THE IMPACT.OF.INFORMATION.TECHNOLOGY.ON THE EFFICIENCY.OF TAX.ADMINISTRATION IN ETHIOPIA

Abstract

This study aimed at examining the impact of information technology on the efficiency of tax administration in Ethiopia. It specifically investigated the benefits, drawbacks, impacts of information technology on tax administration and challenges for application of information technology on tax administration. IT affects the quality of service delivery directly or indirectly, taxation service deliver by the office also affected taxpayers. This has impact on the tax administration. This motivated the researcher to do a study on the impact of information technology on the efficiency of Tax administration in Ethiopia. To achieve objectives, a quantitative research approach and descriptive research method were applied. Sample respondents are taxpayers and staffs from the Ministry of Revenue were selected using a cluster random sampling technique. The study used primary and secondary data sources. The questionnaire was used to gather relevant primary data pertinent to the study. From the findings the application of IT helped in saving time to complete tax payment, efficient and convenient tax payment, increasing transparency in terms of assessing information. IT also provided major benefits for effective taxpayer’s data recording. Furthermore, the study identified challenges that prevent the appliance of IT in tax administration are lack of IT infrastructure, lack of staff commitment, insufficient training, poor network connectivity, and lack of awareness. The finding of study also revealed the drawbacks of information technology in tax administration. These include increase in fraudulent tax refund claims, corporate account takeover (the hacking of corporate body website), filing of fake tax returns and data leaks; it leads to personal identity theft and sensitive data theft and increases making false statements and income declaration. The findings of this study also show that the effective appliance of information technology on tax administration has a big impact on efficiency. When there is a good environment application of Information Technology enables to an increase in the tax base as additional potential taxpayers come into the tax net. The study revealed that information technology (E-tax filling, Network connectivity, Technical skill, Database, Online registration and online remittance) affect tax productivity with 0.375, 0.135, 0.136, 0.111, 0.156, and 0.147 (p=0.00, 0.01, 0.04, 0.032, 0.005 and 0.00), there is relationship of 78.4% (p=0.000), 65.6% (p=0.000), 64.0% (p=0.000), 69.6%(p=0.000), 74.4% (p=0.000) and 72.7% (p=0.000) between E-tax filling, Network connectivity, Technical skill, Database, Online registration and online remittance on Tax administration. It is also recommended that the respective agencies responsible for tax collection should carry out awareness in the form of seminars and sensitization of the process and suitability of information technology on tax administration.