DAMBI DOLLO UNIVERSITY

College of Business and Economics

Department of Accounting and Finance

A Research Proposal in Partial Fulfilment of bachelor's degree

Title: Assessment on VAT Administration Practice

and Its Challenge: The Case of Sayo Woreda Internal
Revenue Office

BY: DAME HORA

ADVISOR: Mr. MUBAREK (MSC)

November 2024

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 ABSTRACT

The study will focus on assessing the value-added tax (VAT) administration practices
and challenges in Sayo Woreda. The primary issue anticipated in connection with VAT
administration practices will be whether the newly implemented tax system, VAT, will
be properly performed in accordance with the rules and regulations established by the
government. The main objective of the study will be to assess the future practices and
challenges in the revenue administration office of Sayo Woreda, as well as to identify
factors that might create administrative problems and potential strengths in VAT
administration.

Finally, the study will aim to provide possible recommendations for improving the
performance of the VAT administrative system in Sayo Woreda. To achieve the study's
objectives, primary and secondary data will be collected using questionnaires and the
manual of Sayo Woreda's VAT administration practices as key data collection methods.
The collected data will be analyzed through tables, graphs, and percentages. This
research will be conducted to evaluate the potential future operation and administrative
practices of VAT and the problems associated with them. It will help VAT payers
understand the need for value-added tax, evaluate anticipated challenges, and propose
corrective actions based on the projected findings and conclusions. Lastly, the study will
be limited to assessing VAT administration practices in Sayo Woreda due to potential
constraints of time and budget.

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 TABLES OF CONTENTS
Abstract…………………………………………………………………………………………… 2
Table of contents…………………………………………………………………………………3
CHAMPTER ONE
1. Introduction………………………………………………………………………………….4
1.1 Background of the study………………………………………………………………4
1.2 Background of the organization……………………………………………………4
1.3 Statement of problem………………………………………………………………….5
1.4 Objective of the study………………………………………………………………… 6
1.4.1 General objective of the study………………………………………………… 6
1.4.2 Specific objective of the study………………………………………………….6
1.5 Significance of the study……………………………………………………………… 6
1.6 Scope of the study…………………………………………………………………………… 6
1.7 Limitation of the study………………………………………………………………………6
1.8 Organization of the study……………………………………………………………………7
CHAPTER TWO
2. Literature review………………………………………………………………………….7
2.1 Introduction………………………………………………………………………………….7
2.2 Direct versus indirect tax………………………………………………………………7
2.3 General overview of VAT………………………………………………………………7
2.4 VAT Terminology……………………………………………………………………………8
2.5 Feature of VAT……………………………………………………………………………….9
2.6 Principal components of VAT……………………………………………………….........10
2.7 type of VAT…………………………………………………………………………………….11
2.8 VAT collection method…………………………………………………………………………12
2.9 VAT registration …………………………………………………………………….13
2.10 Type of registration……………………………………………………………….13
2.11 administration of VAT…………………………………………………………….13
2.12 VAT invoice…………………………………………………………………………….14
2.13 VAT computers system…………………………………………………………...14
2.15 Criticism of VAT…………………………………………………………………….13
2.16 Advantage and Disadvantage of VAT……………………………………….13
CHAPTER THREE
3. RESEARCH METHODOLOGY……………………………………………………………… 14
3.1 type and source of data……………………………………………………………14
3.2 sample size and population………………………………………………………14
3.3 sampling technique………………………………………………………………….14
3.4 method of data collection…………………………………………………………14
Reference……………………………………………………………………………… 15
Questionnaire for Sayo Woreda value added tax administration office

CHAPTER ONE: INTRODUCTION

1.1 Background of study

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Value added tax belongs to the family of sale tax. sale tax is a tax on sale traction, but it is
applied at only one stage of business activity right from the manufacturer to the retailer.
Usually, it is collected from either at the whole seller retailer level.
VAT is becoming increasingly popular on account of its administrative convenience. It is more
difficult to avoid. The government has able to incorporate in its various exemptions, and France
adopted rate. VAT through historical evaluation in 1954 to replace turnover tax. since 1967
other country of European Economic Community (EEC) also started opting for value added tax
(Bhatia,2003 p:152-155)
Later it was gradually expanded to African countries especially countries, which are the
colonies of France like Cote ’devoir, Senegal and Mali. From all African countries Ethiopia
introduce VAT a recent time in 2003. The need for VAT emanated from the wither of the sale
tax intended to place (Bhatia, 2003 p: 145).
In case of Ethiopia, VAT also introduce to replace for sale tax due to various reason there are to
improve tax collection and to combat fiscal fraud. The reason also classified into internal and
external factor for the introduction of VAT in Ethiopia to replace sale tax (Mismark, 2008
p:312). According to Bhatia, VAT refers to comprehensive idea on that included producer's
middle person and finally included consumer. In Ethiopia at introduction stage of VAT the
people accepted by VAT since it is based on paying ability of the taxpayers who register for
VAT collection at the rate of 15% and other necessities are expected from payment of tax. VAT
was introduced as a measure to tax base and promote investment, Federal Inland Revenue
Authority (FIRA) has improved to administer VAT by proclamation number 286/2002.

Finally, the researcher will evaluate the factors contributing to administrative challenges and
identify the major issues encountered during the collection process. The study will also provide
targeted recommendations to address these existing problems and enhance the efficiency of the
VAT administration system.

1.2 Background of the Organization

Sayo is a woreda in Oromia Region, Ethiopia. This district received its name from the name of
the Oromo tribe (Sayyoo') that settled it first, Dembidolo which is a separate district now is part
of the Kelem Welega Zone. Sayo is bordered on the south by the Gambela Region, on the west
by Anfillo, on the north by Yemalogi Welele, on the northwest by Hawa Gelan, and on the east
by the Birbir River which separates it from the Illubabor Zone.
This woreda has different governmental sectors to undertake different activities to serve society.
Among these sectors revenue sectors is one which was established for the purpose of revenue
collection that has a greater contribution for the development of the country. It collects various
taxes, including value-added tax, excise tax, business income tax, property tax, and others, in
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accordance with government regulations. These taxes are levied on different entities based on
the categories they fall under. As mentioned earlier, tax collection is carried out using various
methods, such as raising awareness through education and seminars provided to taxpayers, as
well as offering training to office employees who may lack comprehensive knowledge. This
ensures the proper and efficient collection of taxes.

In general, this office was established to implement tax system reforms and provide accelerated
and equitable tax assessment services, contributing to the country's economic development.

1.3 Statement of the problem

The primary source of government revenue is taxation, with VAT being one type of tax that
significantly contributes to increasing government revenue and balancing it against
expenditures. Although the VAT system has been widely accepted and implemented by both
developing and developed countries, various challenges have been associated with its
application.

VAT has been criticized for placing its burden on the end consumer, making it inherently
regressive. This means that low-income individuals bear a disproportionate burden compared to
higher-income individuals, as VAT is based on the consumption of essential goods. Despite
these challenges, many tax reform committees and economists continue to advocate for the
VAT system, considering it suitable for the prevailing economic conditions in developing
countries. However, implementing the VAT system in underdeveloped countries is particularly
challenging due to inefficient and inexperienced tax administration systems that struggle to
manage complex tax structures.

Additional challenges arise on the taxpayers' side, including a lack of understanding of VAT,
unwillingness to comply, and limited capacity and skills among personnel tasked with VAT
collection. On the government’s side, there are issues such as improper implementation of rules
and regulations and insufficient enforcement mechanisms. Given these challenges, this study
aims to investigate VAT administration practices in Sayo Woreda to identify the gaps and
propose solutions for effective implementation.

1.4 Objective of the study

1.4.1 General objective

The general objective of this study is to analyze and evaluate the VAT administration practices
and challenges in the Internal Revenue Office of Sayo Woreda.

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1.4.2 Specific objective of the study
Based on the overarching objective, the specific objectives of this research will be as follows:

1. To evaluate whether taxpayers and tax authorities comply with government-issued rules and
regulations in implementing VAT.
2. To identify the factors contributing to administrative challenges related to VAT.
3. To examine the key issues associated with VAT collection.
4. To offer actionable recommendations based on the research findings.

1.5 Significance of the study.

The main purpose of this study will be to explore the operation of value-added tax (VAT)
and its associated challenges. Furthermore, it will aim to assist policymakers and taxpayers
in understanding the importance of VAT, its mechanisms for determination, and the
administrative issues it poses for both taxpayers and decision-makers. This understanding
will help them contribute meaningfully to the country's development. Additionally, the
study will serve as a valuable reference for future researchers conducting studies in the same
area.

1.6 Scope of the study

The study will be conducted to assess the VAT administration practices in the Internal
Revenue Office of Sayo Woreda. It will primarily utilize secondary data, although primary
data will also be employed to a certain extent. The secondary data will be collected from
documents, online resources, and relevant reference materials.

1.7 Limitation of the study

During the preparation of this research paper, the researcher may probably face several
limitations, including:

 Respondents' potential unwillingness to provide complete information.

 Limited time allocated for conducting the research.
 Insufficient funding available for the project.
 A lack of personal computers necessary for data analysis.

1.8 Organization of the paper

The study is divided into five chapters. The first chapter provides an introduction to the
paper, while the second chapter reviews relevant literature. Chapters three and four focus on
the research methodology and data analysis, respectively. The final chapter summarizes the
findings, draws conclusions, and presents recommendations to address issues in VAT
administration.

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 CHAPTER TWO
2. Literature Review
2.1 Introduction
This chapter critically reviews contemporary theories and empirical findings related to the
assessment of value-added tax administration. Tax is a compulsory levy that economic units pay
to the government without any direct entitlement to a specific return; it is not a price paid for
services rendered by the government. The benefits taxpayers receive from the government are
not directly related to their status as taxpayers (Bhatia, 2003, p. 145). Taxes are broadly
classified into two categories: direct and indirect taxes (Gupta, 2001, p. 141).

2.2 Direct versus Indirect tax

The distinction between direct and indirect taxes can be made based on the coincidence of
impact and incidence, but this is not the only criterion. It is argued that taxes on production are
direct, while those on consumption are indirect. Similarly, income taxes are considered direct,
whereas expenditure taxes are seen as indirect (Bhatia, 2003, p. 134).

Direct taxes are levied on income receipts, such as income tax, profit tax, capital gains tax, and
property or wealth tax. In contrast, indirect taxes may not necessarily fall on the recipient; examples
include customs duties, excise taxes, sales tax, value-added tax, turnover tax, and stamp duties
(Gupta, 2001, p. 142).

2. 3 General overview of Value Added Tax (VAT)

VAT belongs to the family of sale taxes therefore, it would be helpful to briefly distinguish
between VAT is a type of sales tax, and it’s essential to differentiate between various sales tax
forms, placing VAT within that context. A general sales tax applies to sales transactions where
the seller pays tax based on net sales rather than gross value. In contrast, VAT divides tax
liability across stages, with the total retail price reflecting the value added to raw materials
throughout production and trade.

Consumption tax (retail sales tax) is charged on the amount consumers pay for goods, while
VAT is imposed on the amount factories receive for production. VAT is a comprehensive
consumption tax applied to the value added to intermediate products at various production
stages. Over 50 countries, including Canada, Japan, and all EU nations, utilize different VAT
rates. The tax originated in France in 1954 when the country joined the European Union, which
mandated VAT introduction for membership.

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VAT is a straightforward multi-stage sales tax that excludes intermediate goods and services
from its tax base. It is calculated as the difference between sales proceeds and the cost of
intermediate goods and services over a specific period:

Value added = total transactions - intermediate transactions.

As part of the sales tax family, VAT is an indirect tax levied whenever taxable entities supply
goods and services during their business activities, ultimately borne by the consumer. It taxes
the value added by businesses to goods and services during the production and distribution
processes (Bhatia, 2003, p. 145).

2.4 Value Added Tax Terminology

Some of the terms that are in value added tax literate are: -
Output tax: - The VAT that your business pays over on taxable supplies made and can be
recovered only on so far as your business in VAT registered and make taxable output.
Input tax: -The VAT that your business collects on taxable supplies (VAT paid on sale).
VAT payable: - this is the VAT to be paid to the FIRA by the taxable person. It is arrived at by
the formula
VAT payable = output tax- input tax
VAT refundable: - The net VAT that taxable person expected from FIRA when input VAT
exceed output VAT in Ethiopia
Zero rating: -the supply is changed with VAT at 0% but credit can be taken for VAT paid on
purchase Use to make supplies.
Positive rate (stand rate): -the supply is changed with the rate of 15%
Exemption: - the supply is exempted from VAT. No VAT is charged on the supply no credit
can be taken For VAT paid on the purchase used to make supply(misrack,2008p:312-314)

2.5 Feature of VAT

VAT is an indirect tax in that it is levied and changed by a government on consumer’s
expenditure, which is directly curetted from business on their business transactions and from
importers on their imports it is invented because very high sale taxes and tariff encourage
cheating and smuggling. Hence, VAT is characterized by the following features.
a) General or Comprehensive tax

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VAT is a “general or comprehensive tax” that applies in principles of all commercial activities
involving the import, production and distribution of goods and the provision of service.
b) Broad base tax

VAT is abroad based tax” since the government collects such tax from all sectors, that is from
import, manufacturing, wholesale and retail sectors as well as service sectors. Hence, VAT
conceptually affects all commercials sectors.
c) Percentage of price

VAT is “a percentage of price” which means, the actual tax burden is visible at each stage in the
import production and distribution chain.
d) Collected fractionally

VAT is collected” fractionally” because each time the item changes hands in the process of
import, production and distribution, the VAT is assessed and collected on the incremental value
of the product. The total tax levied at each stage in the economic chain of supply is an
accountant fraction of the value added by a business to its product.

e) The principle of tax credit system

Basically, VAT is a multi-point tax. However, it works on the principle of tax credit system.
That is, it provides for granting set off (credit) of the tax paid at the earlier stage (Source:
Misrak Tesfaye 2011 P:465).

2.6 Principal Components of VAT

As the VAT system is governed by the principle of tax credit system, VAT for VAT registered
persons have two principal components. There are input VAT and output. The difference
between output and input VAT results in Net VAT.
2.6.1 Input VAT

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Input VAT is the VAT payable by a taxable person on goods and services supplied to him
by VAT registered suppliers and on goods which he/she in ports for the purposes of a
business carried on by him/her and for which registered for VAT.
2.6.2 Output VAT
Output VAT is the VAT collected by taxable person at the time of sale of taxable goods and
service. It is the VAT changeable on sales of table goods and services whenever a taxable
person supplies taxable goods or services to another person.
2.6.3 Net VAT
The difference between the amount of output tax and input tax represents either net VAT
payable to the tax authority or net VAT refundable from the tax authority.
Output VAT >Input VA:– Net VAT payable
Output < Impute VAT: – Net VAT credit /Net Vat refundable
(Source: Misrak Testay, 2011 Pi 473)

2.7 VAT Rates

VAT collected by a registered seller for the government is typically calculated by
multiplying the selling price of the taxable product by the applicable VAT rate. There are
two types of VAT rates: the standard VAT rate and the zero VAT rate.
a. Standard VAT rate
The standard VAT rate is a positive rate (>0%) established by national tax law for taxable
goods and services. Ethiopia has a single standard VAT rate of 15%.
b. Zero – VAT rate
Zero VAT rate refers to a VAT rate of 0% established by a country's tax law for taxable
goods and services. Under this rate, a VAT-registered person does not charge VAT on sales,
resulting in no output VAT. Consequently, the supplier has no tax liability on these sales but
can claim a tax credit or refund for the VAT paid on purchases related to the supply
(Source: Misrak Tesfaye, 2011, p. 473-474).

2.8 Type of Value Added Tax

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VAT can vary based on the tax base. If a firm can deduct the entire credit upon purchasing
capital equipment, it is referred to as consumption VAT. If the deduction is allowed as the
equipment depreciates over time, it is called income VAT (Bhatia, 2003, p. 148).

a. Income Type Tax

This tax allows firms to deduct the full value of their non-capital from another firm. This
approach contributes to the overall net value added for the country, with the aggregate tax base
in the absence of international trade being the Net National Product (NNP). Essentially, the tax
base is calculated as sales minus materials and depreciation for each firm (Bhatia, 2003, p. 147).

b. Consumption Type VAT

Without foreign trade, the primary tax base for the economy is calculated as profit (P) plus
depreciation (d) minus investment (I). Thus, the aggregate tax base equals GNP - I (Misrack,
2008, p. 309).

c. Growth National Product (GNP) Type VAT

This tax applies to both consumer and capital goods and is paid by the seller when the product is
sold to the final purchaser, whether a consumer or a firm purchasing capital goods. This type of
value-added tax is often unpopular with governments as it discourages capital investment and
economic growth.

GNP = IG + C, where IG = investment growth and C = consumption (Bhatia, 2001, p. 401).

d. Wage Type VAT

This VAT allows firms to deduct net earnings from their capital to determine the tax base, as
earnings from capital consist of profit plus interest.

2.9 VAT Collection method

In the consumption-type VAT system, each firm determines its tax base by subtracting the cost
of intermediate and capital goods from its sales. There are two methods for computation:

a. Accounting Method
This method requires firms to pay taxes based on the computed tax base.
b. Invoice Method
Under this method, firms calculate their growth tax by applying the tax rate to total sales
(Musgrave, 2004, pp. 400-402).

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 2.10 VAT Registration
If supply is within the scope of VAT, the person who makes such supply must register for VAT.
Under the VAT law of Ethiopia, any person conducting a commercial an activity or intending to
conduct a commercial an activity may apply to be registered for VAT.
2.11 Type of Registration
A. Obligation Registration
A person engaged in taxable activities who is not registered must apply for VAT registration if
the total value of taxable transactions exceeds 500,000 Birr at the end of any period, or if there
are reasonable grounds to expect that such transactions will exceed 500,000 Birr over the next
12 months.

B. Voluntary Registration

A person conducting taxable activities who is not required to register for VAT may voluntarily
apply for registration if they regularly supply or render at least 75% of their goods and services
to registered persons (source: http://www.erca.gov.et/VAT).

2.12 Administration of VAT

The administration of VAT does not require a firm to calculate value added. The most common
means of administrating the tax is the invoice method developed in French and used in
European Union Nation to collect the tax. Under the invoice method, all transactions are taxed
at a fixed proportion rate regardless of whether they are final intermediate transaction taxpayers
are then allowed to deduct the terming of their tax liability. Tax liability is simply by applying
the fixed rate of taxation to total sale invoice and then deducting the amount of VAT paid
previously on intermediate purchased.

Tax liability = tax payable on sale-tax paid on intermediate purchase

= t (sale)- (t (purchased))
= (t) (sale-total intermediate purchased)
= (t) (value added)
Where it is the rate of taxation
Firm that makes capital purchase are allowed on additional tax paid on capital good so tax
Liability of firm that makes capital purchased in each tax period would be: -
Tax liability = ((t) (total sale-total intermediate purchase)-(t) capital purchased)
= t (total sale-total purchase-capital purchase)
= (t) (value added investment)
2.13 VAT Invoice
VAT invoice is the documents used as basis for input recover see also procedure of drawing up
VAT invoice.
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  Sale ledger: - is required to determine VAT amount for each operation subject to
VAT and to register VAT invoice in it/for retail trade to register copy of cash
receipt.
 Purchase ledger: -is requested to register VAT invoice used by seller and to
determine VAT amount subject to recover.
2.14 VAT Computers System
The VAT computer system, the minister of revenue, is acquiring a system that has already
been developed by a national company and operates successfully in other countries which
will only require customization to meet the specified need of ERCA. The customization
effect commenced in May 2003 and implementation of the system is expected to commence
in the TIN (Taxpayer identification number) and VAT inter system will be converted.
(Source: - http://www. More. Gov et/Vat. Admin.htm).

2.15 Criticism of VAT

VAT has been criticized as the burden of it relies on personal end customer of product some
critics consider it to be regressive tax means the poor pay more as percentage of the income
than rich have.
Defender argue that exciting taxation through income is arbitrary, and the VAT is in fact
proportional tax in that people with higher income is pay more at the consumer more the
effect of progressive or regressive of VAT system can also be affected when different class
of good are taxed at different (source:- http://www.answer. Com/topic/. valued added tax).

2.16 Advantage and Disadvantage of VAT

Advantages of VAT
 The crude method simplifies tax liability assessment for firms.
 VAT aims to remain neutral in resource allocation for production and business, thereby avoiding
integration of less economically suitable production methods.
 It does not impede the adoption of advanced, capital-intensive technology.
 A key advantage of VAT is its neutrality regarding resource allocation, leading to reduced tax
evasion.
 VAT encourages exports and allows for easier separation of tax from production costs.

Disadvantages of VAT
 VAT can be complex, requiring an honest and efficient government to verify and link various
production activities.

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 Unless the VAT rate is exceptionally high, the government may collect less revenue compared to
sales tax.
 It is difficult to assume that any modern government can maintain a truly neutral tax system in
terms of allocation and distribution effects (Bhatia, 2003 p:149).

CHAPTER THREE
3. RESEARCH METHODOLOGY
3.1 Type and Source of data
To conduct this study the research will use both primary and secondary data sources.
Primary data source from employees of tax administration office and business and service
organization to these primary data the researcher is employed. Secondary data source from
documents, manual of Sayo Woreda VAT administration office and published books which
are used as qualitative approach source of data.
3.2 Sample size and population
Engaging the entire population of businesses and service organizations registered in Sayo
Woreda is both timely and financially impractical. Some of these organizations are
registered to pay VAT. Therefore, the researcher will select a sample from a percentage of
the total taxpayers and include 100% of the employees from the tax administration office as
part of the study sample.
3.3 Sampling technique
The researcher will use simple random sampling to ensure that every segment of the
woreda's population has an equal chance of being selected, thus eliminating personal bias.
3.4 Method of data collection
The data will primarily consist of responses from a questionnaire distributed to selected
employees of the organization, focusing on suggestions related to VAT administration
practices in Sayo Woreda.
3.5 Method of data analysis
The data analysis methods used in this study primarily involve descriptive data analysis,
including tables and percentages.

The table indicates that 100% of respondents believe VAT is more advantageous than sales tax.
According to a questionnaire conducted with tax administration employees, VAT benefits taxpayers
by allowing them to add 15% to their sales

The likelihood of tax evasion is lower under VAT compared to sales tax, leading to potentially
higher revenue. Additionally, VAT helps avoid the cascading effect of taxing components of the
final product multiple times (tax-on-tax).

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 REFERENCE

1. Alka, Gupta,2001,public Finance and planning 1st edition,anmol puplication pvt.ltd

New Delhi
2. David N.Hyman,2002, contemporary application of theory to policy 7 th edition,
Harcourt, College, united state of America
3. H,L Bhatia,1996,2003, public finance ,19th and 24th revised and enlarged edition, vikas
publication house pvt ltd,New Delhi
4. Misrack Tesfaye,2008,Ethiopia tax accounting theory And mpractice,1st edition
5. Musgrave ,2004,public finance in theory and practice ,7th edition , New Delhi. Web sites
6. http://www.erca. Gov.et/vat.php
7. http://www.answer.com/topic/value added tax
8. htt://www.more.gov.t/vat.admin.htm

Questionnaire for Sayo Woreda value added tax administration office

15
 Questionnaire on Assessment of VAT administration practice in Sayo Woreda

Dear Sir/Madam,
This study is part of the requirement for the fulfillment of B.A degree in accounting at
Dambi Dollo University. The title of the research is “Assessment of VAT Administration
practice and challenges in the Internal Revenues office of Sayo Woreda “.
The objective of this study is to describe and evaluate VAT administration practices,
focusing on taxpayer and tax authority compliance with government regulations. We aim to
identify VAT collection issues through this questionnaire, which will gather data essential
for assessing VAT in your organization. Your responses will significantly contribute to the
research's success. Therefore, I greatly appreciate your participation in completing this
questionnaire and kindly request that you answer each question honestly.

Part one, respondent’s personal information

1. Sex: male female

2. Age: from18-25 from 26-35 from 36-45 from 46-55 above 55

3. Level of education
8-12 Diploma Degree 2nd Degree
Other please, specify ____________________________________
4. Please would you indicate your position and profession?
Position __________________ Qualification___________________
Part two, general questionnaire to employee of VAT Administration of Internal Revenue
Office
1. Does taxpayer report their invoice on time?
Yes No
2. What type of action is taken if the taxpayer is not paid by the due date?
Financial penalty
Temporary shutdown of business
Prison penalty
Other please, specify
____________________________________________________________
3. Does the tax record invoice properly? Yes No
4. If you say “No” what type of action are taken by the tax administration Ofice?
_______________________________________________________________________
_______________________________________________________________________
___
5. Does the tax administration office incompliance with the rule and regulation issued by
the government? Yes NO
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6. If your answer is “NO” what is the reason
_________________________________________
______________________________________________________________________
______________________________________________________________________
7. What are the major problems related to the VAT collection?
Lack of taxpayer awareness
Misunderstanding the tax system
Responsiveness of the tax pay
If any other, please specify
____________________________________________________
_______________________________________________________________________
_
8. How do you see the advantage of VAT to increase the government revenue?
Low medium high
9. What is/are the reason do the taxpayer give for their late payment?
_____________________

10. What action does the organization take for late payment?

11. What types of penalties are taken for those who are trying to escape from registration
and tax payment?
_______________________________________________________________
_______________________________________________________________________
12. What types of actions are taken by the tax administration office to increase the number
of registrants?
Encouraging and initiating taxpayers to register
Facilitating workshop, seminaries panel conferences
Hiring and appointing educated expertise in VAT offices
If any other please, specify
________________________________________________________
13. How does the tax administration office create awareness and understanding of the VAT
system for taxpayers?
____________________________________________________________________
______________________________________________________________________
______________________________________________________________________
14. Which problems have existed with respect to challenges in the application of VAT?
Lack of experience of employees
Lack of educate personnel

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 Lack of skill manpower
Lack of awareness of taxpayer
Other please,
specify__________________________________________________________
15. Does the VAT advantageous than sale tax? a, Yes No
A, please, indicate your reason
_________________________________________________
____________________________________________________________________
__
16. Do you think VAT is more convenient than sale tax from the administration point of
view?
Yes No
17. If you say “NO” what is/are reason to replace?
_____________________________________
_________________________________________________________________________
_______
18. Who are beneficiaries from market competition?
VAT registered non-VAT registered
19. How?
____________________________________________________________________
_________________________________________________________________________
___
20. If you have other comments, please add them.
_________________________________________________________________________
_
__________________________________________________________________________
__________________________________________________________________________
Thank you for taking the time to complete this questionnaire!

Questionnaire for Sayo Woreda business Community

Questionnaire on Assessment of VAT Administration practice in Sayo Woreda
Dear Sir/Madam

This study is a requirement for completing a B.A. degree in Accounting at Dambi Dollo
University. The research title is “Assessment of VAT Administration Practice in Sayo
Woreda.” The objective is to evaluate VAT administration practices, focusing on
taxpayer and tax authority compliance with government regulations, as well as VAT
administration and collection issues. The questionnaire aims to collect data to assess
VAT practices within your organization. Your responses will contribute to my research
and are crucial for gathering reliable data. I would greatly appreciate your participation

18
 in filling out this questionnaire, and I kindly request that you answer each question
honestly.

Part one, respondent’s personal information

1. Sex: male female
2. Level of education
8-12 certificate 10+2 diploma degree
If other please, specify_____________________
3. Type of business organization you are currently engaged in?
Service giving organization
Manufacturing organization
Merchandizing
If other please, specify_______________________________
4. What is the legal form of your business entity?
Partnership

Limited company

Sole proprietorship
Joint venture
Part two, general questionnaire to business community of Sayo Woreda
1. How do you judge VAT administration practice in Sayo Woreda?
Poor good very good excellent
2. Why you select it, one from the above alternative please specify the reason?
_______________________________________________________________________
3. Would the taxpayer be incompliance with rule and regulations issued by the
government?
Yes No
4. If your answer is “NO” what is the reason?
__________________________________________
_______________________________________________________________________
____
5. Activity taken by the administration office to create awareness of VAT to tax pay?
Within 3 months within 4 months within 6 month within a year
6. Would you think that the above chosen alternative satisfactory to create awareness?
_______________________________________________________________________
___
7. Would you report your invoice on time? Yes No
8. If your answer is” No” state the reason?
__________________________________________
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 ______________________________________________________________________
9. The relation between taxpayer and tax administration office
Strong medium weak
10. Please, specify the reason as to why you selected any of the above choices.
_______________________________________________________________________
____
11. Would you think the lack of awareness and misunderstanding of the tax system have an
effect on the following alternative?
At the time if collection
Unable to differentiate exempted good and service
Overstate the exempted good
All
12. Would you record the invoice properly? Yes No
13. If you say “NO” what is/are reason/s?
_______________________________________________________________________
______________________________________________________________________
14. If you have any comments, please add it.
_______________________________________________________________________
_______________________________________________________________________
______________________________________________________________________
Thank you for taking the time to complete this questionnaire!

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