FACTORS AFFECTING TAX COMPLIANCE IN SMALL AND MEDIUM ENTERPRISE IN WOLKITE TOWN

Abstract

This study investigated factors affecting tax compliance of small and medium enterprises in Wolkite town. This will greatly inform efforts to enhance tax compliance of small and medium enterprises in the town. The multiple regression model was estimated as analytical tools. The study is based on household-level data collected in 2020 from 134 randomly drawn micro and small enterprises working in Wolkite town. The multiple regression analysis indicated from among 7explanatory variables 5 were significant in explaining the factors influencing tax compliance of small and medium enterprises in Wolkite town. These variables were age, education, tax rate, tax knowledge of the tax payers and tax compliance costs. Of these, education and tax knowledge of the respondents indicated positive influence, while age, tax rate, and tax compliance costs exerted negative impact. The result of the study suggests working on raising the knowledge and awareness of micro and small enterprises tax payers will improve their tax compliance behavior in Wolkite town.