Presentation by Gebregziabher G. Tsadik, Assefa Gezae and Worku Tamrie at the second annual meeting of the Ethiopian Tax Research Network, which took place in Addis Ababa on 8th October 2018.

1. 1
Perception of Value Added Tax Compliance in Ethiopia:
Filing and Invoicing
The case of three federal branch offices in Addis Ababa
By:- G/her G/tsadik
Worku Tamrie
Assefa Gezae
08 Oct 2018

2. 2
Presentation Outline
Items
Introduction
Objectives of the study and Research Questions
Conclusions and Recommendations
Research Methods and Material
Results and Discussions
1
2
3
4
5

3. 3
Introduction
Tax compliance refers to complex attitudinal issues toward all
types of tax
Includes registration, filing, computation and payment of taxes
Theories have been taken in to account to understand the
attitude of taxpayers to tax compliance
Tax Compliance
VAT Compliance
Similarly, VAT compliance deals with behavioral issues but
specific to VAT
 It can be analyzed through the same theories
It includes perception of VAT registrant toward filing and
invoicing compliance
1

4. 4
Introduction
Perception to
VAT filing and
invoicing
compliance
Various studies have been undertaken on perception of
taxpayers toward tax compliance in other countries and Ethiopia
 However, as to the researchers knowledge studies not
undertaken on perception of VAT registrant to VAT filing and
invoicing compliance
1
Therefore ,this study intends to fill the existing knowledge gap by conducting an in
depth investigation on perception of VAT registrant on VAT filing and invoicing
compliance issues

5. 5
VAT Filing and Invoicing Legal Framework Overview
1
Compliance VAT Law
Proclamation Regulation
VAT Filing  VAT registrants are required to file a
VAT return no later than the last day
of the calendar month
 Failure to file a timely return is liable
for penalty equal to 5 percent of the
amount of tax underpayment for
each month
285/2002
article 26 sub
articles 1-4
and article 46
sub article 1-4
Regulation
no 79/2002
article 9 sub
article 1-16
VAT
Invoicing
 A person registered for VAT that
carries out a taxable transaction is
required to issue a VAT invoice
 Any person issued incorrect tax
invoice penalizes 100% on the
transaction
285/2002
article 22 sub
articles 1-7
and article
45(a-c)

6. 6
Objective of the study and Research Questions
The broad research objective is to assess perception of value
added tax compliance on filing and invoicing in Ethiopia
Specific research questions are:
 How do VAT registrant perceive VAT invoicing and filing
compliance?
What are VAT invoicing and filing compliance related issues in
Ethiopia?
2
Note: To address these research questions the researchers tried to analysis the cause and effect
relationship between variables

7. 7
Methods and Materials
Research Approach and
Sources of Data
• Quantitative
• Qualitative research
approach
• Primary Sources
- Survey tools
- Interview and FGD
• Secondary Sources
- ERCAs’ various
reports and relevant
laws
3
Analysis of Data Collected
• Descriptive statistics
software (SPSS);
Multiple Linear
Regression
• Pie Charts and Tables
• Percentages, mean, std
and narrative
discussions of ideas
Sample Selection
• As of 11 January 2018 there were
23,114 VAT registrant;
• Samples were selected based on
simple randomly i.e. 1,060
• Sample selection was proportional
as # of taxpayers in branches:
LTO: 52, EAST: 612, and WEST: 396
• Out of 1,060 survey questionnaires
distributed 652 were completed
and returned*
Note: * The response rate was 62%

8. 8
Results and Discussions
4
Sex
45%
55%
Female
Male
Majority of respondents were Male
Respondent’s Age
54.50%36.50%
9%
21- 30
31- 40
>40
Most of respondent’s age
were between 21 and 30 years
Respondent’s education qualification
4.00% 9.20%
61.10%
23.10%
2.60% High School
Deploma
1st Degree
2nd Degree
>2nd Degree
Majority of respondents have 1st degree
26%
19%
20.40%
5.70%
15.20%
13.70%
Import and
Export
Service
Construction
Whole seller
and Retailer
Manufacture
Sector
Source: Survey tool and SPSS Computation
Most of respondents engaged in
construction and service sector

9. 9
Results and Discussions….
4
The researchers have considered various variables that may have impact on VAT filing and
invoicing compliance behavior
Attitude of VAT invoicing and filing compliance (Dependent variable)A
62%
31%
3% 4%
‘Your view in terms of
invoicing non-compliance?’
‘Your view in terms of
invoicing non-compliance?’
56%
35%
6% 2%
It is very wrong and very
accountable by law
It is wrong and accountable
by law
It is wrong but not make
accountable
It is not wrong and not
make accountable
The attitude of VAT invoicing non-
compliance is low
The attitude of VAT filing non-
compliance is low
Source: Survey tool and SPSS Computation

10. 10
Results and discussions ……
4
Attitude of VAT registrant toward VAT invoicing and filing compliance (dependent variable)A
Questions Descriptive statistics Result
“The prevalence of forged VAT
invoices?” The alternative answers were
ranges from very high =1 to very low =5
Mean=2.73 Attitude to invoicing
non-compliance is low
“VAT registrant honestly file?” The
alternative answers were ranges from
strongly agree =1 to strongly
disagree=5
Mean=3.22 Attitude to filing
compliance is low
Source: Survey tool and SPSS Computation

11. 11
Results and discussions ……
4
Perception of VAT registrant to independent variables
B
Questions Descriptive statistics ResultAssumptions
“Perception of VAT registrant
that ERCA provide services
without discriminating tax
payers” and the response
range from strongly agree =1
to strongly disagree=5.
Mean=2.55 Perception of VAT
registrant to ERCA
provide services
with discriminating
taxpayers is not
low
Perception of fairly
treated by the tax
administration have
impact on invoicing
and filing compliance
“Perception to the
government use VAT revenue
for providing public goods and
services” and the response
range from strongly agree =1
to strongly disagree=5.
Mean=3.07 Perception of VAT
registrant toward
government use
VAT revenue for
providing public
goods and services
is low
Perception to the
level of goods and
services provided by
the government
influence non-
compliance behavior
to invoicing and filing
compliance
Source: Survey tool and SPSS Computation

12. 12
Results and discussions ……
4
Perception of VAT registrant to independent variables
B
Questions Descriptive statistics ResultAssumptions
“Perception of other VAT
registrant taxpayers are
compliant to VAT invoicing
and filing” and the response
range from strongly agree
=1 to strongly disagree=5.
Mean=2.47
Low perception
towards other VAT
registrants are
noncompliant
Noncompliant
behavior of other
(customer,
neighbourand peer
group) may influence
the perception of VAT
invoicing and filing
compliance
Source: Survey tool and SPSS Computation
“Perception of VAT
registrant that customers
request invoice during
transactions ” and the
response range from
strongly agree =1 to
strongly disagree=5.
Mean=2.3 Perception of VAT
registrant that
customers request
invoice during
transactions is high

13. 13
Results and discussions ……
4
Perception of VAT registrant to independent variables
B
Questions Descriptive statistics ResultAssumptions
“Perception to VAT registrant
that VAT filing process is
easy’” and the response range
from strongly agree =1 to
strongly disagree=5.
Mean=2.89 VAT registrants have
perception that VAT
filing process is not
easy
Perception to
government
legitimacy have
impact on perception
of VAT invoicing and
filing compliance
“Perception to taxpayers
easily access VAT laws’”
and the response range from
strongly agree =1 to strongly
disagree=5.
Mean=2.69 VAT registrants have
perception that VAT
laws are not easily
accessible
“Perception of VAT laws are
complex and difficult to
understand easily ’” and the
response range from strongly
agree =1 to strongly
disagree=5.
Mean=2.99 VAT laws are
perceived as
complex and difficult
to understand
Source: Survey tool and SPSS Computation

14. 14
Results and discussions ……
4
Perception of VAT registrant to additional independent variables
c
Questions Descriptive statistics ResultAssumptions
“Perception to cash register
machine improve invoicing
and filing compliance ” and
the response range from
strongly agree =1 to strongly
disagree=5.
Mean=1.61 High perception to
cash register
machine that can
improve invoicing
and filing
compliance
Perception to cash
register machine
improve invoicing and
filing compliance have
impact on perception
of VAT invoicing and
filing compliance
Source: Survey tool and SPSS Computation
“Perception of difficult to get
input VAT invoice during
purchases ’” and the response
range from strongly agree =1
to strongly disagree=5.
Mean=2.98 VAT registrants have
perception to get
input VAT invoices is
difficult
Perception of VAT
registrant toward
getting input VAT
invoices during
purchase might
influence the
behavior of invoicing
and filing compliance

15. 15
Multiple Linear Regression Between the Mentioned VariablesD
4
Coefficientsa
Model
Unstandardized
Coefficients
Standardized
Coefficients
t Sig.B Std. Error Beta
1 (Constant) 1.140 .597 1.908 .057
Perception of difficult to get input VAT invoice
during purchases
.118 .056 .112 2.117 .035
Perception of VAT registrant that customers
request invoice during transactions
.131 .059 .112 2.217 .027
Perception of other VAT registrant taxpayers
are compliant to VAT invoicing and filing
-.133 .060 -.119 -2.236 .026
Perception of VAT laws are complex and
difficult to understand easily
-.079 .058 -.071 -1.367 .172
Perception of VAT registrant that ERCA
provide services without discriminating tax
payers
.105 .049 .108 2.116 .035
Perception to the government use VAT revenue
for providing public goods and services
.120 .055 .117 2.196 .029
Perception to cash register machine improve
invoicing and filing compliance
.032 .084 .018 .376 .707
Sex .528 .136 .199 3.892 .000
Respondents' age .112 .107 .053 1.046 .296
Education level -.170 .097 -.089 -1.751 .081
Business sector .111 .029 .179 3.749 .000
a. Dependent Variable: The prevalence of forged VAT invoices
Source: Survey tool and SPSS Computation

16. 16
Regression between the mentioned variables…….D
4
 Perception of VAT registrant that customers request invoice during transactions
 Perception of difficult to get input VAT invoice during purchases
 The perception of others’ compliance and compliance attitude
 Perception of VAT registrant that ERCA provide services without discriminating tax payers
 Perception to the government use VAT revenue for providing public goods and services
Sex
Business sector
The result of multiple linear regression (P<0.05) show a positive and statistically significant
relationship to VAT invoicing and filing compliance behavior on the following variables:-
Meaning: A one-point increase or decrease in the perception of these variables is likely to
positively increase or decrease the probability of the view that noncompliance of VAT filing
and invoicing
Source: Survey tool and SPSS Computation

17. 17
Regression between the mentioned variables…….D
4
The result of multiple linear regression (P>0.05) show a negative and statistically significant
relationship to VAT invoicing and filing compliance behavior on the following variables:-
 Perception of VAT laws are complex and difficult to understand easily
 Perception to cash register machine improve invoicing and filing compliance
 Respondents' age
Education level
Source: Survey tool and SPSS Computation
Meaning: A one-point increase or decrease in the perception of these variables is likely to
negatively decrease or increase the probability of the view that noncompliance of VAT filing
and invoicing

18. 18
Conclusions Recommendations
The perception of VAT registrants to the following
variables was found to have statistically
a significant (positive) impact on VAT filing and
invoicing compliance attitude
The study highlighted VAT filing and invoicing
compliance issues that have impact on
taxpayers behaviors. Based on this findings the
following points are recommended:-
Conclusions and Recommendations
5
Perception of ERCA provide services without
discriminating tax payers
Perception of VAT registrant that customers
request invoice during transactions
Perception of difficult to get input VAT invoice
during purchases
Perception to the government use VAT revenue
for providing public goods and services
Perception of VAT registrant that of others’
compliance
Gender and business sector
Variables that was found to have negative
statistically a significant impact on VAT filing and
invoicing compliance attitude
Perception of VAT laws are complex and
difficult to understand easily
Perception to cash register machine improve
invoicing and filing compliance
Age and Education level
•ERCA need to assess the existing taxpayers
and public communication systems and
procedures and practices to upgrade
taxpayers and the public awareness
toward tax
•ERCA need to modernize core processes
including filing and other using
digitalization
•ERCA Should focused on the key
manufacturers , importers and
distributors in order to issue VAT
receipt to buyers
•ERCA has to develop and implement
compliance policy

19. 19
Thank You!