The Impact of Tax Perception on Compliance Behavior

Temesgen Andualem



It is a widely accepted agreement that, government expenditure is a necessary condition for a country to grow and develop. Taxes are the main sources government use to achieve its legitimate projected revenue to finance the country’s expenditure. Cognizant of this fact, taxpayers’ perceptions regarding tax and the benefit it gives for the society's influence government's ability to collect the required amount of money, which can be used as an engine for running the wellbeing of the society. Thus, this study tries to examine how business taxpayers perceive the tax system in Nekemte City, and how their perception influence their tax compliance behavior. To this end, data were collected through questionnaire from 234 sample respondents. To measure their tax perception, mean and standard deviation were used while ordinal logistic regression was employed to ascertain whether factors of tax perception influence tax compliance behavior or not. The result revealed that business taxpayers in Nekemte City believe taxes are important for the nation’s development, although they feel that city administrators and tax office of the city don’t communicate properly, how the taxes collected spend in the way it benefit the residents of the city. Moreover, factors of economic deterrence, social influence, and fiscal exchange influence the probability of tax compliance.

Key Words: - Tax Perception, Economic Deterrence, Fiscal Exchange, Comparative Treatment, Social Influence, Political Legitimacy

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ISSN : 2251-1547