Determinants of Value Added Tax Collection Performance in West Shoa Zone, Oromia Regional State, Ethiopia

The study was conducted to investigate the determinant factors of Value Added Tax collection performance in West Shoa Zone by giving emphasis on three selected districts i.e. Ambo city Revenues Authority, Dandi and Bako woredas Revenues Authority’s. The researchers used cross-sectional data covering a period in 2017. Since the data was survey in nature the researcher used both qualitative and quantitative (Mixed) research approaches to achieve objective of the study. The researchers used purposive and stratified sampling method to take a sample of Tax payers, Consumers and Revenues Authority Employees.  Descriptive statistics and multiple regressions were used to analyze primary and secondary data to reach the result of the study using Statistical Package for Social Science (SPSS) version 20. The result of the study showed that Tax payers awareness on Value added Tax, Tax payers’ maintenance of account and Value added Tax Rate have  positively influenced Value added Tax collection performance whereas Tax Evasion, Tax avoidance and Tax non-compliance variables have negatively affected Value added Tax collection performance for tax payers. The study results also  showed that Value added Tax Assessment, Value added Tax Audit, Competence training, Adequate manpower, Tax payers identification and Penalization variables have positively influenced Value added Tax collection performance whereas External Legal Environment variable negatively affected Value added Tax collection performance for institutional variables.  Thus, it’s recommended that Revenues Authority should fulfill necessary manpower and create continuous follow up in order to improve Value added Tax collection performance. Keywords: Value added Tax, Tax avoidance, Tax Evasion, performance, Tax payers DOI : 10.7176/RJFA/10-21-06 Publication date: November 30 th 2019

time frame (Mohd et al, .2011). Tax non-compliance can takes place in the form of either tax Evasion and/or tax avoidance. Tax evasion is an attempt to escape tax liability (wholly or partially) by breaking the tax law and it is a criminal act since it is achieved principally by making false declarations such as under-reporting income or over-reporting relieves and allowances. Soyode and Kajola (2006), defined tax avoidance as the arrangement of tax payers affairs using tax shelters in the tax laws, and avoiding tax traps in the tax laws, so as to pay less tax than ought to be paid, hence the person pays less by taking the advantage of the loopholes in the tax laws.

Empirical Review
Bisrat (2010) The VAT is simply a multistage sales tax that exempts the purchase of intermediate goods and services from the tax base. This study, focusing on the Ethiopian case was analyzing the causes of noncompliance by VAT taxpayers. It was analyzed the impact of low audit probability, the perceived fairness of VAT, dissatisfaction with the tax authority, and how business people think about the VAT money on tax compliance. To gather adequate information for analysis purpose, a combination of quantitative and qualitative methods is applied. The final major factor studied was how business people think about the VAT money. These are taxpayers" beliefs on the relationship between VAT money and their business fund, the equivalence of VAT payment with the value added by the business, and taxpayers" contribution in the VAT collection. The findings of the study suggest these are not really a major problems concerning tax compliance.
Hailemariam (2011) studied on identifying and assessing the problems rose in association with the implementations of VAT by the Ethiopian Revenue and Customs Authority. The researcher used both qualitative and quantitative descriptive research designs and a sample of taxpayers and employees of the authority were selected using stratified random sampling method. The researcher used questionnaires, Interviews and relevant documents to collect primary and secondary data from the data sources. Pie charts, graphs, table, Percentages were used in analyzing the collected data. The study identified misunderstanding of the public in general and business community in particular regarding the VAT laws, resistance against registrations for VAT by some traders, administration inefficiency from ERCA, provisions of understated financial statements, and nonissuance of invoices or issuance of illegal invoices exercised by registered business enterprises was the main problems. The study recommends that the authority should train the taxpayers about the rules and regulations of VAT continuously, recruiting new employees and give nonstop training for the existing once, delegate the tax authority to regional and city administration and it should also increase its follow-up and investigation to control noncompliance enterprises, as well as effectively and efficiently performing the tasks of identification of VAT taxpayers, processing of returns, controlling collections, making refunds on time, auditing taxpayers, recognizing genuine taxpayers and levying penalties to tackle the problems it has encountered.
From the review of available literature, it is inferred that the topics undertaken in these limited research studies mainly focused on the drawbacks of sales tax and make justification for the introduction of VAT. Similarly, problems which could arise in introducing VAT have also been explored in some studies. There are only few studies which explore the effects of VAT after its introduction.
A study made by Wollela (2008) examines VAT administration in Ethiopia and identifies key problems including lack of sufficient number of skilled personnel and gaps in the administration in such areas as refunding, invoicing and filing requirements. The paper suggests that in Ethiopia attempting to implement what is legislated in the main areas (such as refunds) deserves the government's due attention. The study also emphasizes the need to strengthen the administration capacity in general and the tax audit program in particular. Besides the above researcher's knowledge, one can see that empirically studied research under taken by the above authors emphasis on how VAT system implemented and administered. However the researchers were motivated to investigate the status of VAT collection performance rather than its implementation and administration, particularly in West Shoa Zone. As far as the knowledge of researchers in West Shoa Zone, no researches have been investigated on determinants of Tax collection performance emphasis on Value Added Tax. Therefore, the current study believed to add value to this subject.  Vol.10, No.21, 2019 60 As shown in figure 4.2 in terms of area of occupation the share of West Shoa Zone VAT registered Tax payers for Hotel was 72 (32.1%) accounted the highest percentage and Manufacturing 26(11.6%) was the lowest percentage share of sector. It shows that majority of tax is come from the service nature of business. As indicated in figure 4.3, the highest level of average annual turnover of West Shoa zone VAT registered taxpayers were less than 500,000 birr which accounted 110(49.1 and the lowest one was more than 10, 000,000 birr that accounted only 12(5.4%).  Table 4.1.summarizes the source of information on the concept of VAT presented for Tax payers. Out of total respondents 80(35.7%) and 57 (25.4%) VAT registered Tax payers got information from TV and radio respectively. 51(22.8%) and 36 (16.1%) Tax payers got the concept of VAT from Pamphlets and training respectively. This indicated that most of VAT registered Tax payers were got concept VAT through television and radio programs respectively.  In terms of maintenance of accounts West Shoa Zone tax payers asked maintaining all Books of Accounts as per required procedures and guidelines of VAT Proclamation is cumbersome replay that (40)17.9% strongly disagree, (10)4.5% disagree, (85)37.8% agree,(70)31.3% strongly agree and (19) 8.5 % neutral. Also the respondents asked whether they maintain all Books of Accounts of VAT as per proclamation. (34)15.2% strongly disagree, (97)43.3 % disagree, (22)9.8% neutral and (71)31.7% agreed. This indicated that many of tax payers are not maintaining Book of account as per proclamation. Its observed that; most of the traders do not keep proper records of their transactions and those who keep proper records mostly default by keeping two different records to evade tax. Mostly they undervalue their turnover so that it does not qualify for VAT. Most small traders do not wish to register for VAT; because they will be forced to sale their products at a relatively higher price and so fail to compete effectively in the market. Therefore, the respondents say that, the West Shoa Zone Revenues Authority should employ effective methods in effective identification of the taxpayers as many of them do not wish to register voluntary.

Source: Survey Result, 2018
As it is indicated in table 4.5, the culture of tax compliance were observed, the result shows that few VAT Registered Tax payers would attempt tax evasion. Out of respondents (69)30.8% strongly agree, (25)11.2% strongly disagree and the other tax payers (35)15.6% disagree, (51)22.8% agree and (44)19.6% neutral. This shows that, most of respondents strongly agreed in society with a culture of high compliance with VAT law but some VAT Registered Tax payers attempt tax evasion. For the Tax payers should evade VAT if the VAT system  (60)26.8% agreed, (72) 32.1% strongly agreed and for Splitting the business will affect the VAT the respondents respond that (32)14.3% disagree, (51)22.8% neutral, (56) 25% agreed and (85)37.9% strongly agreed. This shows that most of Tax payers agreed the Splitting the business will affect the VAT. The non-compliance of other taxpayers has a negative impact on compliance tax payers'. 0.0 0.0 3.6 29.9 66.5 Source: Survey Result, 2018 The respondents were asked there is Non-issuance of invoice to all buyers, the respondents respond that (120)53.6%agreed, and (104)46.4% strongly agreed. That implies that majority of tax payers agreed on Nonissuance of invoice. In addition the Tax payers asked the non-compliance of other taxpayers has a negative impact on compliance tax payers' (8)3.6% neutral, (67) 29.9% agreed and (149)66.5% strongly agreed. This means that most of Tax payers agreed on the non-compliance of other taxpayers has a negative impact on compliance tax payers. Respondents were asked questions related to Awareness on Mechanisms for raising objection against penalty is low. They respond that 45 (20.1%) disagreed, 57(25.4%) agreed and 122(54.5%) strongly agreed. It implies that the majority of respondents have insufficient awareness on Mechanisms/procedures for raising objection against penalty. Findings further revealed that respondents who have been penalized by West Shoa Revenues Authority because of late payment were 39 (17.4%) and 10(4.5%) of the respondents have been penalized due to Nonissuance of VAT invoice whereas a majority of respondents 175 (78.1%) have never been penalized.

Descriptive statistics of VAT Revenues Authority employees Variables
Data was also collected from employees of Revenue office and result obtained from them was summarized as follows: Internal VAT administration Table4 The respondents were asked in conducting Revenue Collection, the Revenues Authority has sufficient Staff Members. (47)63.5 % of the respondents disagreed, (17)23% of the respondents strongly disagreed, and (10)13.5% of the respondent's agreed. It revealed that the Revenues Authority did not have sufficient Staff Members. On the other hand there is shortage of resources and infrastructural facilities to implement and enhance the enforcement of VAT Law, (28)37.8% strongly agreed (32)43.2% agree and (5)6.8% disagreed and (9)12.2% strongly disagree. This shows that most of the respondents agreed on there are shortage of resources and infrastructural facilities to implement and enhance the enforcement of VAT Law. Respondents were asked on whether there is intense follow up and supervision over the identified VAT payers. The following were the responses; (41)55.4 % of the respondents disagreed, (10)13.5% agreed while (8)10.8% strongly agreed, (11)14.9% strongly disagreed and (4)5.4% remained neutral. It indicated that less close follow up and supervision by West Shoa Zone Revenues Authority on identified taxpayers. On the Tax payers' VAT report assessed on time, (20) 27% strongly disagreed, (29)39.2% disagreed, (5)6.8% neutral, and (20)27% strongly agreed. It implies majority of respondents disagreed on Tax payers' VAT report assessed on time. For the question VAT registered Tax payers have trust in assessment and collection procedures. (44)59.4% disagreed, (5)6.8% strongly disagreed, (9)12.2% neutral and (16)21.6% agreed. It shows that most of VAT registered Tax payers have not trust in assessment, and collection procedure. Respondents were asked there are tax payers yet to be registered for VAT but Revenues Authority so far not included. The following were the responses; (42)56.8% of the respondents strongly agreed, (21)28.4 % agreed while (7)9.5% disagreed, and (4)5.3% of the respondents were strongly disagreed on the tax payer's identification. It implies that there were tax payers yet to be registered for VAT but Revenue Authority so far not included. Also the respondents were asked the methods used by West Shoa Zone Revenues Authority to identify tax payers are adequate. They respond that 13.5% strongly disagreed, 64.9% disagreed and 21.6% agreed. This indicated that the methods used by West Showa Zone Revenues Authority to identify tax payers are not adequate. Respondents were asked that Tax payers who need to register for VAT when their annual turnover was more than Birr1 million. The Required turnover of Birr 1 Million is very high standard. (48) 64.8% of the respondents strongly agreed, (17)23% agreed while (9)12.2% disagreed on the registration threshold being high. In addition the respondents were asked it should be worthwhile to amend the possibility of reducing the requirement of 1Million Turnover. (2)2% strongly disagreed, (9)13% disagreed (38)51.4% agreed and (25)33.6% strongly agreed. Some of the respondents argued that this amount is higher and suggest that it should be lowered. They say that, small businesses wishing to secured businesses with registered businesses are unable because they are not registered and would wish to but the constrain remains to be the registration threshold. Some of the respondents say that, the nature of the businesses they are in requires them to register for VAT and be able to even get tenders but they are not in the position because they are not registered. Most respondents suggest that, the registration threshold should be reviewed to a position of being able to accommodate many businesses despite the fact that it will demand more administration for it to work effectively.  shows that the respondents are asked there is lack of commitment in VAT experts to impose penalty on tax payers as per proclamation. The respondents respond that (5)6.8% strongly disagreed, (11)14.9 % disagreed, (2)2.6% neutral, (31)41.9% agreed and (25)33.8% strongly agreed. For the question there is lack of transparency and consistency in imposing penalties, (2)2.7% strongly disagreed, (15)20.3% disagreed, (40)54% agreed and (17)23% strongly agreed. Whereas for if there is no penalty or legal enforcement, there is a possibility that VAT registered Tax payers may not pay VAT they respond that (6)8.1% disagreed, (2)2.7% neutral, (12)16.2% agreed and (54)73% strongly agreed. It indicates that majority of respondents argued that there is lack of commitment in VAT experts to impose penalty on tax payers as per proclamation, lack of transparency and consistency in imposing penalties and if there is no penalty or legal enforcement, there is a possibility that VAT registered Tax payers may not pay VAT. The above table shows that out of 578 VAT registered Tax payers in Ambo city administration Revenues Authorities 13(2.55%) were penalized. That means 7(1.21%) by Non-issuance of invoice, 4(0.695) by Non-post advertisement and 2(0.35) by Obstruction to Revenues. In case of Dandi Woreda Revenues Authority out of 77 VAT registered Tax payers only 3(3.9%) were penalized by Non-issuance of invoice but in Bako Woreda Revenues Authority, out of 80 VAT registered Tax payers none of them were not penalized in 2017 year. In general it reviled that in West Shoa zone Revenues Authority there is poor practice on imposing penalty on VAT registered Tax payers. Source: Survey Result, 2018 VAT registered Tax payers Respondents were asked to give their views on the percentage change of total revenue collections from VAT is increasing from year to year, but not the meet the targets. 33.9% of the respondents strongly agreed, 43.3% agreed, 6.7% remained neutral while 12.1% disagreed and 4% strongly disagreed. In addition to that the Respondents were asked Revenue Authority witnessed unachieved VAT Targets,33.1% of respondents strongly agreed, 45.5% agreed, 13.8%neutral and7.6% disagreed on unachieved VAT Targets. Also the respondents asked VAT income is affected due to lack of intensive follow up, 36.6% strongly agreed, 52.2% agreed,8.1%neutral and 3.1% disagreed. This indicates that the percentage change of total VAT collections from year to year is not meets the target.

External Ethiopian VAT administration
Whereas the question for Revenues Authority employees asked the percentage change of total revenue collections from VAT is increasing from year to year, but not the meet the targets, 74.3% agreed and 25.7% strongly agreed. For the question Revenue Authority witnessed unachieved VAT Targets, 39.2% strongly agreed, 54% agreed and 6.8% neutral and finally the Revenues Authority employees were asked VAT income is affected due to lack of intensive follow up, 18.9% strongly agreed, and 56.8 % agreed, 10.8% neutral and 13.5% disagreed. this indicates that even if the revenue collections from VAT is increasing from year to year, but not the meet the targets due to lack of intensive follow up. Moreover data was collected from Consumers and result was summarized as follows: The above table shows that the respondents were asked to State level of awareness on VAT. They replied that 28(56%) have little aware, 15(30%) unaware, 5(10%) moderately aware and 2(4%) completely aware. Therefore majority of consumers respondents of the study have little aware of VAT. The respondents were asked as per VAT proclamation, all VAT registered tax payers should give invoice to consumers, but they are not practicing so. From the fifty respondents 21 (42%) agreed, 16(32%) strongly agree, 5(10%) disagreed and 8(16%) neutral. It indicated that most consumers respondents were agreed to as per VAT proclamation, all VAT registered tax payers give invoice to consumers, but they are not practicing.  As it's shown from the above Table 4.27.consumers respondents were asked to express their view about Consumers are not willing to buy goods and services with VAT. Consequently, 23(46%) of consumers were replied that agreed, 13(26 %) of consumers were responded strongly agreed, 8(16%) of consumers were answered disagreed and 6(12 %) of consumers were replied that neutral. Therefore, from this finding, the majority of the respondents of Consumers were not willing to buy goods and services with VAT. It can conclude that the main reason for not willing to buy goods and services with VAT, by most consumers were lack of awareness about VAT.

Status of VAT income as a percentage of total tax revenue
For analysis purpose, VAT collection with its respective total tax revenue collection 2011to 2017 year for West Shoa Zone Revenues Authority showed in the following:

Regression Analysis
Regression analysis was conducted to empirically determine whether independent variables were significant with dependent variables. The regression analysis was done with VAT collection performance as dependent variable and determinants of VAT collection performance as independent variables (Tax payer's awareness of VAT, Tax payer's maintenance of account, Tax Evasion, Tax Avoidance, Tax Non-compliance, and VAT Rate) Tax payers point of view and VAT assessment, VAT audit, Competence training, Adequate manpower, Tax payers identification, External legal Environment and penalization on institutional point of view.

Model summery of Tax payers related variables
The regression results in the table4.30.indicated the goodness of fit for the regression between independent variables and dependent variables was satisfactory in the multiple regressions. An R squared of 0.63 indicates that 63% of the relationship explained by the identified six factors namely Tax payer's awareness of VAT, Tax payer's maintenance of account, Tax Evasion, Tax Avoidance, Tax Non-compliance, and VAT Rate. The rest 37% is explained by other factors in the VAT collection performance not studied in this research. Further, the adjusted R-square=0.62 shows that, the factors accounted for 62% of the variance in VAT collection performance.
Regression results in table 4.30.below indicated the coefficient for each of the variables as well as their significance levels in the model. As shown, Tax payer's awareness of VAT, Tax payer's maintenance of account, Tax Evasion, Tax Avoidance, Tax Non-compliance and VAT rate were determinants influence significantly VAT collection performance. The regression equation for Tax payer's variables was: VCP i = α0 + β1TPAWOV i + β2 TPMOA i + β3TE i + β4 TA i + β5 TNCOM i + β6 VR i + ɛi VCP i=2.6165+ 0.5893TPAWOV + 0.2676TPMOA -0.2949TE-0.1172TA-0.1379TNCOM + 0.1028VR + ɛi Moreover, the model summery also shows the significance of the model by the P value statistics (P=0.000) and F=62.78 makes known the sound explanatory power of the model. This statistics indicates that the overall model is significant in explaining the dependent variable since the associated probability is lower than 0.05. It also suggests that the relationship between the dependent variable and independent variables is linear. The beta (β) sign also shows the positive or negative effect of the independent variables coefficient over the dependent variable.
The findings shows that when Tax payer's awareness of VAT increase, VAT collection performance increase by 58.93% by controlling other factors constant. When Tax payer's maintenance of account increase, VAT collection performance increase by 26.76% by controlling other factors constant. When Tax Evasion increase, VAT collection performance decrease by 29.49% by controlling other factors constant. When Tax avoidance increase, VAT collection performance decrease by 11.72% by controlling other factors constant. When Tax Non-Compliance increase, VAT collection performance decrease by 13.79 % by controlling other factors constant. When VAT rate increase, VAT collection performance increase by 10.28% by controlling other factors constant. This implies that Tax payers awareness of VAT, Tax payers maintenance of account and VAT rate have a positive relationship with VAT collection performance and statistically significant (P-value =0.000, 0.000 and 0.034 respectively, refers to less than 0.05). But Tax Evasion, Tax Avoidance, Tax Non-Compliance have a negative relationship with VAT collection performance and statistically significant (P-value =0.000, 0.006 and 0.000 respectively, refers to less than 0.05). All variables related to Tax payers ; (Tax payer's awareness of VAT, Tax payer's maintenance of account, Tax Evasion, Tax avoidance, Tax non-compliance and VAR rate) are found significantly influencing VAT collection performance in the study area.

Model summery related to Institutional variables
The regression results indicated the goodness of fit for the regression between independent variables and dependent variables was satisfactory in the multiple regressions. An R squared of 0.78 indicates that 78% of the relationship is explained by the identified seven factors namely VAT assessment, Adequate Manpower, VAT audit, competency training, Tax payer's identification, External legal environment and penalization. The rest 22% is explained by other factors in the VAT collection performance not studied in this research. Further, the adjusted R-square=0.76 shows that, the factors accounted for 76% of the variance in VAT collection performance.
Research Journal of Finance and Accounting www.iiste.org ISSN 2222-1697(Paper) ISSN 2222-2847(Online) Vol.10, No.21, 2019  Moreover, the model summery also shows the significance of the model by the P value statistics (P=0.000) and F=34.22 makes known the sound explanatory power of the model. This statistics indicates that the overall model is significant in explaining the dependent variable since the associated probability is lower than 0.05.It also suggests that the relationship between the dependent variable and independent variables is linear. The findings show that when frequency of VAT Assessment increase, VAT collection performance increase by 15.67% by controlling other factors constant. When frequency of VAT audit increase, VAT collection performance increase by 13.16% by controlling other factors constant. When frequency of training increases, VAT collection performance increase by 22.94% by controlling other factors constant. When adequate manpower increase, VAT collection performance increase by 22.13% by controlling other factors constant. When Tax payers Identification increase, VAT collection performance increase by 35.12% by controlling other factors constant. When External legal Environment increases, VAT collection performance decreases by 15.09% by controlling other factors constant. When Penalization increases by, VAT collection performance increases by 37.92% by controlling other factors constant. This implies that VAT Assessment, VAT Auditing, Competence training, Adequate manpower, Tax payers identification and Penalization have a positive relationship with VAT collection performance and statistically significant in explaining VAT collection performance as p value=0.046, 0.037,0,002, 0.001, 0.000 and 0.006 respectively. But External legal environment has a negative relationship with VAT collection performance and statistically significant in explaining VAT collection performance as p value 0.014. Among the independent variables, Tax payer's identification has been found to be the most determinant and statistically significant.

In-depth interview results
The interviews were conducted by using semi-structured interview method to reach five VAT Administrations starting from Oromia Revenues Authority Assessment and follow up department head to woreda level. These were; Oromia Revenues Authority Assessment and follow-up department head (1), West Shoa Zone Revenue Authority Assessment and follow-up department head (1), Assessment and follow-up department heads of selected three woredas (3) were interviewed at different times.
There are tax payers yet to be registered for VAT but Revenue Authority so far not included, what are the reasons. They responded that many reasons, some of them are: lack of man power and resources, Tax payers not tell their exact annual income, lack of commitment of some employees at different level to identify tax payers, political pressure, lack of awareness of VAT, biased of employees and the instability of external part.
In-depth interview were asked about what are mechanisms for raising objections against penalties by tax payers in handling their grievances. Their responses were similar to the procedures written on proclamation. Appeal is made according to a constitutional right as far as the law. The VAT system is not exception to these rules. A tax payer under VAT, Who is aggrieved by the decision of tax authorities, may lodge his complaint to a body competent to hear and decide on such application. The aggrieved parts have two options: tax appeal committee or regular courts. The tax payer objecting the assessment by revise committee while taking appeal to Tax Appeal Committee is required to deposit 50% of the additional tax assessed. Then the committee gives the decision based on VAT proclamation. If Tax payers satisfied with decision given by committee the appeal can finalized at this stage unless go for regular courts.
For the interview question how the administrative officials are handling the challenges of VAT Levy and Collection by using appropriate VAT Management Techniques, The interviewee suggested that first we identify the areas of the problems. Then we discussed with committee and give the direction to solution. This means that make awareness creation to Tax payers, Employees and society as all. According to Oromia assessment and Follow up department leader said that there is person to do on VAT assessment and collection. In addition to we call other employees from different Zone to make operation side used as best techniques.
On what are the criteria used by the authority for sample selection of tax payers for audit and audit procedures. They responded that we follow audit criteria which are comprehensive and sample audit that have 13 points procedure. By using SIGTAS if the summation of thirteen point procedures greater than fifteen we used comprehensive audit and if the summation of thirteen point procedures less than fifteen we used sample audit. But according to west Shoa Zone assessment and Follow up department leader suggested that not follow this procedures rather used based on the year of VAT registered Tax payers. The first VAT registered Tax payers audited first.
Another question what are the major problems in relation to the assessment and collection of VAT were interviewed. The major problems they raised were lack of manpower and interruption of SIGTAS. Especially from the three selected woredas assessment and Follow up department leaders point of view there is no Auditor at woreda level to audit VAT registered Tax payer's document. Finally for what is the reason consumers are not willing to buy goods and services with VAT. They suggested that due to lack of consumers awareness of VAT, due to all Tax payers not registered for VAT and Consumers are interested to buy goods or services from nonregistered enterprise to get lower Price.

Conclusions
The study covered the interaction between Value Added Tax collection performance and exploratory variables of Tax payers (Tax payer's awareness of VAT, Tax payer's maintenance of account, Tax Evasion, Tax Avoidance, Tax Non-compliance, and VAT Rate) and Institutional variables (VAT assessment, Manpower, VAT audit, competency training, Tax payer's identification, External legal environment and penalization).The main objective of the study was to evaluate the determinants of VAT collection performance in West Shoa Zone. The researchers used quantitative and qualitative research approach and primary and secondary data type. Survey design was used with questionnaire and semi-structured interview as tool of data collection. In this study both purposive and stratification sampling techniques were used. The study analysis was used the descriptive statistics, Pearson correlation matrix and ordinary least square (OLS) estimation method. The outcome of regression result shows that classical linear regression model assumptions were not violated.
According to Pearson correlation result of Tax payers variables shows that Tax payer's awareness of VAT, Tax payer's maintenance of account and VAT Rate were positive correlated with VAT collection performance. Moreover, the coefficient estimates of correlation was 0.622, 0.5205 and 0.1837 from highest to lowest ρ<0.05 respectively. While Tax Evasion, Tax Avoidance and Tax Non-compliance were negative correlated to VAT collection performance with coefficient estimates of correlation was -0.5471, -0.3984 and -0.2854, ρ<0.05 respectively. On the other hand Pearson correlation result of Institutional variables shows that variables (Tax payers identification, Competence training, VAT assessment, VAT audit and Adequate manpower ) were positive and significantly correlated with VAT collection performance (r=0.7197, 0.7480, 0.6294, 0.5145 ,0.3463, ρ<0.05 respectively). But, two variables (External legal environment and penalization) were negative and significantly correlated with VAT collection performance (r=-0.3203,-0.2455, ρ<0.05 respectively). In general it's concluded that Value added tax have a great contribution in increasing government revenues, Hence the government authority/tax office has to focused on factors which negatively affect VAT and needs to take a corrective actions.