Perceptions of Value Added Tax Filing and Invoicing Compliance in Ethiopia: The Case of Three Federal Branch Offices in Addis Ababa

Abstract

African governments are increasingly seeking to improve tax compliance in the pursuit of domestic revenue sources. Despite this trend, there is limited understanding of value added tax (VAT) compliance in Africa. In Ethiopia, increased VAT compliance is essential for the government to meet its ambitious domestic revenue goals. Therefore, we surveyed 652 Ethiopian VAT-registered businesses to better understand VAT compliance attitudes. Our study found that compliance is negatively affected by the time and effort required to file VAT. Additionally, registrants do not perceive a strong link between tax collection and adequate government service provision. As a result, we recommend a streamlined VAT filing and invoicing process that is digitized and available in the local language. We also recommend improved tax administrative support, training, and explanatory materials. Finally, our findings indicate that a demonstrated relationship between VAT collection and improved government service provision will positively influence compliance.