Assessment on the implementation of Value-Added Tax (VAT) in Mekelle City Administration

Assessment on the implementation of Value-Added Tax (VAT) in Mekelle City Administration

Taxes are important sources of public revenue. Value Added Tax (VAT) is VAT is a tax on consumer expenditure. It is collected on business transactions and imports. A taxable person can be an individual, firm, company, as long as such a person is required to be registered for VAT. Even if VAT is one of the most important sources of revenue and its implementation in Ethiopia is infant.

This study tried to explore the major problems and prospects of Value-Added Tax (VAT) implementation in Mekelle City Administration. By considering the population size and availability of large numbers of VAT registered business firms, a total of 150 respondents from VAT collectors (registered business firms) and 50 respondents from VAT payers (consumers) were considered. The data gathered from both business tax payers and ultimate consumers were analyzed using soft ware package of Statistical Package for Social Scientists (SPSS) version 16.

The result of the study indicated that significant number of business community felt that the government is the sole beneficiary of VAT, the willful registration of the businesses has not yet come to the desired level, there is negative perception about the fairness of the payment across the businesses, significant decline in the number of the customers following the implementation of VAT has been observed, many consumers believe that VAT has been the very reason for business firms to impose higher price on products or services delivered and failure to give VAT & to tear down receipts.