rates for each tax, limited exemptions and abroad base has proven much easier to be administered than a complicated tax system (Carlos Silvani and Katherine Baer, 1997)The tax payer segmentation is used as focus for modernization of revenue and tax administration in developing countries. Unsmooth tax enforcement and low voluntary to taxation is seen. In developing countries tax service quality is affected by tax payers are large and diverse, poor knowledge of tax laws and obligations, lack of computerized access, costly face to face service. (Buenos Aires, 2007). How revenue generated in developing country is based on fairness of tax system, the economic welfare of the country and political situation (type) of the government.
The cost of tax compliance and cost of government to administer the tax is necessary. The techniques used to effective tax administration are having a clear strategy, having simple as well as understandable tax administration, observing tax payers as clients, try to control corruption, using technology to facilitate service delivery, reducing tax evasion and increasing the performance of revenue authority (Richard M. Bird ,2008).Developing countries has problems in mobilizing resources for investment from domestic sources.
Expenditure program of developing country is affected by low tax revenues. The sustainable development goals (SDGs) have a goal towards enhancing capacity of developing countries to increase their domestic resource mobilization. United Nation Development Program (UNDP) (2016)126.96.36.199.
1 Tax system of EthiopiaThe history of the tax system in Ethiopia has along and ancient time. Some of them to start from recent years from the Derg Regime, the tax system is characterized by excessive high tax rate and narrow bases, which fails to generate adequate tax revenue to the country. Following the down fall of the Derg Regime in the last two decades the government conducted tax policy reforms, which aimed at rationalization of the tax rate and broadening of the tax base (Gebregergs, 2015).
The Ethiopian Federal Democratic republic constitution Art.95-100 states Ethiopia the Fundamental power to tax for Revenue Authority to Tax is derived from the Constitution of 1995, which follows the federal structure, which power of taxation is given to both the federal and regional states. The constitution gives the taxation powers taxes exclusive to the Federal Government, exclusive to the regional states and concurrent power of taxation given to both regional and federal government and undesignated power of taxation.
Like other countries taxes are important sources of public revenue in Ethiopia. The existence of consumption of public goods and services necessitates the collection of taxes by the government. Even though people need to pay taxes based on rationale of vertical and horizontal equity; tax systems are not comprehensive and transparent for tax payers especially less educated business operators. The business owners complain that the tax assessment method is based on subjective estimation and results in over taxation. Since tax payers have no simplified access, clarification on information of the tax laws, lack of awareness on tax rules and regulations and this has an impact on the practicality of the regulations (Ethiopian Chamber of Commerce, 2005)According to UNDP, 2016 Ethiopia has increased tax collection from Birr 12.4 billion in 2005 to birr 165.3 billion in 2015.
However there is a challenge in increasing the tax revenue proportionate GDP: the tax to GDP ratio remained low at 13.4% in 2015 which is below the sub Saharan average of about 18%. Although the economy has been growing at remarkable rate averaging more than 10% the slow growth in tax to GDP ratio suggests the growth in tax collection is not equal with the economic growth that indicates large amount of untaxed potential.
Theoretical Literature ReviewAccording to Marion B. Folsom (1955) The Haphard development of our tax system, in periods of depression, war and defense buildup, the law itself became complex, cumbersome, and in some case unclear. The tax system, however, cannot itself provide economic growth. The purpose of the revision of the tax law is to remove inequities, to reduce restraints on economic growth and the creation of jobs, to close loopholes and to clarify the law.
2.2.1 Fairness of tax systemAccording Brad hooker2005) fairness is interpreting and applying rules consistently without partiality between individuals. It is proportional satisfaction of a certain type of moral reasons.According to shu-yiOei (2004) Fairness is a key issue in designing tax system since taxes exist to secure fairness. However it is difficult to pin point about fairness in tax administration. What is means to be fair or equitable in administration of tax system and on how various aspects of tax administration should be evaluated under a fairness criterion is not well developed.
Fairness in tax administration has been tremendously instrumentalist or consequentiality. The question of fairness has most often been linked to whether perception of fairness procedural justice cause tax payers to be more compliant with their tax obligations. Fairness in tax administration is multifaceted construct that must be understood and evaluated by the phase of tax administration that is under examination and a determination of who constitutes a similarly situated taxpayer. How the fair tax works:According to Bill Bradley and Richard Gephardt (1984) it is designed to improve the income tax system on several fronts at the same time. The goals of the fair tax are: To broaden the income tax base to include many of the presently excluded or sheltered sources of income and to treat income more uniformly; To reduce income tax rates, thereby increasing incentives and reducing economic distortions; To maintain, for the most part, the current proportional distribution of the tax burden among households income groups and between households and corporations; To retain the tax preferences that are generally available to most tax payers and that are needed to avoid genuine hard ship and thereby increase the prospects for its enactment.
According to Marion B. Folsom (1955) the removal of tax inequities means fairer treatment and reduced hard ship for many tax payers. Closing loopholes enabled tax payers to avoid their fair share of the burden by taking advantage of technicalities.
This will save revenue, make the tax system fair and eliminate economic distortion.According to Bill Bradley and Richard Gephardt (1984) the quickest approach to deficit reduction is simply to increase tax rates under the existing income tax. Raising income tax rates may be one of the worst ways to deal with deficit. Increasing a rate is unfair because the higher the rates only increase the burden on those who already pay affair share of tax the most successful tax avoiders continue to escape taxation. Raising tax rates rewards and promotes tax sheltering and evasion, and penalizes the return to productive activity. Broadening the tax base is the price of lowering tax rates by bringing presently excluded items in to the tax base. The fair tax can bring us closer than we have ever been before to the goal of being united in a fair and cooperative partnership rather than being divided by a complicated, inefficient and unfair income tax system.According to House of Commons Treasury Committee Report (2010) Fairness of the tax system should be a good principle to support the system.
If the tax system is unfair this leads to tax evasion and avoidance as well as may lead to loss of legitimacy of the government system. Many supporters say simple flat rate taxes would reduce evasion, increase tax and decrease the rate. The tax system which is unfair will lose political support. The level of the taxes generated, the quality of the tax administration, the complexity of the laws, the tax compliance costs certainty and predictability of the tax system are among factors which influence the economic growth of the country.
The tax system not to be entirely fixed and should be changed to respond to international agreements. Fairness is in respect to a procedure, treatment of similar peoples and expectation of authority to the tax payers. The tax levels and structures to be fair without discourage economic activity. (James Mirrlees ,2011).According to UNDP, 2016 a good tax system is efficient, fair and easy to administer. Interpretation of clear and unambiguous tax law creates increased opportunities for taxpayers to behave in ways that were unintended by the law. Good tax law strengthens the tax authority's ability to deliver procedural fairness in the conduct of its administration (OECD).According to Girma (2017) enhancing the level of tax administration system; building positive attitude of tax payers towards the tax administration and the tax law: improving the tax administration in terms of enhancing fair tax collection; improving legal frame work are among the tax revenue has to do to alleviate problems contributing to the prevalence of unfair tax assessment and collection.
According to Qihou Zhou (2007) a method of determining tax rate structure should be fair. It balances each tax payers desire to minimize his or her tax burden with the collective wish of all tax payers. The scheme yields arrange of fair tax for each tax payer to pay.The key to creating trust for a tax authority is to act in ways the community will experience to be fair. Fairness of the procedure 2.
2.2 Service deliveryEffective service delivery is important to measure the tax administration performance. To deliver good service the laws have to transparent and access to clear information about tax, appeal rights. Service designed to tax payers compliance with the law are an important, Buenos Aires (2007)Tax administration employees' integrity, responsiveness and quality have to be high to improve the service delivered. An effective and efficient tax administration is necessary. Lewis L. Baurer, 2005.
The objectives of most tax administration is to insure compliance with tax laws and to improve tax payers service delivery and its satisfaction as well as To improve tax payers knowledge and behavior which improve factors affecting tax payers behaviors' and attitude towards taxation help to improve customer service programs Keith Walsh (2012).Improving the effectiveness of the tax administration and service delivery to make tax payers comply with the tax system is the obligation of the tax authority. The complexity of the tax administration and multiplicity of its activities is the problems of many countries. Because of this using information technology and computers to collect tax, to register the tax payers, filing of reports and payment through banks are introduced for improvement. Nelson Gutierrez, (2002)There are many interactions between the tax payers and tax officers' tax payers want their tax returns to be accurate Teresa Stephenson (2006).According to KetemaDerar (2016) the service delivered by ERCA is not a satisfy tax payers.
There are no timely and quality services given by the branches of ERCA. It is not efficient in dealing with tax payers such as making refunds of overpaid tax, solving problems of tax related issues timely and correctly, issuing tax clearance and delivering regular tax training and education. There is lack of staff motivation to serve the tax payers due to work load and system breakdown. Most of tax payers feel that there is no trust between the tax payers and the authority. Haftay, (2017) ERCA should give unreserved consideration to human resource capacity development of the employees to increase the quality of service delivery.2.
2.3 Clarity of tax systemAccording to House of Commons treasury committee report (2010) the clarity of the tax laws for tax payers to understand is very important. The more clearly the tax system, less tax appeals about the transaction of the business. There are barriers to the clarity of tax system. These are Lack of legal clarity: lack of clarity of the tax law comes from ambiguity about the detail evaluation and the language used in tax legislation. Many tax laws are written broadly and supplemented by different guidance.
The tax laws should be clearly drafted by parliament and clear to everyone. Complex tax system: the more complex the tax system difficult to administer for the tax authority as well as for the tax payers to assess their own tax liability. To improve the complexity the tax it has to be use tax policy to achieve wider goals than simply increasing revenue and increasing evaluation to reduce avoidance. Tax laws should be clear to tax payers and should be simple, understandable and clear in their objectives. Poorly targeted legislation: creates doubt for the tax payers. It should be clear to tax payers to be liable for payments or not.Complex tax system discourages investment especially for long term investments.
A transparent tax system has rules for investment for negotiation with investors and minimizes the administrative corruption. Simplifying tax system increases transparency and reduces the uncertainty of business to comply with the tax system and complicated procedures increases corruption. The complexity of the tax laws is increased while taxes increased in number when there is no financial instruments and innovations with tax avoidance. Tax administration view business as evaders, want to violate the rules and businesses view tax administrators as corrupt and deliberately make procedures complicated. A hand book for tax simplification (2009) page8Tax incentives given to tax payers is reduces tax fairness. Continuous review of tax incentives is necessary.
The government should evaluate any incentives its attraction strategy and cost and benefit analysis. Tackling the duration of tax holiday to exist beyond the period the period they get tax incentives. Controlling tax abuse of tax holidays is important through strict requirement for complete financial statement. According to Stanley s.
surrey (1961) the main purpose of any tax system is to raise enough revenue to meet the obligations of the government. The functioning of the tax system obviously affects the performance of the entire economy. In democratic society the tax system is not only obligated to facilitate the growth of the whole economy, but also to insure that both the system and its administration are fair. According to Marion B. Folsom (1955) in the revision, the provision of the law have been arranged in a more logical order, absolute material has been deleted, and the language has been made more certain and understandable .
According to TaddeseLencho (2012) tax directives have increased in absolute number and diversity in recent times with strengthening of the tax administration in Ethiopia. All the public bodies connected with tax administration have been busy issuing one or another form of directives in the area of taxes. Many of the tax directives emerge from the Ministry of Finance, but there are significant numbers of directives from the Ethiopian Revenues and Customs Authority (ERCA or its predecessors). The tax laws authorize various ministries and governmental agencies to issue directives on issues related to taxation: the Ministry of Justice the Ministry of Justice (on the subject of the composition, membership, etc.
of the Tax Appeal Commission), the Ethiopian Investment Agency (on the subject of tax incentives accorded to investors), and National Bank of Ethiopia (NBE) (on the subject of special technical reserves required of financial institutions and deductible under the income tax law).Because of the extensive delegating-provisions scattered throughout the tax laws of Ethiopia, the directives issued by administrative agencies cover a wide-range of subjects, so much so that it is difficult to jot them down into categories or patterns. One way of making sense of the field of directives is to employ a classification adopted in other tax systems.
2.3 Empirical Literature ReviewThe previous sections present the theories, concepts, principles and best practices of tax system and tax payers' satisfaction. Even though there are efforts to modernize and then create fair tax system, most findings of previous literatures related to the current research, indicated that tax system of the world has still a challenge. Even though, as my knowledge there is few studies in Ethiopia, for further understanding, some empirical literatures concerning factors that affect tax payer satisfaction is reviewed as follows. According to Rwanda Revenue Authority (2016) taken survey in Kigali and boarder customs stations about effective tax administration enforcement of the laws relating to revenues and conducting survey by using qualitative and quantitative approaches involves tax payers and stake holders. The finding of the survey is tax payers were aware of tax services given by the authority. However in some of the domestic services were not well known especially by the medium tax payers. The tax authority adherence to service charter standard is low.
Delay in getting feedback from revenue authority is the other problem. The other problem is related to knowledge of ICT. According to Washington state Revenue (2016) tax payer satisfaction survey result, to provide the highest level of service possible uses the customer feedback work group. The methodology used to conduct survey was stratified and strata. The outcome of the survey is that improving online training to the tax payers, deliver customer – focused services and administer programs.WollelaAbehodieYesegat and Odd-HelgeFjeldstad, (2016) focuses on business people's perception o the tax system and compliance attitude in Ethiopia and the key issues are the attitudes of paying taxes are influenced by the government services and satisfaction with tax administration procedures and practices and corruption by tax administrations. The study was based on a survey of 500 business tax payers in Addis Ababa and sampling method used is stratified random sampling.
Data collection method was questionnaire and in-depth interview held with tax payers and tax advisors. the statistics used is descriptive first and followed by regression model the variables are tax compliance attitude as dependent variable and perception of tax rates as a high, tax audit as law and penalty as likely; perception of government service as good, political legitimacy assessed in terms of perception of corruption as high, perception of tax administration as high, perception of tax administration as satisfactory. The finding from descriptive statistics is that perception of non compliance is low as well as low level of tax noncompliance attitude; tax payers have a low level of trust in decisions of the tax administration; failure to pay taxes lead to penalty the fairness of tax system lack fairness.
RedaeBerheRedae and shailinderSekhon (2016) study about taxpayers' knowledge and Tax compliance Behavior in Ethiopia: a study of Tigray state focusing on the business income tax payers tax knowledge towards the tax laws in Tigray state, factors affecting business income tax payers knowledge, how tax knowledge influencing the attitude of tax payers in the region. The study covers one year 2014 and used stratified and convenience sampling method as well as questionnaire, observation, interview and survey for data collection method and descriptive statistics is used. The finding of the study is tax knowledge and tax compliance behavior has not been comprehensive in Ethiopia. Even though the various tax reforms under taken by government to increase tax revenue, to create tax payers awareness; tax payers' knowledge do not given attention. Most of the tax payers do not understand the tax system of the country.
KetemaDerar (2016) tax payers' knowledge towards tax rules and procedures is low. Most of the respondents were not clear with the tax rates deductible and non deductible expenses and lacks timely information and updates of changes of tax directives and guide lines issued by ERCA. Temtim (2014) study business tax payers' satisfaction with the tax system in Addis Ababa The study was conducted on trader, manufacture, and service provider. The study is focusing on how is the satisfaction of federal business tax payers with the tax system, tax payers' service, availability of tax information, tax collection procedures, administrative mechanisms, tax law enforcement and with the tax reform related to cash register machine and VAT withholding. The research Methodology used is both quantitative approach through self-administered survey by stratified sampling method and qualitative approach by in-depth interview by using snow ball sampling method. The data was analyzed by using descriptive statistics. The finding of the survey is that business tax payers have not satisfied with VAT withholding system in general and to put some business in particular importers for VAT refund.
The statutory time limit for VAT refund is 30 days. But the tax authority took more than two months to give payments. So business tax payers do not satisfied with the time it took to receive their Vat withholding. The other is problems related to tax policy and administration capability, tax collection mechanism, tax payers' services, tax payers' incentives and in the area of tax audit selection tax payers have low satisfaction.Haftay (2017) study the large tax payers' satisfaction in relation to service delivery with special focus on large tax payers' branch office. The research approach he used was mixed approach and self-completed questionnaire as well as semi structured face to face questionnaire .the findings related to service quality dimension are more dissatisfied , tax payers were dissatisfied with compliant handling.Girma (2017) study about fairness of tax assessment and collection by using both qualitative and quantitative research approach and the data is collected by using semi structure questionnaire structured interview.
the study found that the tax administration is weak and ineffective in providing continuous and inclusive tax law education, building trustful tax assessors, penalizing delinquent tax payers, upgrading tax payers with better turnover progress and building impartial appeal review committee and inequitable tax assessment in the study area. There is a significant and direct relationship between level of tax administration system and fairness of tax assessment. The relationship between fairness of tax assessment and attitude of taxpayers towards tax administration system and tax law : there is no proper enforcement of tax law there is negative perception of tax payers on implementation of tax laws, ethics of tax assessors, fairness of estimation of tax, 2.4. Conceptual frame work of the studyThe aim of this section is to generalize the general idea from the past literature based on the theoretical discussions. Even though there are many factors affecting tax payers' satisfaction Based on the theoretical discussions factors that affect large payers' satisfaction in relation to the study are fairness, service delivery and clarity of tax system.Figure2.1: Conceptual frame work Source: researcher own design2.
5 The gaps of previous related studiesFrom the above empirical studies, there was difference in tax system of developed and developing country. Specifically Ethiopia's tax system is still lack fairness, service quality is low, the clarity of tax laws as well as tax system is still low. The above Ethiopian related studies do not demonstrate much on the tax system on general and large tax payers' in particular.
The study will add assessing the tax payers' satisfaction level of large tax payers with tax system to fill the gap. 2.6 Summary of literature reviewIn this chapter, theoretical, conceptual and empirical literatures related to the problem under consideration were revised. In the conceptual, meaning of the tax system, trends of tax system of the world, developing country and Ethiopia. In the theoretical literature literatures related to fairness of tax system, service delivery and clarity of the tax system was discussed.
In the review of empirical literature, the finding of the studies that related to the tax payers satisfaction and tax system was discussed. The next chapter deals about the research design and methodology of the study.CHAPTER THREERESEARCH METHODOLOGYThe purpose of this chapter is to present the research methodology of the study. In this research methodology the study deals with the methods used in the context of the research study and explains why a particular method or techniques is used. The chapter discusses the research design, Sampling design, Methods of data collection and analysis.3.1 Research ApproachQuantitative research: in this approach the researcher relies on numerical data (Creswell, 2003). Quantitative research is based on the measurement of quantity and quantitative analysis of data. It consists inferential, experimental and simulation approaches to research.Qualitative research: concerns not on the measurement of quantity. It is concerned with subjective assessment of attitudes, opinions and behavior (Kothari, 2004). It is based on the concept of quality and reviewing the findings based on quality from the general people (Ranjit Kumar, 2008).This study hada mixed research approach that means descriptive and inferential type using both qualitative and quantitative research approaches to assess the determinant of tax payers' satisfaction with the tax system. The research approach was chosen based on the purpose and the research hypothesis developed to be addressed. The reason to use this approach was to address problems of the study from different perspectives. The quantitative approach with aquantitative research questionnaires, used to answer the research questions which are very imperative to meet the objectives of the study. Furthermore, the qualitative approach used in the semi- structured interview, open ended questions were used to answered questions which did not answered by the quantitative approach.3.2 Research MethodSince the primary reason of conducting this research was to analyze the relationship between tax payers' satisfaction with the determinants of satisfaction like fairness of the tax system, service delivery and clarity of the tax system, therefore the researcher has used explanatory research method. The researcher collected the primary data through self-administered and hand delivered questionnaires with close and open ended type. The reason behind using self-completed was it would have better response rate, administered simply, minimize cost and time. Moreover, since most of large tax payers representatives were afull professional, they easily understand the questions and explained their opinions for the open ended questions. Inaddition, the researcher has collected primary data using semistructured face to face interview from selected tax officials, and employees. 3.3 Sampling DesignThe sample design is a definite plan for obtaining a sample from a given population.it refers to the technique or the procedure that the researcher would adopt in selecting items for the sample. Samples can be probability or non-probability sampling. In probability sampling each element has probability of being included in the sample but non probability sampling there is no equal chance to be included as a sample (Kothari, 2004). Samples are selected on random basis indicating more the representative of the population (Tabachnick and fidell, 2001). Accuracy is important for a good sampling design. The intention of this study is to generalize of the findings by using descriptive statistics as well as inferential statistics to large tax payers.The sampling design depends on the type of the research, objectives, purposes of the study and findings the researcher likes to draw from the study. 3.4Sampling TechniquesThis study usesprobability and non- probability sampling techniques. To obtain a fair representation of the population the researcher used simple random sampling from probability sampling method to collect data from tax payers of the branch office. Purposive sampling method is from non- probability sampling method to collect data from employees of the organization by using work process and different teams of the organization. The reason for using simple random sampling is all tax payers to have equal chance of being selected in the sample to avoid selection bias and to make generalization about the population and purposive sampling to get more accurate information on the tax authority tax system.3.4 Population and sampling unit3.4.1 PopulationPopulation is all the items under consideration or observation in the study. Taking the whole population in the study may lead to bias as the number of observation increases, takes a great deal of time, money and energy (Kothari, 2004).The population of this study includes employees of ERCA LTO branch and tax payers of the branch office. Therefore, the target population of the study comprises tax payers of the branch office. According to the data given from the customer service team of the branch office the total number of the tax payers of the branch office were 1,146.In addition, four higher officials and tax employees were participated in the in-depth interview using purposive sampling. 3.4.2 Sample sizeIn the determination of sample size,the general rule implies that the larger the sample size, more representative sample it will be, and the more accurate results. Due to time and cost constraint it is difficult to contact all the population. To get accurate and timely information and to make the analysis easy, sample should be determined. To determine the representative sample the researcher will use the below formula.The sample size was determined by using Yamane formula The formula is: n= N 1+N (e) 2 Where: n = sample sizeN = population sizee = the level of precision/ standard error n = 1,145 = 296 1+1,145 (0.05)2The rationale to use this formula for calculating the sample size was- the formula gives relatively large sample size to be more representativeof the population. In the formula confidential level is 95% with margin of error5% which is more acceptable in social science studies. More over 4 tax officials and tax office employees are will be participated in the in-depth interview using purposive sampling. 3.5 Data Sources and type of dataFor the study both primary and secondary data sources will be used to explore and assess the determinant of tax payers' satisfaction with the tax system.3.5.1Primary SourcesThe primary data will be collected using hand delivered and self-administered structured questionnaires from the tax payers of the organization and interview will be collected from employees of the organization.To conduct the research both primary and secondary data from different sources will be used.Questionnaires: Are the main instrument to collect information. The questionnaires comprise mainly close ended and few open ended questions. The close ended questions are used for the reason that they are easier to categorize the response gathered, understand and replied by the respondent. This means the respondents were to choose between given alternatives for their answers instead of constructing their own responses. 3.5.2 Secondary SourcesSecondary data sources will be gathered from ESCU library and ERCA, books, journals, articles, annual reports of the organization, research reports, proclamation, regulations, directives , published and unpublished documents, internet etc. to accomplish the study having relevant secondary data. Personal Interview: by interviewing the top management in ERCA LTO.The use of interviews is appropriate in obtaining either multifaceted or sensitive information, as well as understanding concepts that require detail elaboration.3.6 Reliability and validity test3.6.1 ReliabilityThe researcher used reliability test analysis for the assessment of tax payers' satisfaction with the satisfaction determinant factors using cronbach's alpha. Cronbach alpha is the widely used measure of internal consistency/reliability when data have multiple likert questions in aquestionnaire that forms ascale to decide whether the scale is reliable or not (Adamand mark, 2016). Cronbach's alpha reliability coefficient normally ranges between 0 and 1. The closer the coefficient is to 1, the greater is the internal consistency of the items(variables) in the scale. Joseph and rosemary (2015) provide the following rules of thumb ? 0.9 Excellent, ? 0.8 Good, ?0.7 Acceptable, ?0.6 questionable , ? 0.5 poor and < 0.5 Unacceptable level of alpha. This this end,as indicated in table below , the researcher has checked the reliability of the research 39 items in the likert type questionnaires and got an excellent overall cronbach's alpha coefficient 0.92.Table 3.1 Reliability StatisticsCronbach's Alpha N of Items.928 39Source: survey questionnaires using SPSSV.21 (20183.7.2ValidityValidity on the other hand, is ageneral term denoting "correctness of measure" (yaremko, 1982).The content validity was checked by ensuring that the data collection instruments designed very carefully to include all the necessary questions related to answer the problem statementTable 3.2 Test for validityKMO and Bartlett's TestKaiser-Meyer-Olkin Measure of Sampling Adequacy. . 879Bartlett's Test of Sphericity Approx. Chi-Square 4344.249 Df 435 Sig. .000Source: survey questionnaires using SPSSV.21 (2018.3.6Data Analysis Techniques and InterpretationDescriptive research is basically conducted to gain information focused on concurrent status of the phenomenon what exists in terms of variables in a situation which requires survey. It explains what occurs in relation to various variables. The analysis of data is based on view, perception, behavior, facts, interaction of the person where numeric data are developed. In quantitative data analysis numerical data are produced as well as hypothesis is examined (Ranjit, 2008).The researcher collected data from sample study area generally descriptive (qualitative) as well as inferential statistics (quantitative) will be used to assess the impact of tax payer satisfaction with the tax system. The data analyzed by using a statistical Package for social science (SPSS V.21 and V.20). The collected data were analyzed by tables, percentages, charts and graphs and figures. Further quantitative methods of data analysis will be adopted using non-parametric hypothesis testing techniques.3.7. Ethical considerationThroughout the work of the study, the researcher kept ethical issues in which the study is expected to consider. Therefore the researcher tried to produce reliable data collection instruments and used relevant source of information for the study. The respondents were given freedom to say anything they feel. More over the confidentiality of the information gathered is kept and keeping the privacy of the respondent.3.8 Chapter summaryThis chapter has outlined and explained the detailed research methodology that has to be used in the study. It discussed data collection instruments, the sample, data collection procedures, statistical techniques and procedures. The next chapter deals with the data analysis part of the study.Chapter Four4.0 Data Presentation, Analysis and Discussion4.1 IntroductionThe aim of this study is toassess determinants of tax payers' Satisfaction level with the tax system at Ethiopian Revenues and Customs Authority, the Case of Large Tax Payers Branch office. This chapter deals with the detail analysis of the findings based on the data collected using both from primary and secondary sources which were analyzed using statistical package for social science (SPSS v20.0.). After data were collected, checked, edited and verified and coded it is analyzed using statistical package for social science. The data collected from the respondents were organized through descriptive statistics such as frequencies, tables, graphs, and percentages. Inferential statistics mainly Pearson correlation, Freidman test and Wilcoxon signed rank test were used for testing the hypothesis. A 5% level of significance was considered in testing the hypothesis. The results of each specific objective found on the basis of data collected from respondents are presented in this chapter. The chapter includes the demographic information of the respondents, the response rate and analysis of measures, hypothesis test results and discussion of the findings in relation to the objective of the study.4.2 Analysis of Respondents' Response RateAccording to Cooper (1999) a response rate from30% to 80% of the total sample size can be generalized to present the opinion of the entire population. Therefore, to conduct the field survey, 296 survey questionnaires were distributed for tax payers and 253 were returned i.e. 85 percent of the questionnaire. It is adequate for this study. The remaining 43 questionnaires left unreturned because some tax payers were not volunteer and others did not fill properly. 4.3 Demographic Information of the RespondentsThe aim of the following data presentation is to provide the readers with a clue from whom the data were collected. Figure 4.1 below shows sex of the respondents. Source: field survey result using SPSS v.20. , 2018As shown the above figure, in the above chart the proportion of male respondents out of 253 was 60 % and the remaining female respondents were 40%. It could be concluded that men draw a high level of participation in large tax payers. Table 4.1 Age of the respondentAge Frequency Percent18-27 56 22.128-37 99 39.138-47 38 15.048-57 38 15.0above57 22 8.7Total 253 100.0Source: Source: field survey result using SPSS v.20. , 2018According to table 4.1 above, among the respondents 22.1% were the age 18-27, 39.1% were the age from 28-37, 15% were both the age 38-47 and 48-57 and 8.7% were above 57 years old. The results showed that the majority of the respondents were aged between 28 and 37. This is an indication that most tax payers in the sample were at matured ages and information given to this study is free from emotionsFigure 4.2 Level of the Educational RespondentSource: compiled from survey questionnaire using SPSSV 20, (2018)As presented in figure 4.2 above, from the total of 253 respondents 0.79% can read and Write, 7.9% were high school completed, 28.06% were diploma holders, 53.75% were first degree holders and 9.5% had second degree. This indicated that majority of the respondents were first degree holders, diploma, second degree holders, high school complete and read/write. From this finding the researcher can understand that, the respondents can understand and answered the questionnaires properly. Table 4.2 position in the business organizationposition in the business NO % Owner 2 0.8%Employee 177 70.5%Manager 25 9.2%Other 49 19.5%Total 253 100.0%Source: Source: field survey result using SPSS v.20. , 2018As presented in table 4.2 above, from the total of 253 respondents 0.8 % Owners, 70.5% of them were employees, 9.2% of them were managers and 19.5% were others. This implies majority of the respondents were employee of the business enterprises. Table 4.3 Work experience in the companyWork experience in the company N N %below one year 21 8.3%1-2 years 62 24.5%3-5 years 74 29.2%6-10 years 63 24.9%above 10 years 33 13.0%Total 253 100.0%Source: Source: field survey result using SPSS v.20. , 2018As presented in table 4.3 above, from the total of 253 respondents 8.3 % had an experience of below one year, 24.5 % had an experience of 1-2 years in the company, 29.2 % had an experience 3-5 years in the company, 24.9% had an experience 6-10 years in the company and 13.0% had an experience of above 10 years in the company. From the result most of respondents had an experience of 3-5 years followed by 6-10 years in the tax related issues. This indicates that most of the respondents were experienced in tax system of the country.Figure 4.3 types of business Source: Source: field survey result using SPSS v.20. , 2018Based on the above figure 20.94% of the respondents business type was construction, 21.73% was import/export, 16.20% was manufacturing, 13.43% whole seller, 12.64% was finance sector,4.34% transport and storage, 2.37% education and health and 8.3 % hotel and others. From this finding majority of the respondents were import/export followed by construction. Table 4.4 Year of the customer of LTOhow long you have been the customer of LTO Count Column N %1-3 years 46 18.2%4-6 years 53 20.9%7-9 years 37 14.6%10-12 years 40 15.8%above 12 years 77 30.4%Total 253 100.0%Source: Source: field survey result using SPSS v.20. , 2018As presented in table 4.4 above, from the total of 253 respondents 18.2 % had 1-3 years of the customers of the Branch office, 20.9% of them were 4-6 years , 14.6% of them were 7-9 years, 15.8% were 10-12 years and 30.4 %of them were above 12 years of the customer of LTO Branch Office. This implies that most of the business were above 12 years since they became tax payer of the branch office. From this the information provided about the branch office was given by the experienced businesses.4.4 Presentation of the Findings and DiscussionHere, the results of the study in line with the specific objectives or the questions under the objectives of the research are presented in the following manner.4.4.1 Level of tax payers' satisfaction in terms of Fairness of the Tax SystemUnder this section, the respondent tax payers' general view on the current tax system in terms of fairness of the tax system has been discussed based on the research question.Table 4.5 Questions of Fairness of Tax System Parameters strongly disagree Dis Agree Neutral Agree strongly Agree No % No % No % No % No %the tax system is fair 17 6.7 122 48.2 17 6.7 87 34.4 10 4the tax collected from you is based on ability to pay 17 6.7 146 57.7 21 18.3 63 24.9 6 2.4Government punish equally tax payers who do not pay tax 96 37.9 101 39.9 35 13.8 21 8.3 0 0The government is fairly levying taxes 58 22.9 96 37.9 47 18.6 45 17.8 7 2.8The tax laws are being implemented in the way that contributes to enhance fairness of tax system 45 17.8 92 36.4 61 24.1 52 20.6 3 1.2Tax rates are fair 55 21.7 109 43.1 45 17.8 44 17.4 0 0Source: field survey result using SPSS v.20. , 2018As shown in the above table Respondents were also provided with different questions targeted to evaluate the level of fairness in the tax system. Regarding the fairness of the tax system 4.0% of the respondents strongly agree, 34.4 % of the respondents agree, 6.7% neutral, 48.2% disagree and 6.7% strongly disagree. As a result, majority of the respondents indicated that the tax system is not fair. In addition tax payers to explain their ideas about the fairness of the tax system and replied as follows. tax authority did not fairly levying tax the tax system is not flexible not equal for all tax payers, some of tax payers are benefited and others not tax levied is not based on the fact, it is arbitrary Not equal between the same business types in the same level. Tax evaders and avoiders are treated as innocent tax payer and no distinction between non payers and payers. There is no modern controlling mechanism of contrabandists. The tax system is not equal for all this leads to some group to benefit without payment. Tax payment system is not the same between employee and employer. Even the tax payment is different between tax types. Employment income tax is high than the others are among points raised by the respondent. From the interview tax officials explain the tax system is considered as not fair. Tax laws unfair tax system which shows illegal traders and innocent tax payers treated equally. The difference for treatment of tax payers', calculation of tax leads to lack of fairness in the tax system. Since some tax payers were not paid taxes by shadowing the tax incentives and holidays and others did not get the opportunity to get tax incentives on the same level of business the level of fairness of the tax system is low. In addition tax payers who used cash register machines and did not used the machine were treated equally. The controlling system of tax payers were low.This agreed to the response of tax payers. But there is difference in fairness of levying the tax. Tax officials said tax payers are not paid tax as revenuegenerated. Tax payers of the branch office are large and have books of accounts and payment of tax is based on the book of account.With Regard to the collection of tax based on ability to pay as a criterion to measure fairness of tax system, 2.4% strongly agree that the tax paid is based on ability to pay, 24.9 % agree, 8.3% neutral, 57.7% disagree, and 6.7% strongly dis agree as the result of the survey result presented on the above table. That means the majority of the respondents revealed that the tax collected from them is not based on ability to pay. From the interview result strengthening the result found from tax payers respondents that tax payers are paid taxes regardless of the ability of the tax payers. Because of lack of knowledge about tax laws the tax paid were fear of the penalty. Fairness of the tax express, every tax payers who get equal revenue must be paid and treated equally in the tax office. There are tax payers who have the ability to pay and do not pay tax by evading tax and avoiding tax by using tax loopholes. Willingness to pay less if there is no laws and penalties imposed on the tax payers. Respondents asked about punishment for all tax payers equally who do not pay tax for the Government, 37.9% strongly disagree, 39.9% disagree, 13.8% neutral and 8.3% agree. The higher portions of the respondentsdisagree and strongly disagree. Tax officials were asked to explain about equal punishment of tax payers the results showed that government didn't punish tax payers equally who do not pay tax. There were tax payers who were not paid tax even though getting revenue and not penalized. The penalty system of the revenue authority is weak.That laws were not well functionalized to penalize all tax payers who didn't pay taxes. There is no distinction between Illegal tax payers and innocent tax.The other point provided to tax payers' respondents was concerning Fairness of levying tax by the government. 22.9% strongly disagree, 37.9% disagree, 18.6 % Neutral, 17.8% agree and 2.8 % strongly agree. This indicates that majority of the respondents dis agree with the fairness of levying taxes by the government.Regarding the implementation of tax laws to enhance fairness of the tax system, 17.8% of the respondents strongly disagree, 36.4% disagree, 24.1% neutral, 20.6% agree, and 1.2% strongly agree. Majority of the respondents are disagree.From interview result of the tax official about the implementation of tax laws in the way that contributes to enhance fairness of the tax system, showed that supports the survey result. They explained tax laws are implemented to increase the fairness of the tax systemrather fear of laws. Most of the officials did not implement tax laws based on knowledge rather experience or redundancy of the works and takes as habit.Regarding the Fairness in the tax rates in Ethiopia, 21.7% of the respondents strongly disagree, 43.1% disagree, 17.8% neutral and 17.4% agree. Most of the respondents are disagree with the fairness of the tax rates in Ethiopia. From the interview of the tax officials, There are different types of tax paid but tax rates are different for all taxes. The tax rates practiced for the branch office tax payers is flat rate for VAT, business profit tax. The tax rates are not fair in sense it is not uniform for all tax payers and tax types. There were high for taxes paid on boarders and customs and as well as employment income tax is high when compared to others. Some of them were not agreed to the tax payers' perception of high tax rates paid high tax. Since the burden of tax is shifted on the consumer tax whether the tax rate is high or low does not affect the tax payers.4.4.2 Level of Tax Payers Satisfaction in terms of service delivered to themIt is reasonable for tax payers to expect the tax authority to provide better services to increase tax payers' attitude to pay taxes. This portion, therefore, discussed the satisfaction of sampled tax payers' on the service and related issues provided by the tax administration. The information was collected on five likert scale ranging from 1 which is very poor to 5 which is very good. Table 4.6.1 Results of questions regarding level of tax payers' satisfaction in terms of service delivered to them.Parameters Very poor Poor Neutral Good Very Good No % No % No % No % No %What is Friendliness and behavior of tax officials? 28 11.1 107 42.3 12 4.7 86 34.0 20 7.9What is the attitude of tax officials towards solving your problem? 37 14.6 74 29.2 20 7.9 80 30.8 44 17.4level of service delivery according to the standard set by the authority 61 24.1 66 26.1 15 5.9 81 32.0 30 11.9level of authority in Providing e- filing for all tax payers 34 13.4 90 35.6 36 14.2 66 26.1 27 10.7the level of authority to solve your complain 39 15.5 82 32.4 57 22.6 56 22.2 19 7.5partiality in appeal review 42 16.6 74 29.2 85 33.6 45 17.8 7 2.8simple to get tax refunds 48 19.0 90 35.6 31 12.3 63 24.9 21 8.3simple is to get clearance 49 19.4 99 39.1 14 5.5 70 27.7 21 8.3Tax audit selection procedure 49 19.4 65 25.7 35 13.8 74 29.2 30 11.9Tax collection system 40 15.8 68 26.9 30 11.9 95 37.5 20 7.9Tax payment facility 31 12.3 78 30.8 18 7.1 101 39.9 25 9.9Accessibility of web sites 79 31.2 74 29.2 30 11.9 50 19.8 20 7.9Source: field survey result using SPSS v.20. , 2018According to the above table, from the friendliness and behavior of the tax official point of view, 11.1% of the respondents respond very poor, 42.3% poor, 4.7% neutral, 34.0% good and 7.9% very good. Most of the respondents respond the relationship between tax payers and tax officials as poor. From the interview, tax officials replied that, tax payers and tax officials' attitude is not positive. Majority of the tax officials worrying about caught and not caught by corruption by silly errors or by signing of any service delivered to the tax payers. The perception of the employee about the organization is that not heartily delivered the service as needed.As a result they fear each other and the relationship is not as a friend.This results in agreement of the response of the tax payers.According to the above table, the attitude of tax officials towards solving tax payers' problem 14.6% of the respondents respond very poor, 29.2% poor, 7.9% neutral, 30.8% good, 17.4% very good. This indicate that the majority of the respondents satisfied by the attitude of the tax officials to solve tax payers' problem. During the interviewing tax officials response is not agreed with the tax payers' response. Even though majority of the tax payers were satisfied by the attitude of the tax officials to solve the problem of tax payers tax officials replied that due to lack of self-confidence did not fruitful.According to the above table level of service delivery according to the standard set by the authority from the whole respondent 24.1% respond very poor, 26.1 % poor, 5.9% neutral, 32.0% good and 11.9% very good. This shows the highest number of the respondents were when we sum up very poor and poor. According to the interview result service delivery of the tax authority is no as standard set by the authority. Even though the authority signed customer charter, the service delivered is not meet the required needs of the tax payers.According to the table above, the level of the tax authority in providing E-filing for all tax payers 13.5% of the respondents respond very poor, 35.6 % of the respondent responds poor, 14.3% of the respondents respond neutral, 26.3% of the respondents respond good, and 10.8% of the respondent respond very good. This replied that most of the respondents did not satisfy by the E-filing provided by the tax authority. The interview result of tax officials shows E-tax system provided by the tax authority is not included all tax payers, the system is not well functioned.Due to lack of internet service there is delay of system to use E-tax effectively for who has an access of e-tax system.According to the table above the level of the authority to solve tax payers complain among the whole respondents 15.5% responds very poor, 32.1% poor, 22.6% neutral, 22.2% good and 7.5% very good. This indicates that the service given by the tax authority to solve complain of the tax payers is poor according to the respondents' response. The interview result showed complain came from the officials treatment, service quality, customer handling system of the officer, bureaucratic treatment of the tax payers point of view the tax authority did not solve the complain of tax payers. Rather lack of struggle to each other's when weakness observed and lack of commitment for the achievement of the goals of the organization is seen. According to the above table, 16.6% of the respondents replied that partiality in appeal review is very poor, 29.2% poor, 33.6% neutral, 17.8% good and 2.8% very good. Even though the highest percentage in partiality in appeal review when we sum up the highest percentage of the respondents responds that partiality in appeal review by the tax authority is very poor and poor. Appeal committees were not partial in appeal review. According to the above table, regarding the simplicity to get tax refunds 19.0% of the respondents respond very poor, 35.6% poor, 12.3% neutral, 24.9% good and 8.3% very good. This indicates that most of the respondents' response was poor in simplicity in getting tax refunds. Tax officials during interview response has similarity with that of the respondents, due to request rate of refunds is increasing in present timetax officials who serve the tax payers were not refunded tax in a simple and as set in the tax laws and regulation. Tax payers were not know the tax laws and the criteria to get refund and without fulfilling the criteria refunding is not done. So this resulted in the delay and the complication to get tax refunds.According to the above table, from the total respondents 19.4% of the respondents replied very poor, 39.1% poor, 5.5% neutral, 27.7% good and 8.3% very good in simplicity in getting clearance. From the finding most of respondents replied very poor in simplicity of getting clearance from the tax office. In addition respondents revealed that the tax authority asked tax payments which is paid. In line with the simplicity to get tax clearance the interview result agreed with the respondents idea, the tax system is not as much modern and due to lack of knowledge of technologies and modern filing system sometimes unpaid tax for long term shown in the tax payers profiles and files as well as on SIGTASS. The system of write off tax arrears is not well functioned as well as due to carelessness of tax officials after payment tax they may not write-off taxes,penalties, and interests shows as unpaid. Due to this problems getting tax clearance is not as simple as expected by the tax payers'.From the above table, based on tax audit selection procedure from the total respondents 19.4% of the respondents respond very poor,25.7% poor, 13.8% neutral, 29.2 % good and 11.9% very good. The finding revealed that majority of the respondents replied very poor and poor when we sum up them. In addition the respondents revealed that Tax audit procedures waiting time to get tax audit and other procedures of audit selection system such as risk based audit selection system were not used effective criteria of audit selection.According to the interview result tax audit selection procedure is based on two. When tax payers were suspected to evade tax return investigation audit take place to dictate the truth in the short period of time without any delay. But with the normal circumstance tax payers were audited as far as possible before period of According to the above table, the tax collection system of the tax authority 15.8% of the respondents respond very poor, 26.9% poor, 11.9% neutral, 37.5% good and 7.9% very good. This indicates that majority of the respondents responded good for the tax collection system of the authority.Based on the above table, from tax payment facility point of view 12.3% of the respondents respond very poor, 30.8% poor, 7.1% neutral, 39.9% good and 9.9% very good. From the finding majority of the respondents responded goodfor payment facility given by the tax authority. Payment system through banking system is appropriately practiced and this helps the tax payers from thefts. From the above table, accessibility of websites of the tax authority, 31.2% of the respondents respond very poor, 29.2% poor, 11.9% neutral, 19.8 % good and 7.9% very good. From the finding accessibility of the websites of the authority is very poor as replied by the majority of the respondents.When asked the tax officials to explain about the accessibility of the websites, the tax authority did not update the websites, each of the branch office did not use it and most of the time controlled by the Head Office. The information given is few and did not shows about each branch office information. Table 4.6.2 Results of questions regarding level of tax payers' satisfaction in terms of service delivered to them Parameters Yes No No % No %participation in training program 161 63.6 92 36.4Tax office Location and accessibility is convenient? 189 74.7 64 25.3faster service delivery for all tax payers 89 35.2 164 64.8Source: field survey result using SPSS v.20. , 2018According to the above table, 63.6% of the respondent were participate in the training program of the authority, 36.4% did not participate in the training program. Tax payers were also asked explain about whether training program was enough to the tax payers and they replied that the training was on-off. It was not up to date about the tax laws as well as boring and all tax payers have no equal knowledge about tax. This means the training was not enough.According to the above table, from the respondents 74.7% replied that the tax office location and accessibility convenient and 25.3% replied not convenient. Majority of the respondents relied the tax authority is convenient and accessible.Faster service for all tax payers and 64.8% of the respondents replied that the tax authority did not deliver faster service for all tax payers. The respondents asked to express additional information about the service delivery of the organization and replied as follows: Problems faced taxpayers did not get solution in the short time. It takes long time to get the solution this resulted from lack of confidence and knowledge of the tax officials. In addition appeal committees were shows individual interest and attitude. There is no common understanding of the laws and regulation. Lack of modern technology in tax system for all the society, lack of internet access for all tax payers', modern documentation/filing system. Tax payers, who has no unpaid tax ask for payment because of lack of accuracy of the tax system and technology. This resulted in redundant requests of files and different documents to get different services from the tax authority. E-tax is not available for all tax payers. Taking long time for 1to5 meeting on the work time is another problem. This hinders fast service delivery of the authority and has to be known by the tax payers the day of the meeting. Tax officials did not available on their position to get different service. Tax officials had no feeling of giving service to the tax payers. They are not believe mentally to deliver service internally they are not volunteer to give service. With regard to interview in service delivery, it is not as expected from the tax authority for the tax payers who come to pay money for the country. This comes from three factors: internal –internal believe and voluntariness of tax officials, lack of knowledge of the tax officials, externally from system failure, lack of willingness of tax payers to give information.Table 4.6.3 Results of question regarding level of tax payers satisfaction the responses of the tax authority in the tax assessmentParameter Response Frequency PercentWhat is your level of satisfaction in regarding the responses of the tax authority in the tax assessment strongly dissatisfied 66 26.1 Dissatisfied 79 31.2 Neutral 42 16.6 Satisfied 55 21.7 very satisfied 11 4.3 Total 253 100.0Source: field survey result using SPSS v.20. , 2018According to the above table, among the respondents 26.1% strongly dissatisfied, 31.2% dissatisfied, 16.6% neutral, 21.7% satisfied and 4.3% very satisfied by the responses of the tax authority regarding tax assessment.Table 4.6.5 Results of question regarding level of tax payers' satisfaction the tax authority to solve problems by using suggestion of the tax payersParameter Response Frequency Percentthe tax authority uses your suggestion and solve problems strongly agree 31 12.3 Agree 61 24.1 Neutral 26 10.3 Disagree 135 53.4 Total 253 100.0Source: field survey result using SPSS v.20. , 2018According to the table above, from the respondents replied about the tax authority to solve problem based on the suggestion given by the tax payers 12.3% of the respondents replied strongly agree, 24.1% agree, 10.3% neutral and 53.4% disagree. Most of the respondents disagree with the authority solving problems based on the suggestion given by the tax payers. Regarding the responses of the officials through interview they agree even though opportunity to give suggestion is given for the tax payers, tax payers were not use appropriately as well as the tax authority also.4.4.3 Level of Tax Payers Satisfaction in terms of clarity of the tax systemUnder this section, the respondents' general view on the clarity of the tax system has been discussed. The respondents were asked to indicate their agreement or disagreement with some statements relating to some of the factors that influence clarity of the tax system in Ethiopia. This was based on likert scale, where strongly disagree to strongly agree. Table 4.7.1 Results of question regarding level of tax payers' satisfaction in terms of clarity of the tax systemParameters strongly disagree Dis Agree Neutral Agree strongly Agree No % No % No % No % No %Easy in filing up the declaration forms 33 13.0 58 22.9 20 7.9 114 45.1 28 11.1Tax laws are participatory 73 28.9 83 32.8 44 17.4 43 17.0 10 4.0The tax laws made based on the reality of the country 84 33.2 69 27.3 55 21.7 32 12.6 13 5.1Tax laws are clear and understandable by all tax payers 71 28.1 124 49.0 32 12.6 18 7.1 8 3.2Tax laws are applicable for all tax payers equally 73 28.9 111 43.9 27 10.7 32 12.6 10 4.0Amended Tax laws/ regulation/ directives reaches tax payers on time 94 37.2 99 39.1 29 11.5 25 9.9 6 2.4Unclear rules are getting solution in the short time by the tax authority 89 35.2 107 42.3 36 14.2 15 5.9 6 2.4The government has clearly defined tax policies 58 22.9 56 22.1 48 19.0 68 26.9 23 9.1The tax procedures are clear and simple 57 22.5 86 34.0 27 10.7 68 26.9 15 5.9The tax authority gives updated information to the tax payers 74 29.2 107 42.3 29 11.5 36 14.2 7 2.8Website Tax authority always updated and delivered full information 84 33.2 78 30.8 43 17.0 37 14.6 11 4.3Source: field survey result using SPSS v.20. , 2018According to the above table, the satisfaction of tax payers based on the filing up of the declaration forms 13% of the respondents strongly disagree, 22.9% disagree, 7.9% neutral, 45.1% agree and 11.1% strongly agree. From the finding filing the declaration forms majority of the respondents agree. This indicates in terms filing of the declaration tax payers were satisfied. Regarding the participatory of the tax laws to the citizens based on the above table, 28.9% of the respondents strongly disagree, 32.8% disagree, 17.4% neutral, 17% agree, 4% strongly agree. This indicates that majority of the respondents disagree. Tax laws are changed and new tax laws are implemented without the active participation of the citizens. Interview results shows that tax laws are not amended based on active participation of the tax payers, rather when tax officials faces difficulties and controversial for the implementation. In addition new directives are made by different authority in the country. Based on above table, tax payers' respondent asked whether tax laws are made based on the reality of the country and 33.2% of the respondent replied strongly disagree, 27.3% disagree, 21.7% neutral, 12.6% agree and 5.1% strongly agree. From this we can understand that most of the respondents disagree about the tax laws of Ethiopia is based on the reality of the country.Based on the above table, Regarding understandability and clearness of the tax laws, 28.1% of the respondents strongly disagree, 49% disagree, 12.6% Neutral, 7.1% agree and 3.2% strongly agree. This indicates majority of the respondents disagree regarding the understandability and clarity of the tax laws. From the interview as indicated above tax payers did not actively participate on the laws and since there are the taker of the law rather the maker they may not understand the tax laws. Continual education is necessary from the tax authority to full fill the gaps.Regarding the applicability of the tax laws for all tax payers equally, based on the above table, 28.9% of the respondents strongly agree, 43.9% disagree, 10.7% neutral, 12.6% agree, 4% strongly agree. Majority of the respondents were disagree. The tax laws were not applied for all the society equally. Interview respondents agreed with the tax payer respondents that application of tax laws for all tax payers is not equally, because of unethical behavior of tax officials, loopholes in the tax laws, change in the laws other may benefited and the one may not, incentives given for the tax payers, lack of modern controlling system of illegal tax payers and the like were among the problems leads to un equal application of tax laws for the tax payers.Regarding amended tax laws/regulation/directives to reaches tax payers on time based on the above table, 37.2% strongly disagree, 39.15 disagree, 11.5% neutral, and 2.4% strongly disagree. Majority of the respondents disagree. Tax payers did not get amended tax laws on time. This leads to unfair punishment of the tax payers. From the interview of tax officials, since the way to deliver of amended tax laws is through limited ways and the source of the laws/ directives were from different organizations, tax payers may not get update information and this leads to different penalties on tax payers.Regarding the tax authority to give solution to unclear rules in the short time, 35.2% strongly disagree, 42.3% disagree, 14.2% neutral, 5.9% agree and 2.4%strongly agree. Majority of the respondents disagree. Unclear rules are getting solution after a long period of time. From the interview of the officials unclear rules and regulation are amended by the head office. This takes long period of time to get a solution and returned back for the application.Regarding the government to have clearly defined tax policies based on the above table 22.9% of the respondents replied strongly disagree, 22.1/% agree, 19% neutral, 26.1% agree and 9.1% strongly disagree. The finding revealed that most disagree and agree. The tax laws were not clearly defined and easily understandable by all tax payers. With the regard to the clarity and simplicity of tax procedures, based on the above table 22.5% of the respondent replied strongly disagree, 34.0% disagree, 10.7% neutral, 26.9% agree and 5.9% strongly agree. The finding shows that most of the respondents replied disagree. According to the interview of tax officials, the overall tax procedure lacks clarity and simplicity because of less concentration on tax education awareness of tax payers to create compliant tax payer to change the attitude of tax payers towards taxation tax laws. Based the above tables, tax authority gives updated information to the tax payers 29.2% of the respondent strongly disagree, 42.3% disagree, 11.5% neutral, 14.2% agree and 2.8% strongly disagree. From the finding majority of the respondents replied disagree. They were not satisfied by the information given by the tax authority.Regarding website of tax authority, 33.2% of the respondent replied strongly disagree, 30.8% disagree, 17.0% neutral, 14.6% agree and 4.3% strongly agree. From the finding majority of the respondents replied website of the tax authority did not updated itself and did not deliver full information. Information from the website is not full, updated and not go with the time and leads to incorrect action to the tax system.From the interview result of the officials, the tax authority website lacks update information, accessibility, delivery of full information. In addition it is only concentrated on a few points, all branches did not participate on the system.Table 4.7.2 Results of delivery of new directives to tax payersMeasurement Response Frequency PercentFrom where do you get new directives about the tax laws? Media 49 19.4 Websites 64 25.3 Magazine 74 29.2 Brochures 15 5.9 Periodicals 51 20.2 Total 253 100.0Source: field survey result using SPSS v.20. , 2018From the above table, 19.4% of the respondents get new directives from media, 25.3% websites, 29.2% Magazine, 5.9% Brochures and 20.2% periodicals. This indicates that majority of the respondents get new directives about the tax laws from magazine, website, periodicals, media and brochures respectively from highest to lowest. Respondents asked to express their own idea about the clarity in the tax system and some of them were listed as follows: Lack of awareness for all tax payers about the legal frame work for taxation Tax official lacks updating themselves with new proclamation and directives The tax authority does not participate the society before applying new rules and regulation as well as amended rules and laws are not reaches to tax payers on the time. There is no modern controlling mechanism of illegal traders There is boundary between tax payers and government. They looks each other as enemy this resulted from lack of confidence and bad attitude between tax payers and tax officials. The tax laws are not on the reality of the country Copy of the other country.Table 4.7.3 Results of question regarding level of tax payers' satisfaction in terms of the overall tax systemMeasurement Responses Frequency Percentoverall tax system very poor 42 16.6 Poor 91 36.0 Neutral 31 12.3 Good 84 33.2 very good 5 2.0 Total 253 100.0Source: field survey result using SPSS v.20. , 2018Based the above tables, overall tax system 16.6% of the respondent very poor, 36.0% poor, 12.3% neutral, 33.2% good and 2.8% very good. From the finding majority of the respondents perceived the overall tax system as poor. They were not satisfied by the tax system. From the interview result the tax system of the country did not fulfill many things to satisfy the tax payers. There are different problems faced by the tax organization that has to be combated in the future.Table 4.8. Level of satisfaction on general based on the objectivesParameters Very low Low Medium High Very high No % No % No % No % No %Level of fairness in the tax system 34 13.4 139 54.9 38 15 42 16.6 0 0Level of service delivered 56 22.1 81 32 36 14.2 54 21.3 26 10.3Level of clarity of the tax system 39 15.4 93 36.8 59 23.3 50 19.8 12 4.7Source: survey result of SPSS v.20, 2018From the above finding based on the three objectives the level of tax payers satisfaction based on the respondents response, the highest number of the respondents replied low.4.5 Analysis of Measures4.5.1 Measures of ReliabilityTest of Measure of reliability is conducted based on Cronbach's alpha (Joseph A. Glien; Rosemary R. Glien, 2013), the reliability of any given measurement refers to the extent to which it is a consistent measure of a concept, and cronbach's alpha is one way of measuring the strength of that consistency. According to them, the measure of items is reliable if cronbach's alpha coefficient value is more or equal to 0.70. Hence, the measurement scales used in this study are reliable since the Cranach's alpha value in this study is .935 as shown in the following table.Table 4.9 Reliability StatisticsCronbach's Alpha Cronbach's Alpha Based on Standardized Items N of Items.935 .921 47Source: field survey result using SPSS v.20. , 20184.6 Hypothesis Testing4.6.1 Test of the correlation between fairness of the tax system and satisfaction of tax payersTable 4.9 correlation between the three objectives and tax payers' satisfactionCorrelations overall satisfaction by tax system what is the level of fairness in the tax system what is the Overall satisfaction by service delivered what is you general view by the Clarity of the tax systemSpearman's rho overall satisfaction by tax system Correlation Coefficient 1.000 .177** .438** .570** Sig. (2-tailed) . .005 .000 .000 N 253 253 253 253 what is the level of fairness in the tax system Correlation Coefficient .177** 1.000 .272** .193** Sig. (2-tailed) .005 . .000 .002 N 253 253 253 253 what is the Overall satisfaction by service delivered Correlation Coefficient .438** .272** 1.000 .472** Sig. (2-tailed) .000 .000 . .000 N 253 253 253 253 What is you general view by the Clarity of the tax system? Correlation Coefficient .570** .193** .472** 1.000 Sig. (2-tailed) .000 .002 .000 . N 253 253 253 253**. Correlation is significant at the 0.01 level (2-tailed).H0: There is no a significant relationship between fairness of tax system and tax payers satisfaction.HA: There is a significant relationship between fairness of tax system and tax payers'satisfaction Based on the test results in the table 4.9 above, p