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Problems and prospects of implementing VAT in Ethiopia

Abstract: 

One of the mechanisms in which countries raise revenue to finance government spending on the goods and services that most of us demand is taxation. As compared to the developing countries, the developed countries have been able to generate substantial revenue through imposing of taxes. One of the reasons for this has been the efficient tax system operating in the developed countries unlike the developing economies which are characterized by weak monetization and the low development of the formal sectors. In other words, these countries have employed a tax system that have one or a combination of the following desirable characteristics as economic efficiency, administrative simplicity, flexibility, political accountability and fairness. The tax system need to be economically efficient meaning the tax system should not have an impact on the allocation of resources. The tax system a country adopt should be easy and inexpensive to administer and that should be able to respond to changing economic circumstances. Taxpayers should also be able to determine what they are actually paying so that the political system can more accurately reflect the preferences of individuals. The tax system should be seen to be fair in its impact on all individuals.

It follows that optimality in a tax system requires absence of distortion in any economic activity( Hancok, 1995 ). It is expected that people's tax payments is in line with their income and they are required to pay a tax in proportion to their level of income. On the part of the tax collectors, collection of tax should be time conscious and convenient and the cost of collecting the taxes should not be high to discourage business. Alternatively, this means that the ideal tax system in developing countries should raise essential revenue without excessive government borrowing and should do so without discouraging economic activity and without deviating too much from tax system in other countries( Tanzi, 2001)

Corporate Author: 
Alemayehu Seyoum ... [et al.] (editor)
Publisher: 
Ethiopian Economic Association (EEA)
Primary Descriptors: 

value added tax (VAT); Taxation

Secondary Descriptor: 

Tax reform

Geographic Descriptors: 
Ethiopia
Cataloge Date: 
02/27/2013
Broad Subject heading: 
Tax system
Call Number: 
330.963 PRO 2005
Serial Key Title: 
Proceedings of the Second International Conference on the Ethiopian Economy
Publication catagory: 
Content type: 
Volume: 
III
Publication date: 
2013-05-27 23:05:00
Forum or Discussion date: 
2013-02-27 15:01:59
Place of publication: 
Addis Ababa, Ethiopia
Type of material: 
Book
Current frequency: 
Annualy