Challenges of Value Added Tax (VAT) Collection Performance: a Case Study of Hawassa City Revenue Authority (South Ethiopia)

Abstract

This study investigates the challenges of Value Added Tax (VAT) collection performance in case of Hawassa City Revenue Authority. The study adopted a mixed research method approach to answer the research questions. A survey data was collected from 94 VAT registered businesses of which 78 were addressed through distribution of self-administered questionnaires and an in-depth interview was conducted with tax officials. The interview was conducted with three tax officials at different time to check the consistency of information. Beside to primary source secondary source of data collected from the annual report of Hawassa City Revenue Authority from the year 2008 up to 2013. Findings from mixed approach portrayed that both tax payer community and customers misunderstanding VAT in combination with administrative incapability challenging the effective collection of VAT in Hawassa city. Failure to issue invoices after selling and customers` lack of initiative to ask for receipts after shopping and getting services also increasing the prevalence of un-collectability of VAT in the city