CHAPTER ONE

Introduction

1.1 Background of the Study

Organizations are established to accomplish their goals and objectives effectively and

efficiently. They are concerned about both their own effectiveness and the role they play in the

society. It is fair to realize that distributed the resource equally and growth depends on their

ability to adapt the changing environment through strategic thinking which is called

organizational development or strategic planning.

Ethiopian revenues and customs authority Akaki Kality sub-city small tax payer’s branch office

is one of revenues collecting branch. After tekmet/October,2003 EC Addis Ababa city

administration of revenues authority agreed with the federal democratic republic of Ethiopian

revenue and customs authority in order to work together to satisfy the citizen need. Even though

the collected money is totally delivered to Addis Ababa city administration of revenues authority

as usually previously done. But the main reason to works together with Ethiopian revenues and

customs authority is adapted the structure and technical skill transferring in the process of

collecting tax so in Addis Ababa each of 10 sub-city is administrated by Addis Ababa city

administration of revenues authority and the collected tax from each of 10 sub-city delivered to

Addis Ababa city administration but they apply the structure and techniques of Ethiopian

revenues and customs authority.

Akaki Kality sub-city small tax payers branch office is administrated 11 Wordas but in this time

only 8 are functional. This small tax payers branch office has 185 employees and all are intended

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by performed different task, like collecting the tax of house and land, turn over tax, value add tax

(in each of month),pension and etc.

In this organization for long years different works are performed by one person but now this

organization had 6 fundamental sectors:-

The 1st sector task is tax collecting and levied.

The 2nd sector task is tax audit.

The 3rd sector task is financial administration.

The 4th sector task is information desk technical.

The 5th sector task is related to customer service.

The 6th sector task is keeping collecting tax by legal right.

1.2 Statement of the problem

When an institution was established, it has its own vision, mission and objectives, that directs to

give the expected quality service without corruption, with in transparency and in a responsible

way which can be trust between every citizen and government and also to satisfy the needs and

interest of the citizen effectively and efficiently. Thus, it is expected from the leaders to keep the

goal and objectives of the tax system and lead accordingly and honestly. Therefore, the

collection of tax is supposed to carry out all its goal and objectives, which means their

development is achieved.

But, because of many reasons may it esteem from the citizen, the government policy or agency,

lack of technology and ethics of tax worker the development plan are not fulfilled. So there are

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various problems that cause customer service dissatisfaction that was clearly described and listed

below as follows:-

Prioritization of personal interest rather than community serving or lack of patriotism.

Unbalanced or unfair tax levid on citizen without studied the income of commercial

center or by estimation.

Lack of awareness and understanding of the need of tax.

The problem of modern technology and controlling system.

Implementing directly developed country tax system rather than designing a system that

considered and related with our commercial.

Shortage of qualified workers and absence of necessary department.

1.3 Research Question

This study was mainly expected to find the right answer (responses) to the following questions:-

1. What are the main problems of customer dissatisfaction in the process of tax collection?

2. What are the main problems of cash registrar machine?

3. What are the main problems of quality service of akaki kality sub-city small tax payer’s

branch office?

4. Does akaki kality sub-city small tax payer’s branch office has enough man power?

5. How was the overall performance of akaki kality sub-city small tax payer’s branch office

gives satisfied and quality service for the tax payer?

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1.4 Objectives of the study

1.4.1 General Objective

The general objective of this study was to discover and identify the reasons (causes) that attribute

to customer dissatisfaction from the service of Akaki Kality sub-city small tax payers branch

office.

1.4.2 Specific objective

- To know the process of tax collection and service of akaki kality sub-city small tax payer’s

branch office.

- To know the problems seen in both tax payer and collector.

- To know in which service area dissatisfy of tax payers.

1.5 Significance of the study

The study is important to government, citizens, and to any interested party in the following ways.

1. It shows the service giving performance of akaki kality sub-city small tax payer’s branch

office.

2. It states the problem of tax collection and the distribution of tax collection.

This research study will solve the problem seen in both tax payer and collector that will help

Ethiopian revenue and customs authority and akaki kality sub-city small tax payer’s branch

office to enable to give quality service in the future.

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1.6 Limitation

In conducting this study, few limitations the researcher faced can be listed as:-

Not getting some necessary information, especially secondary source about the

organizations.

The new structure of the organization changing of employee’s position and the new

employees of the organization are not well known about the past document of the

organization.

Because of shortage of time and financial constraints the collection of tax in this sub-

city is classified in each woreda. Even though administrated by low level tax payer

branches of bearue. Because of the number of branch if will faced many things.

1.7 Research methodology

1.7.1 Research design:-in order to maximize the achievement of the research; I have used

exploratory method of design that assisted the research to dig out the root causes of

dissatisfied tax payers within services of akaki kality sub-city small tax payer’s branch office.

Further more both qualitatively and quantitatively approaches were included which in fact they

had great role in acquiring the necessary primary data from targeted respondents.

1.7.2 Sampling technique:- This study was conducted in Addis Ababa specifically Akaki Kality

area. Akaki kality is the most industrialized area of Ethiopia. The town is one of the sub towns of

the capital city of Addis Ababa. It is found 25 KM away from the center of Addis Ababa to the

South. In this research work involved 50 respondents from tax payers, selected by simple random

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sampling and 6 Akaki Kality sub-city small tax payers branch office workers was selected by

purposive sampling technique.

1.7.3 Method of data collection:- The data needed were obtained from the primary sources, the

primary data is obtained by using personal interview and questioner methods. For both methods,

the researcher select the respondents from those the whole tax payer and worker of Akaki kality

sub-city small tax payer’s branch office. The selection was made by using purposive sampling

technique for interviewed the worker and simple random sampling for respondents of tax payer

in akaki kality sub-city.

A. Interview Method

Interview method was one of the methods used by the researcher to collected data from workers

of Akaki Kality sub-city small tax payers branch office.

The reasons behind used interview method included –

More information in great depth can be obtained.

If any resistance happened from respondent it enabled the interviewers tackled by their

own skill.

It was possible to collected supplementary information.

Miss interpretation of the answer for the questions was easily avoided.

In this interviews method, there were about 6 respondents from selected workers of Akaki Kality

sub-city small tax payers branch office the sampling technique here was purposive sampling

technique. This technique enabled the research to selected respondent that he/she thinks best fit

to the questions.

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B. Questionnaire Method

Questionnaire Method was the other method that i used in this study. The reasons behind used

this method was:-

Enabled the researcher to collect the data from large number of respondents.

The respondents feel free to write their response on the paper.

In this method the researcher used tax payers of Akaki kality sub-city small tax payer’s branch

office .here the 50 respondents was selected from different trade in akaki kality sub-city by

simple random sampling technique.

The secondary sources and observation were also means in acquiring relevant data. Journals

were in use, I have also to review the literature with regard to the topic of research. Generally I

tried to improve repeatedly all the techniques for the better achievement of the outcome.

1.8 organization of the paper

The paper comprises four chapters. The first chapter contains back ground of the study,

statement of the problem, objective of the study, significance of the study and research

methodology. The second chapter contains review of earlier studies related to the topic of the

study. The third chapter presents the analysis and interpretation of the study. Finally in the fourth

chapter conclusion and recommendation will be followed.

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CHAPTER TWO

LITERATURE REVIEW

2. Major Types of Taxes existing in Ethiopia

2.1 Direct Taxes

2.1.1 Tax on Income from Employment / Personal Income Tax

Every person deriving income from employment is liable to pay tax on that income at the rate

specified in Schedule ‘A’as follows:

Employment Income(per month)

Tax rate(in %) Deduction(in Birr)

Over birr To Birr0 150 Exempt threshold151 650 10% 15.00651 1,400 15% 47.501,401 2,350 20% 117.502,351 3,550 25% 235.003,551 5,000 30% 412.50Over 5,000 35% 662.00

Table 2.1 personal income tax

Example: Computation of Personal Income Tax

Monthly Salary of 500.00 Birr

- Personal Income Tax = 500 Birr x 10% tax rate = 50 Birr

- Deduction = 50 Birr - 15 Birr deduction fee

- Tax payment = 35 Birr

Employment income shall include any payments or gains in cash or in kind received from

employment by an individual. Employers have an obligation to withhold the tax from each

payment to an employee, and pay the Tax Authority the amount withheld during each calendar

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month. In applying the procedure, income attributable to the months of Nehassie and Pagume

shall be aggregated and treated as the income of one month. (ECC and EBDSN ,2005,p.3)

If the tax on income from employment, instead of being deducted from the salary or wage of the

employee, is paid by the employer in whole or in part, the amount so paid shall be added to the

taxable income and shall be considered as part thereof.(Ibid)

The following categories of income shall be exempt from payment of personal income tax:

Income from employment received by casual employees who are not regularly employed

provided that they do not work for more than one month for the same employer in any

twelve months;

Pension contribution, provident fund and all forms of retirement benefits contributed by

employers in an amount that does not exceed 15% of the monthly salary of the employee;

Subject to reciprocity, income from employment, received for services rendered in the

exercise of their duties by diplomatic and consular representatives, and other persons

employed in any Embassy and who are national of that state and bearers of diplomatic

passports;

Payments made to a person as compensation or a gratitude in relation to personal injuries

suffered by that person or death of another person;

Amounts paid by employers to cover the actual cost of medical treatment of employees;

Allowances in lieu of means of transportation granted to employees under contract of

employment;

Hardship allowance;

Amounts paid to employees in reimbursement of traveling expenses incurred on duty;

Amounts of travelling expense paid to employees recruited from elsewhere than the

place of employment on joining and completion of employment or in case of foreigners

travelling expenses from or to their country, provided that such payments are made

pursuant to specific provisions of the contract;

Allowance paid to members and secretaries of board of public enterprises and public

bodies as well as to members and secretaries of study groups set up by the Federal or

Regional Government;

Income of persons employed for domestic duties.

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2.1.2 Business Profit Tax

This is the tax imposed on the taxable business income / net profit realized from entrepreneurial

activity. Taxable business income would be determined per tax period on the basis of the profit

and loss account or income statement, which shall be drawn in compliance with the generally

accepted accounting standards. Corporate businesses are required to pay 30% flat rate of

business income tax. For unincorporated or individual businesses the business income tax ranges

from 10% - 35%. Unincorporated or individual businesses are taxed in accordance with the

following schedule below:

Schedule ‘c’Taxable business income/Net profit per year

Tax Rate(In %) Deduction(In Birr)

Over Birr To Birr0 1800 Exempt threshold1801 7800 10% 180.007801 16800 15% 570.0016801 28200 20% 1410.0028201 42600 25% 2520.0042601 60000 30% 4950.00Over 60,000 35% 7950.00

Table2.2 Business profit tax

Example: Computation of business profit tax

Business Net Profit per year/Taxable Income = 70,500.00 Birr

- Business Profit Tax = 70,500 Birr x 35% tax rate = 24,675 Birr

- Deduction = 24,675 Birr - 7,950 Birr deduction fee

- Tax payment = 16,725.00 Birr

In the determination of business income subject to tax in Ethiopia, deductions would be allowed

for expenses incurred for the purpose of earning, securing, and maintaining that business income

to the extent that the expenses can be proven by the taxpayer. (Ibid)

The following expenses shall be deductible from gross income in calculating taxable income:

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The direct cost of producing the income, such as the direct cost of manufacturing,

purchasing, importation, selling and such other similar costs;

General and administrative expenses connected with the business activity;

Premiums payable on insurance directly connected with the business activity;

Expenses incurred in connection with the promotion of the business inside and outside

the country, subject to the limits set by the directive issued by the Minister of Revenue;

Commissions paid for services rendered to the business;

Sums paid as salary, wages or other emoluments to the children of the proprietor or

member of the partnership shall only be allowed as deduction if such employees have the

qualifications required by the post.

The following categories of income would be exempted from payment of business income tax:

Awards for adopted or suggested innovations and cost saving measures;

Public awards for outstanding performance;

Income specifically exempted from income tax by the law in force in Ethiopia, by

international treaty or by an agreement made.

Penalty for understatement of tax:

If the amount of tax shown on a declaration understates the amount of tax required to be

shown, the taxpayer is liable for a penalty in the amount of 10% of the understatement or

50% if the understatement is considered substantial. The understatement is considered

substantial if it exceeds 25% of the tax required to be shown on the return or 20,000 Birr;

The penalty shall continue to apply until, the Appeal Commission or a Court, as the case

may be shall have rendered its final decision.

Penalty for late payment:

A taxpayer who fails to pay tax liability on the due date is subject to:

A penalty of 5% of the amount of unpaid tax on the first day after the due date has

passed; and

An additional 2% of the amount of tax that remains unpaid on the first day of each

month thereafter. (Ibid)

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2.1.3 Tax on Income from Rental of Buildings

This is the tax imposed on the income from rental of buildings. If the taxpayer leased furnished

quarters, the amounts received attributable to the lease of furniture and equipment would be

included in the income and taxed. (Ibid)

Example: Computation of Rental Income Tax

Net profit per-year/Taxable Income 38, 000.00 Birr

- Rental Income Tax = 38,000 Birr x 25% tax rate = 9,500 Birr

- Deduction = 9,500 Birr -2,820 Birr deduction fee

- Tax payment = 6,680 Birr

Conditions of payment:

The owner of a building who allows a lessee to sub-lease is liable for the payment of the

tax for which the sub-lessor is liable, in the event the sub-lessor fails to pay;

When the construction of a rental building is completed or when the building is rented,

the owner and the builder are required to notify the administration of the Kebele in which

the building is situated about such completion and the name, address, and tax

identification number of the person or persons subject to tax on income from rental of

building;

The Kebele administration has the obligation to communicate the information obtained

to the appropriate tax authority.

2.1.4 Tax on Interest Income on Deposits

Every person deriving income from interest on deposits shall pay tax at the rate of 5%. The

payers are required to withhold the tax and account to the Tax Authority. (Ibid)

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2.1.5 Dividend Income Tax

Every person deriving income from dividends from a share company or withdrawals of profits

from a private limited company shall be subject to tax at the rate of 10%. The withholding agent

shall withhold or collect the tax and account to the Tax Authority. (Ibid)

2.1.6 Tax on Income from Royalties

‘Royalty income’means a payment of any kind received as a consideration for the use of, or the

right to use, any copyright of literary, artistic or scientific work including cinematography films,

and films or tapes for radio or television broadcasting.

Royalties income shall be liable to tax at a flat rate of 5%. The withholding agent who effects

payment shall withhold the foregoing tax and account to the Tax Authority. Where the payer

resides abroad and the recipient is a resident, the recipient shall pay tax on the royalty income

within the time limit set out. (Ibid)

2.1.7 Tax on Income from Games of Chance

Every person deriving income from winning of games of chance (e.g., lotteries, tombolas, and

other similar activities) shall be subject to tax at the rate of 15%, except for winning of less than

100 Birr. The payer shall withhold or collect the tax and account to the Tax Authority. (Ibid)

2.1.8 Tax on Gains of Transfer of Certain Investment Property

This is the tax payable on gains obtained from the transfer (sale or gift) of building held for

business, factory, office, and shares of companies. Such income is taxable at the following rates:

Building held for business, factory, and office at the rate of 15%;

Shares of companies at the rate of 30%.

Gains obtained from the transfer of building held for residence shall be exempted from tax

provided that such building is fully used for dwelling for two years prior to the date of

transfer. Any person authorized by law to accept, register or in any way approve the transfer

of capital assets shall not accept, register or approve the transfer before ascertaining that the

payment of the tax has been duly effected. (Ibid)

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2.1.9 Tax on Income from Rental of Property

The taxable income under this category is income derived from casual rental of property

(including any land, building, or moveable asset) not related to a business activity. This type of

income is subject to tax at a flat rate of 15% of the annual gross income. (Ibid)

2.2 Indirect Taxes

2.2.1 Turnover Tax

The Turnover Tax would be payable on goods sold and services rendered by persons not

registered for Value Added Tax. The rate of Turnover Tax is

2% on goods sold locally;

for services rendered locally:

o 2% on contractors, grain mills, tractors and combine-harvesters;

o 10% on others.

The base of computation of the Turnover Tax is the gross receipts in respect of goods supplied or

services rendered. A person who sells goods and services has the obligation to collect the

Turnover Tax from the buyer and transfer it to the Tax Authority. Hence, the seller is principally

accountable for the payment of the tax. In accordance with the Turnover Tax Proclamation No.

308/2002, the following would be exempted:

Sale or transfer of dwelling used for a minimum of two years, or the lease of a dwelling;

Rendering of financial services;

Supply of national or foreign currency and of securities;

Rendering by religious organizations of religious or other related services;

Supply of prescription drugs specified in directives issued by the relevant government

agency, and the rendering of medical services;

Rendering of educational services provided by educational institutions;

Supply of goods and rendering of services in the form of humanitarian aid;

Supply of electricity, kerosene and water;

Provision of transport;

Permits and license fees;

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Supply of goods or services by a workshop employing disabled individuals (if more

than 60% of the employees are disabled);

Supply of books.

Assessment of the Tax

If after review by the Tax Authority, it appears that a person has understated his tax

obligation, the Authority can issue an additional assessment;

If, for any reason, the books of account are unacceptable to the Tax Authority, or if the

tax payer fails to submit same when requested by the Authority, or if no books of account

and supporting documents are maintained, the Tax Authority would assess the tax on the

basis of information available;

A presumptive turnover tax would be payable by Category “C”taxpayers who are not

required to keep records. The base for the presumptive turnover tax would be the total

turnover used as base for the income tax;

The assessment made would be prepared in an assessment notification and be delivered

to the taxpayer;

If the Authority makes an additional assessment and within 30 days of notice the person

assessed does not pay the additional assessment or appeal the assessment the person is in

default;

If the Tax Authority fails to assess the tax and notify the taxpayer of the amount still due

within five years from the date of declaration and payment of the tax by the taxpayer the

tax so paid would be final and conclusive. In case where the taxpayer has not declared his

income or has submitted a fraudulent declaration, no time limit provided in any other law

shall bar the assessment of the tax by the Tax Authority.

Notification of Changes

A registered taxpayer is required to notify the Tax Authority:

Any change in the name, address, place of business, constitution, or nature of the

principal taxable activity or activities of the person;

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Any change of address from which, or name in which, a taxable activity is carried on by

the registered person, with in 21 days following such change.

Tax Evasion

A person who evades the declaration or payment of tax, commits an offence and in addition to

any penalty may be prosecuted and be subject to a term of imprisonment of not less than five (5)

years. If any amount of tax is not paid by the due date, the person liable is obliged to pay interest

on such amount for the period from the due date to the date the tax is paid. The interest rate is set

at 25% over and above the highest commercial banks lending interest rate that prevailed during

the preceding quarter.

A person who fails to file a timely return is liable for a penalty equal to 5% of the amount of tax

underpayment for each month (or portion there of) during which the failure continues, up to 25%

of such amount. The penalty is limited to 50, 000 Birr for the first month in which no return is

filed. (ECC and EBDSN ,2005,p.12)

2.2.2 Excise Tax

It is believed that this tax should be imposed on luxury goods and basic goods, which are

demand inelastic. It is also believed that imposing the tax on goods that are hazardous to health

and which are causes to social problems will reduce the consumption thereof.(Ibid)

Rate of Excise tax:

The excise tax would be imposed on goods imported or either produced locally in accordance

with the following schedule, given in Excise Tax Proclamation No. 307/2002. The base of

computation of Excise Tax is the cost of production for goods produced locally; where as for

goods imported the base of computation would be the cost of production, insurance and freight

costs.

Obligations of the taxpayer:

Maintaining books of accounts and supporting documents in accordance with proper

accounting principles and in a manner acceptable to the Tax Authority;

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Submit every 30 days to the Tax Authority, in a form which would be supplied by the

Authority, a declaration containing the necessary information for the proper collection of

the tax;

Comply fully with the requirements of inspection of his premises by the delegates of the

Tax Authority;

Immediately communicate to the Tax Authority the type and address as well as the

commencement and termination date of his business;

Pay in full the tax due within 30 days from the date of termination where such business

is terminated.

Regarding goods imported the Tax Authority can sell such goods where the tax in respect of

them is not paid within six months from the day of deposit within the premises of government

warehouse, or in the case of perishable goods.

Notification of Change

Every taxpayer should notify the Tax Authority of:

Any change in the name, address, place of business, constitution, or nature of the

principal taxable activity or the activities of the person;

Any change of address from which, or name in which, a taxable activity is carried on by

the taxpayer, with in 5 days of the change occurring.(Ibid)

2.2.3 Value Added Tax (VAT)

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. (ECC and EBDSN ,2005,p.15)

Most business transactions involve supplies of goods or services. VAT is payable if they are:

Supplies made in Ethiopia;

Made by a taxable person;

Made in the course or furtherance of a business;

Are not specifically exempted or zero-rated.

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The Value Added Tax would be levied at the rate of 15% of the value of:

Every taxable transaction by a registered person;

Every import of goods, other than an exempt import; and

Import of services.

A person who carries on taxable activity and is not registered is required to file an application for

VAT registration with the Authority if:

At the end of any period of 12 calendar months the person made , during that period,

taxable transactions the total value of which exceeded 500,000 Birr; or

At the beginning of any period of 12 calendar months there are reasonable grounds to

expect that the total value of taxable transactions to be made by the person during that

period will exceed 500,000 Birr.

Registration procedure:

A person applying to register for VAT is required to do so in such a form as is established

by the implementation directives issued by the Ministry of Revenue;

When a person carrying out taxable transactions files an application to be registered for

VAT, the Authority is required to register the person in the VAT register, and to issue a

certificate of registration within 30 days of the registration;

A person registered for VAT is required to use his taxpayer identification number on all

VAT invoices, and on all tax returns and official communications with the Authority.

There is a VAT invoice prepared by the Ministry of Revenue containing the following

information:

Full name of the registered person and the purchaser, and the registered;

Person’s trade name, if different from the legal name;

Taxpayer identification number of the registered person and the purchaser;

Number and date of the VAT registration certificate;

Name of the goods shipped or services rendered;

Amount of the taxable transaction;

Amount of the excise on excisable goods;

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Sum of the VAT due on the given taxable transaction;

Issue date if the VAT invoice, and

Serial number of the VAT invoice.

The registered person is required to issue the VAT invoice to the purchaser of goods or services

upon the supply or rendering, but not later than 5 days after the transaction.(Ibid)

Record Keeping Requirement:

A registered person or any other person liable for VAT under the proclamation shall maintain

for 10 years in Ethiopia:

Original tax invoices received by the person;

Copy of all tax invoices issued by the person;

Customs documentation relating to imports and exports;

Accounting records; and

Any other records as may be prescribed by the Minister of Revenue by directive.

Administrative Penalties:

The following penalties are imposed for violations of the VAT Proclamation:

Where any person engages in taxable transactions without VAT registration where VAT

registration is required – 100%of the amount of tax payable for the entire period of

operation without VAT registration;

Where any person issued incorrect tax invoice resulting in a decrease in the amount of

tax or increase in accredit or in the event of the failure to issue a tax invoice –100%of the

amount of tax for the invoice or the transaction;

Where a person who is not registered for VAT issues a tax invoice – a penalty of 100%of

the tax which is indicated in the tax invoice and is due for transfer to the budget but has

not been transferred; and

Where a person fails to maintain records required – 2,000 Birr for each month or portion

thereof that the failure continues.

A person who fails to file a timely return is liable for a penalty equal to 5% of the amount of tax

underpayment for each month (or portion thereof) during which the failure continues, up to 25%

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of such amount. The penalty is limited to 50,000 Birr for the first month (of portion thereof) in

which no return is filed. If any amount of tax is not paid by the due date, the person liable is

obliged to pay interest on such amount for the period from the due date to the date the tax is paid.

The interest is set at 25% over and above the highest commercial lending interest rate that

prevailed during the preceding quarter. The following types of supplies of goods (other than by

way of export) or rendering of services, as well as the following types of imports of goods are

exempt from payment of VAT:

Sale, transfer or the lease of a used dwelling;

Rendering of financial services;

Supply/import of national/foreign currency and of securities;

Import of gold to be transferred to the National Bank;

Rendering of religious organizations or church services;

Import or supply of prescription drugs specified in directives issued by Minister of

health, rendering of medical services;

Educational services provided by educational institutions, or child care services for

children at pre-school institutions;

Supply of goods and rendering of services in the form of humanitarian aid, as well as

import of goods transferred to state agencies of Ethiopia and public organizations for the

purpose of rehabilitation after natural disasters, industrial accidents, and catastrophes;

Supply of electricity, kerosene, and water;

Goods imported by the government, organizations, institutions or projects exempted

from duties and other import taxes to the extent provided by law or by agreement;

Supplies by the post office authorized under the Ethiopian Postal Services Proclamation,

other than services rendered for a fee or commission;

Provision of transport; Permits and license fees;

Supply of goods or services by a workshop employing disabled individuals if more than

60 % of staff are disabled;

Import or supply of books and other printed materials.

2.2.4 Customs Duty

Any good imported or exported would be subject to:

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Payment of duties and taxes according to the tariff of Harmonized Commodity

Description and coding system;

Payment of duties and taxes according to the preferential tariff rate where goods are

imported from the preferred country;

Payment of duties and taxes at the rate in force on the day the declaration of the goods

are presented to, and accepted by the customs office.(Ibid)

2.3 Stamp Duty

The following instruments shall be chargeable with stamp duty:

Memorandum and articles of association of any business organization, cooperative or any

other form of association;

Award; Bonds; Warehouse bond;

Contract and agreements and memoranda;

Security deeds;

Collective agreement;

Contract of employment;

Lease, including sub-lease and transfer of similar rights;

Notaries acts;

Power of attorney;

Documents of title to property.

2.4 Categories of Taxpayers

Taxpayers are classified into the following three major categories:

1. Category “A” Taxpayers

This category of taxpayers includes:

a) Any company incorporated under the laws of Ethiopia or in a foreign country;

b) any other business having an annual turnover of Birr 500,000 or more.

Category “A“ taxpayers are required to submit to the Tax Authority, at the end of the year, a

balance sheet and a profit and loss statement and the following details:

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a) Gross profit and the manner in which it is computed;

b) general and administrative expense;

c) depreciation expense; and

d) provisions and reserves.

In addition, these taxpayers should register with the Tax Authority the type and quantity of

vouchers they use before having such vouchers printed. Any printing press before printing

vouchers of taxpayers shall ensure that the type and quantity of such vouchers is registered with

the Tax Authority. (ECC and EBDSN ,2005,p.27)

2. Category “B” Taxpayers

Unless already classified in category “A”, any business having an annual turnover of over Birr

100,000 would be classified under Category “B” taxpayers. This category of taxpayers should

submit to the Tax Authority profit and loss statement at the end of the year.(Ibid)

3. Category “C” Taxpayers

Unless classified in Categories “A” and “B”, those businesses whose annual turnover is

estimated up to Birr 100,000 are classified under this category of taxpayers.(Ibid)

2.5 Customer satisfaction

Those who buy the goods or services provided by companies are customers. In other words, a

customer is a stakeholder of an organization who provides payment in exchange for the offer

provided to him by the organization with the aim of fulfilling a need and to maximise

satisfaction. Sometimes the term customer and consumer are confusing. A customer can be a

consumer, but a consumer may not necessarily be a customer. Another author explained this

difference. I.e. a customer is the person who does the buying of the products and the consumer is

the person who ultimately consumes the product (Solomon, 2009, p. 34.)

22

When a consumer/customer is contented with either the product or services it is termed

Satisfaction. Satisfaction can also be a person’s feelings of pleasure or disappointment That

results from comparing a product’s perceived performance or outcome with their Expectations

(Kotler & Keller, 2009, p. 789). As a matter of fact, satisfaction could be the pleasure derived by

someone from the consumption of goods or services offered by another person or group of

people; or it can be the state of being happy with a situation.

Satisfaction varies from one person to another because it is utility. “One man’s meal is another

man’s poison,” an old adage stated describing utility; thus highlighting the fact that it is

sometimes very difficult to satisfy everybody or to determine satisfaction among group of

individuals. Client happiness, which is a sign of customer satisfaction, is and has always been the

most essential thing for any organization. Customer satisfaction is defined by one author as “the

consumer’s response to the evaluation of the perceived discrepancy between prior expectations

and the actual performance of the product or service as perceived after its consumption” (Tse &

Wilton, 1988, p. 204) hence considering satisfaction as anoverall post-purchase evaluation by the

consumer” (Fornell, 1992, p. 11). Some authors stated that there is no specific definition of

customer satisfaction, and after their studies of several definitions they defined customer

satisfaction as “customer satisfaction is identified by a response (cognitive or affective) that

pertains to a particular focus (i.e. a purchase experience and/or the associated product) and

occurs at a certain time (i.e. post-purchase, post-consumption)”. (Giese & Cote, 2000, p. 15) This

definition is supported by some other authors, who think that consumer’s level of satisfaction is

determined by his or her cumulative experience at the point of contact with the supplier

(Sureshchander et al., 2002, p. 364). It is factual that, there is no specific definition of customer

satisfaction since as the years passes, different authors come up with different definitions.

23

Customer satisfaction has also been defined by another author as the extent to which a product’s

perceived performance matches a buyer’s expectations (Kotler et al., 2002, p. 8). According to

Schiffman & Karun (2004) Customer satisfaction is defined as “the individual’s perception of

the performance of the products or services in relation to his or her expectations” (Schiffman &

Karun 2004, p. 14). In a nutshell,customer satisfaction could be the pleasure obtained from

consuming an offer.

Measuring customer satisfaction could be very difficult at times because it is an attempt to

measure human feelings. It was for this reason that some existing researcher presented that “the

simplest way to know how customers feel, and what they want is to ask them” this applied to the

informal measures (Levy, 2009, p. 6; NBRI, 2009). Levy (2009, p. 6) in his studies, suggested

three ways of measuring customer satisfaction:-

• A survey where customer feedback can be transformed into measurable quantitative data:

• Focus group or informal where discussions orchestrated by a trained moderator reveal what

customers think.

• Informal measures like reading blocs, talking directly to customers. Asking each and every

customer is advantageous in as much as the company will know everyone’s feelings, and

disadvantageous because the company will have to collect this information from each customer

(NBRI, 2009). The National Business Research Institute (NBRI) suggested possible dimensions

that one can use in measuring customer satisfaction, e.g:-

• Quality of service

• Innocently

24

• Speed of service

• pricing

• Complaints or problems

• Trust in your employees

• The closeness of the relationship with contacts in your firm

• Other types of services needed

• Your positioning in clients’ minds

There exist two conceptualizations of customer satisfaction; transaction-specific andcumulative

(Boulding, et al., 1993; Andreassen, 2000). Following the transaction specific, customer

satisfaction is viewed as a post-choice evaluation judgement of a specific purchase occasion

(Oliver, 1980 ) until present date, researchers have developed a rich body of literature focusing

on this antecedents and consequences of this type of customer satisfaction at the individual level

(Yi, 1990). Cumulative customer satisfaction is an overall evaluation based on the total purchase

and consumption experiences with a product or service over time. (Fornell, 1992, Johnson

&Fornell 1991) This is more fundamental and useful than transaction specificity customer

satisfaction in predicting customer subsequent behaviour and firm’s past, present and future

performances. It is the cumulative customer satisfaction that motivates a firm’s investment in

customer satisfaction.

2.6 Service quality

25

In order for a company’s offer to reach the customers there is a need for services. These services

depend on the type of product and it differs in the various organizations. Service can be defined

in many ways depending on which area the term is being used. An author defines service as “any

intangible act or performance that one party offers to another that does not result in the

ownership of anything” (Kotler & Keller, 2009, p.789). In all, service can also be defined as an

intangible offer by one party to another in exchange of money for pleasure.

Quality is one of the things that consumers look for in an offer, which service happens to be one

(Solomon 2009, p. 413). Quality can also be defined as the totality of features and characteristics

of a product or services that bear on its ability to satisfy stated or implied needs (Kotler et al.,

2002, p. 831). It is evident that quality is also related to the value of an offer, which could evoke

satisfaction or dissatisfaction on the part of the user. Service quality in the management and

marketing literature is the extent to which customers' perceptions of service meet and/or exceed

their expectations for example as defined by Zeithaml et al. (1990), cited in Bowen & David,

2005, p. 340) Thus service quality can intend to be the way in which customers are served in an

organization whichcould be good or poor. Parasuraman defines service quality as “the

differences between customer expectations and perceptions of service” (Parasuraman, 1988).

They arguedthat measuring service quality as the difference between perceived and expected

service was a valid way and could make management to identify gaps to what they offer as

services.

The aim of providing quality services is to satisfy customers. Measuring service quality is a

better way to dictate whether the services are good or bad and whether the customers will or are

satisfied with it. A researcher listed in his study: “three components of service quality, called the

26

3 “Ps” of service quality” (Haywood 1988, p. 19-29). In the study, service quality was described

as comprising of three elements:-

• “Physical facilities, processes and procedures;

• Personal behaviour on the part of serving staff, and;

• Professional judgment on the part of serving staff but to get good quality service.

“Haywood 1988, p. 19-29).He stated that “an appropriate, carefully balanced mix of these three

elements must be achieved.” (Haywood, 1988, p. 9-29) What constitutes an appropriate mix,

according to him will, in part, be determined by the relative degrees of labour intensity, service

process customization, and contact and interaction between the customer and the service process.

From the look of things, this idea of his could be design to fit with evaluating service quality

with the employee perspective. One of the most useful measurements of service quality is the

dimensions from the SERVQUAL model. In the creation of this model for the very first time,

“Parasuraman et al. (1985) identified 97 attributes which were condensed into ten dimensions;

they were found to have an impact on service quality and were regarded as the criteria that were

important to access customer’s expectations and perceptions on delivered service (Kumar et al.,

2009, p. 214).

The SERVQUAL scale which is also known as the gap model by Parasuraman, et al. (1988) has

been proven to be one of the best ways to measure the quality of services provided to customers.

This service evaluation method has been proven consistent and reliable by some authors (Brown

et al., 1993). They held that, when perceived or experienced service is less than the expected

service; it implies less than satisfactory service quality; and when perceived service is more than

expected service, the obvious inference is that service quality is more than satisfactory (Jain et

27

al., 2004, p. 27). From the way this theory is presented, it seems the idea of SERVQUAL best

fits the evaluation of service quality form the customer perspective. This is because when it is

stated “perceived” and “expected” service, it is very clear that this goes to the person, who is

going to or is consuming the service; who definitely is the consumer/customer.

The original study by Parasuraman et al., (1988) presented ten dimensions of service

quality.Tangibles: the appearance of physical artefacts and staff members connected with the service

(accommodation, equipment, staff uniforms, and so on).

Reliability: the ability to deliver the promised service.

Responsiveness: the readiness of staff members to help in a pleasant and effective way.

Competence: the capability of staff members in executing the service.

Courtesy: the respect, thoughtfulness, and politeness exhibited by staff Members who

are in contact with the customer.

Credibility: the trustworthiness and honesty of the service provider.

Security: the absence of doubt, economic risk, and physical danger.

Access: the accessibility of the service provider.

Communication: an understandable manner and use of language by the service provider.

Understanding the customer: efforts by the service provider to know and understand

the customer.

In first SERVQUAL model that came had 22 pairs of Likert-type items, where one part

measured perceived level of service provided by a particular organization and the other part

measured expected level of service quality by respondent. (Kuo-YF, 2003, p. 464 - 465). Further

28

investigation led to the finding that, among these 10 dimensions, some were correlated. After

refinement, these ten dimensions above were later reduced to five dimensions as below:-

Tangibility: physical facilities, equipment, and appearance of personnel.

Reliability: ability to perform the promised service dependably and accurately.

Responsiveness: willingness to help customers and provide prompt service.

Assurance: knowledge and courtesy of employees and their ability to inspire trust and

Confidence.

Empathy: caring individualized attention the firm provides to its customers.

The aggregated sum of difference between perceptions and expectations from the five

dimensions forms the global perceive quality construct. (Laroche et al., 2004, p. 363) Following

this view, customers’ expectations were met through the outcome dimension (reliability) and

exceed it by means of the process dimension (tangibility, assurance, responsiveness, and

empathy). To confirm the validity of SERVQUAL model in the evaluation of service quality,

Zeithaml et al (2006), stated that “service quality is a focused evaluation that reflects the

customer’s perception of reliability, assurance, responsiveness, empathy, and tangibles”

(Zeithaml et al., 2006, p. 106-107). They added that among these dimensions, “reliability” has

been shown consistently to be the most important dimension in service quality (Zeithaml et al.,

2006, p. 106-107). Other researchers saw the need of additional components of service

expectations that is functional and technical dimensions. (Grönroos 1983) The idea was that,

consumersmake service evaluations based on the technical dimension that is what is delivered

29

and on the functional dimension that is how, why, who, and when it is delivered. (Laroche etal.,

2004 p. 363: Grönroos 1983).

Although the elements listed in SERVQUAL model have been proven to be the mainmethod for

evaluating service quality from the consumer’s perspective (Brown et al.,1993), drawbacks in

using SERVQUAL in measuring service quality has been thereason that the SERVPERF scale

was proposed by Cronin & Taylor (1992, cited in Jainet al. (2004, p. 25-37) after they called into

question the conceptual basis of the SERVQUAL, having found it, led to confusion with service

satisfaction (Jain et al.,2004, p. 25-37). These researchers discarded the ´E´ for ´expectation`

claiming instead that ´P´ for ´performance´ alone should be used. They meant that higher

perceived performance entails higher quality service. Unfortunately, during this past century,

customers have changed their behaviours in ways that do not suit organizational behaviour. Till

date, it is unclear as to which of SERVQUAL and SERVPERF is superior in measuring service

quality (Jain et al., 2004, p. 25-37).

Laroche et al., (2004) made an assessment of the dimensionality of should and will service

expectations. They used a survey measuring customers’ post encounter expectations and vis-à-

vis a well-known airline with a sample of 363 and examined the existence of hypothesized

functional and technical dimensions of should and will expectations and determined the casual

relationships between two types of expectations and hypothesized dimensions. They tested their

dimensions in the context of the turbulent airline industry. This study measured service quality

with other service quality dimensions such as technical and functional dimensions proposed by

Grönross (1983). Hence it was proven that the SERVQUAL model must not be used in

evaluating service quality in all organizations. This could mean that; different industries might

require different measurements for service quality.

30

2.7 Customer satisfaction and service quality

Since customer satisfaction has been considered to be based on the customer’s experience on a

particular service encounter, (Cronin & Taylor, 1992) it is in line with the fact that service

quality is a determinant of customer satisfaction, because service quality comes from outcome of

the services from service providers in organizations. Another author stated in his theory that

“definitions of consumer satisfaction relate to a specific transaction (the difference between

predicted service and perceived service) in contrast with ‘attitudes’, which are more enduring

and less situational-oriented,”(Lewis, 1993, p. 4-12) This is in line with the idea of Zeithaml et al

(2006, p. 106-107).

Regarding the relationship between customer satisfaction and service quality, Oliver (1993) first

suggested that service quality would be antecedent to customer satisfaction regardless of whether

these constructs were cumulative or transaction-specific. Some researchers have found empirical

supports for the view of the point mentioned above (Anderson & Sullivan, 1993; Fornell et al

1996; Spreng & Macky 1996); where customer satisfaction came as a result of service quality.

In relating customer satisfaction and service quality, researchers have been more precise about

the meaning and measurements of satisfaction and service quality. Satisfaction and service

quality have certain things in common, but satisfaction generally is a broader concept, whereas

service quality focuses specifically on dimensions of service. (Wilson et al., 2008, p. 78).

Although it is stated that other factors such as price andproduct quality can affect customer

satisfaction, perceived service quality is a component of customer satisfaction (Zeithaml et al.

2006, p. 106-107).

31

Some authors have agreed to the fact that service quality determines customer satisfaction.

Parasuraman et al., (1985) in their study, proposed that when perceived service quality is high,

then it will lead to increase in customer satisfaction. Some other authors did comprehend with

the idea brought up by Parasuraman (1995) and they acknowledged that “Customer satisfaction

is based upon the level of service quality that is provided by the service providers” (Saravana &

Rao, 2007, p. 436, Lee et al., 2000, p. 226) since service quality acted as one of the factors that

influence satisfaction. More evidence of this relationship has been proven by past researches. As

a result of the definition of customer satisfaction presented by Lewis, (1993, p. 4-12), Sivadas &

Baker-Prewitt (2000, p. 73-82) used a national random telephone survey of 542 shoppers to

examine the relationship between service quality, customer satisfaction, and store loyalty within

the retail department store context. One of the results was that service quality influences relative

attitude and satisfaction with department stores. They found out that there is a relationship

between customer satisfaction and service quality.

In line with the findings of Sivadas & Baker-Prewitt (2000, p. 73-82), Su et al., (2002,p. 372) in

their study of customer satisfaction and service quality, found out that; these two variables are

related, confirming the definitions of both variables which have always been linked. They also

dictated that service quality is more abstract because it may be affected by perceptions of value

or by the experiences of others that may not be so good, than customer satisfaction which reflects

the customer’s feelings about many encounters and experiences with service firm. (Su et al.,

2002, p. 372).

In addition to what the other researchers have found out from customer satisfaction and service

quality, some other authors Wang & Hing-Po (2002), went into details to bringin customer value

in the study of the relationship between customer satisfaction andservice quality. Their study

32

used SERVQUAL model in measuring service quality in China’s mobile phone market, but with

modification on the basis of focus groupdiscussions and expert opinions to reflect the specific

industry attributes and the special culture of China. Emphasis was then paid to the study of the

dynamic relationships among service quality, customer value, customer satisfaction and their

influences on future behaviours after the key drivers of customer value and customer satisfaction

were identified. All of them were based on the development of structural equation models by

using PLS-GRAPH Package. (Wang & Hing-Po, 2002 p. 50-60) This study blended the study of

customer satisfaction and service quality with customer value which added more weight to the

linkage between customer satisfaction and service quality because value is what customers look

in an offer.

Past studies on the relationship between customer satisfaction and service quality which included

SERVQUAL dimension have been published since from 2003 to 2010, the research on this topic

droped from 2004 to 2006 and was stable, between 2008 and2009, there was no study on this

field of study that treated the relationship betweencustomer satisfaction and service quality with

SERVQUAL dimension; research on this topic increased rapidly in 2010 With regards to the

above statistics; Kuo ( 2003) conducted a research on service quality of virtual community

websites with the purpose of constructing an instrument to evaluate service quality of virtual

community websites and to have a further discussion of the relationship between service quality

dimensions and overall service quality, customer satisfaction and loyalty. The researcher used

Factor analysis, t-test, and Pearson correlation analysis to analyse the data collected from college

students of three major universities in Taiwan. One of the results was that” on-line quality and

information safety is positively related to the overall service quality, customer satisfaction, and

loyalty, but the service quality level of this dimension was the poorest.” (Kuo, 2003, 461-473).

33

In contrast to the above studies; Bennett & Barkensjo (2005) studied relationship quality,

relationship marketing, and client perceptions of the levels of service quality of charitable

organizations. Questions were asked to 100 people on their perceptions of service quality of the

organizations that had given them assistance, their satisfaction with a charity service etc. they

constructed a model and estimated using the method of partial least square. Also, perceived

service quality was measured via adaptations of the SERVQUAL instrument but without any

assessments of the respondents' prior expectations concerning the services they would receive

from an organization. In their results, relationship marketing was found to represent an effective

weapon for improving both relationship quality and beneficiaries' satisfaction with service

provision. They stated that “relationship quality and actual service quality induced beneficiaries

to want to recommend a charity to other people and to engage in positive word-of-mouth.”

(Bennett & Barkensjo, 2005, p. 101). Meaning the beneficiaries who stood as the customers were

satisfied since recommendation is signal of satisfaction, confirming the idea that service quality

is related to customer satisfaction. They were not directly conducting a research on the

relationship between customer satisfaction and service quality, but because when talking about

client perceptions, one must think of their satisfaction, and when talking about service quality

there is a link between these two as has been proven by many researchers ( Baker-Prewitt, 2000,

p. 73-82; Kuo-YF, 2003, 461-473; Gera, 2011, p. 2-20) This means it could be useful to test

these three variables (Customer satisfaction, service quality and Service quality dimensions).

The study of Bennett & Barkensjo (2005) stated that “the hypothesis elements ofSERVQUAL

model (Tangible, assurance etc.) were scientifically associated with the service quality construct”

(Bennett & Barkensjo, 2005, p. 101). It could be interesting totest SERVQUAL model with the

34

five dimensions and service quality assuming that expectations is included to see if it will be

significantly associated.

In support of the use of SERVQUAL in the relationship between customer satisfaction and

service quality, Ahmed et al., (2010) conducted a mediation of customer satisfaction relationship

between service quality and repurchase intentions for the telecom sector among university

students, with SERVQUAL model’s 5 dimensions (tangibles, responsiveness, empathy,

assurance and reliability) by Parasuraman et al. to measure service quality.

To crown the fact that customer satisfaction and service quality are important variablesin

business research on customers, Gera (2011) investigated the link between service quality, value,

satisfaction and behavioural intentions in a public sector bank in India and one of their results

states that “Service quality was found to significantly impact on customer satisfaction and value

perceptions” (Gera, 2011, p. 2-20) The literature review shows latest researches up to 2011 on

the relationship between customer satisfaction and service quality. The researches in this area

have been covered so far as below;-

• It has been researched that there is a relationship between customer satisfaction and service

quality

• It has been researched that service quality could be evaluated with the use of SERVQUAL

model.

• It has been researched that service quality could be evaluated by other dimensions of service

quality that is, functional and technical and not necessarily SERVQUAL model.

• Some researchers even tested service quality and service quality dimensions.

35

What is lacking is the relationship between customer satisfaction and service quality dimensions.

Among all the recent articles that I could reach, none of the studies had tested the five

dimensions of SERVQUAL and customer satisfaction and service quality at the same time to

confirm this relationship between customer satisfaction and service quality.

2.8 Conceptual Frame work

The aim of this section is to summarise the idea I got from past literature and to bring out the

contributions I have for this study area. Thus this part starts with the idea generated and the

contribution follows.

The general idea from the past literature is that there is a relationship between customer

satisfaction and service quality; also that service quality could be evaluated with the use of five

service quality dimensions and the most useable is the SERVQUAL scale. Following the two

clarifications about the different views of customer satisfaction of a customer of either being

transaction-specific or cumulative (Boulding et al., 1993; Andreassen, 2000). My theoretical

frame work treats customer satisfaction as transaction-specific. Thus, customers in this paper are

those who consume the services, satisfaction denotes customer’s desire to maintain a business

relationship with the organization and it is also the feelings of the customers towards the services

provided to them by the organizations; while customer satisfaction in this study is the pleasures

obtained by customers for the services provided to them by the employees of the organizations.

It has been proven that “perceived service quality is a component of customer satisfaction”

(Ziethaml et al. 2006, p.106-107). Other researchers had proven also that there is a relationship

between customer satisfaction and service quality (Sivadas & Baker-Prewitt, 2000, p. 73-82;

Wang et al., 2002, p. 50-60; Kuo-YF, 2003, Liang & Zhang, 2009, p. 113-12, Gera, 2011, p. 2-

36

20; Sureshchandar, et al., 2002 p. 363-379). Moreover, the SERVQUAL model has been proven

to be the best model to measure service quality in service sectors especially with the customer

perspective. This idea generates an assumption that the five dimensions of SERVQUAL model

could have a direct relationship with customer satisfaction.

Also, it has been stated that service quality is the overall assessment of a service by

thecustomers, (Eshghi et al., 2008, p.121). Also, the five dimension of SERVQUAL modelhas

been proven to be the main yardsAtick used by most of the researchers in the evaluation of

service quality (Wilson et al., 2008, p. 79; Bennett & Barkensjo, 2005, p.101, Negi, 2009; Wang

& Hing-Po, 2002). This idea generates an assumption that each of the five dimensions of

SERVQUAL model could have a direct relationship withservice quality.

37

CHAPTER THREE

Data Analysis and Interrelation

This Chapter deals with major finding of the study. All the necessary data and information that

were gathered are analyzed and hence the basic issues given the appropriate treatment. However,

before going to the basic part of the study, it would be appropriate to know the respondents

characteristics. As indicated previously, the respondents selected from different commercial

center tax payers of Akaki Kality sub-city small tax payer’s branch office.

3.1. Respondents back ground.

The respondents (tax payers) back ground deals with the respondent’s characteristics such as age,

sex and educational level. It is clearly illustrated in the following table.

38

s.N0 Item Response

Respondents

No %

1 Sex Male 40 80

Female 10 20

Total 50 100

2

Age

18 – 25 2 4

26 – 30 15 30

31 – 35 24 48

36 – 40 5 10

41 – 45 4 8

46 – 50 0 0

Above 50 0 0

Total 50 100

3

Educational

Level

Below grade 12 5 10

Grade 12 complete 30 60

Certificate 3 6

Diploma 5 10

First degree 5 10

Above first degree 2 4

Total 50 100

Table 3.1 Respondents (tax payers) back ground

Gender characteristics of respondents

39

In the table 3.1, on gender presents data of respondents. The table shows that the male

respondents formed majority of the target population with the total of 40 representing 80%,

while 10 respondents representing 20% were females.

Age and educational background of respondents

The researcher needed to know the age distribution of respondents to help categorize the tax

payer because Akaki Kality sub-city small tax payers branch office have different age categories

tax payers. And also the table above summarizes the data obtained on the ages of respondents.

Analyzing the data from the questionnaire, table 3.1 revels that 2 respondents are between 18-25

years represent 4%, respondents between 26-30 represent 30% between 36-40 respondents 5

represent 10% also, between 31-35 respondents are represent 48% which are the majority, by

chance no one respondents is there above 46 years age.

The other information that obtained from the above table which means 3.1 is the educational

background. It was also necessary for the study to determine the educational levels of the

respondents, that is 10% of respondents are below grade 12, 60% are grade 12 completed and 6%

are certificate and 10% are also by diploma, 10% are first degree holder and finally 4% above

first degree. This suggests that tax payers of different educational qualifications are present in the

Akaki Kality sub-city small tax payer’s branch office.

3.2 Attitude of tax payer about Akaki Kality sub-city small tax payer’s branch

office.

40

From all respondents, 50% of the respondents disagree that the distribution of cash registrar

machine is faire. 10% of the respondents doubt to show that the distribution of cash registrar

machine is faire. The remaining 14% and 26% agree and strongly agree respectively. So it

indicated that most of respondents are not satisfied the distribution of cash registrar machine.

Item two of the below table 3.2 revel that, 54% of the respondents agreed on the point that

benefited from development when we are pay tax to the government. Similarly, 14% of them

were strongly agreed and the rest of them doubted and disagreed the point which account for

20% and 12% respectively. This shows that most tax payers believe benefited from the

development.

It can also be seen from the table 3.2 in item three, most of 62% of respondents were not agreed

The amount of tax levied by Akaki kality sub-city small tax payer’s branch office is fair.16% and

22% was strongly agreed and agreed respectively on this point and no one is doubted on this

point. As their response clearly indicated that The amount of tax levied by Akaki kality sub-city

small tax payer’s branch office is unfair.

s.no Items Responses

Respondent

No %

1 The distribution of cash Disagree 25 50

41

registrar machine is faire.

Agree 7 14

Doubt 5 10

Strongly agree 13 26

Total 50 100%

2 When you pay tax, do you

believe benefited from the

development.

Disagree 6 12

Agree 27 54

Doubt 10 20

Strongly agree 7 14

Total 50 100%

3 The amount of tax levied by

Akaki kality sub-city small

tax payer’s branch office is

fair.

Disagree 22 62

Agree 11 22

Doubt 0 0

Strongly agree 8 16

Total 50 100%

Table 3.2 Attitude of tax payer of Akaki Kality sub-city.

All of (50 respondents) of tax payers are not participating in panel discussion and trainings

related with merchandizing and law of merchandize by professionals. the reason for this is

because of there is no meeting prepared. And also 87% of the respondents which majority are

run their business without business knowledge which means they are not took a training

individually related with commercial or merchandizing activity.

42

The respondents put their reason why the cash registrar machine distribution is not fair.the

followings are because of what the distribution is not fair:-

The merchant not give full information and hid their commodity.

Akaki kality sub-city small tax payer’s branch Has poor controlling system.

Corruption

Shortage of cash registrar machine.

3.3 The level of akaki kality sub-city small tax payer’s branch office customer

satisfaction from service.

In this section respondent of akaki kality sub-city tax payers evaluate the satisfaction level from

service of branch office, consuming time for service, measuring workers punctuality and whether

its activity is convenient for documentation or not. As can be seen from the respondents given, it

clearly indicated that the satisfaction level of tax payer service given by Akaki kality sub-city

small tax payer’s branch office is low which account for 60% the rest 24% and 26% of them

believed that it had moderate and low satisfaction level respectively. Which means the tax payer

are not satisfied of akaki kality sub-city small tax payer’s branch office service.

When we seen convenience documentation of Akaki kality sub-city small tax payer’s branch

office from the perspective of tax payers. From all respondents 88% was supported the

convenient documentation performance of this branch office is low.10% and 2% was supported

moderate and high respectively. It indicated that the document are not handling properly and are

not given to the tax payer on the time.

43

As can be seen from fig.1, 66% of the respondent supported the akaki kality sub-city small tax

payer’s branch office took a lot of time to serve one customer.18% and 16% of the respondent

reveled as moderate and low respectively. This may result in shortage of human resource and

problem of convenient documentation.

One of the measurements of quality service is punctuality of the workers. based on the response

of the respondents 96% Akaki kality sub-city small tax payer’s branch office worker was

punctual.4% respondent support moderate and no one is not support low on this point.

44

from se

rvice

satisfa

ction of th

e tax

payer

consu

ming time t

o serve

one custo

mer

documen

tation

worker p

unctuali

ty0%

20%

40%

60%

80%

100%

120%

25%

66%

2%

96%

24% 18%10% 4%

60%

16%

88%

0% highmediumlow

Fig 1 the level of akaki kality sub-city small tax payer’s branch office customer satisfaction from

service.

As we know Qualified human power is one of functional parts for the organization. shortage of

human power and absence of necessary department in the organization directly or indirectly

affect the organization function.2% respondent believe that enough human power Akaki kality

sub-city small tax payer’s branch office but most of the respondent not agreed the point which

means 98% of do not believe enough human power in the Akaki kality sub-city small tax payer’s

branch office and they put the negative impact that shown in this branch office as follows:-

Worker spent a lot of time to accomplish one task.

Weak information network with other sub-city branch office.

The documents are not gives to the tax payer on the time.

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Documentation room and tax leivd department are indicated by respondent that human power are

not sufficient.

3.4 INTERVIEW ANALYSIS

I already indicated in the metrology parts. I interviews, workers of Akaki kality sub-city small

tax payer’s branch office by purposive technique. The next part is the overall responses of Akaki

kality sub-city small tax payer’s branch office worker:-

Cash registrar machine distributed based on the capital, commodity or goods stored in market

cell. The capital is above 5000.00birr the merchant used cash registrar machine. But the

merchants hid their commodity.

The workers of Akaki kality sub-city small tax payer’s branch office believe that shortage of

human power in their own organization. Because of this there is no professional trainer of tax

payer and shortage of qualified worker in documentation department.

According to the respondent a yearly tax are levid by observing the commodity in the market cell

and guessing of the profitability of the merchant. The worker also said that there is no document

lost in the documentation room but because of shortage of human power and poor storage of the

document may customer delay a few minutes.

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CHAPTER FOUR

CONCLUSION AND RECOMMENDATIONS

4.1 Conclusions

This study puts some points are conclusions and this points are listed as follows:-

1. Most of tax payers do not believe the distribution of cash registrar machine is fair.

2. Un fair distribution of cash registrar machine have two negative impacts.

For merchants side of view, he/she does not compute with those are not used cash

registrar machine because the merchant customer are not buy tax levied

commodity or goods.

The government loss a huge amount of money from tax collection.

3. Most tax payers believe that benefited from the development because of tax paid for the

government but they are not believed Ethiopian revenues and customs authority have a

good tax collection system. They also blame the implementation such as the amount of

tax levied and corruption.

4. The amount of tax levied on the tax payer by Akaki kality sub-city small tax payer’s

branch office is not fair related with their profit

5. akaki kality sub-city small tax payer’s branch office levied a yearly tax by forecasting or

guess

6. Many merchants are run their business without knowledge of business.

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4.2 RECOMMENDATION

There are many causes and problems that tax payer are not satisfying the service of Akaki kality

sub-city small tax payer’s branch office. There are some points recommended as a solution.

1. Akaki kality sub-city small tax payer’s branch office has criteria, which merchant is used

cash registered machine or not used. But it does not implement, so this office work a lot

for fair distribution of cash registrar machine and build controlling system.

2. akaki kality sub-city small tax payer’s branch office must improve and correct as much as

possible the implementation of well organized tax collection system especially the

implementation of tax levied on the trade.

3. Akaki kality sub-city small tax payer’s branch office must change a traditional tax

assessment.

4. Akaki kality sub-city small tax payer’s branch office will be prepared a training and

meeting by professionals in order to maximize the amount of tax collection and increase

the knowledge of the merchant. I think because of this majority tax payer do not paid tax

on the time.

5. akaki kality sub-city small tax payer’s branch office have not efficient enough workers

because of this the customer are not satisfied. This branch office for exiting department

must employee additional professional and must extend the necessary department.

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