The prime objective of this study is to investigate the main determinants of VAT revenue productivity in Ethiopia. In order to address this main objective we focused on the following specific objectives.
VAT is one of the indirect taxes levied on consumption where the value of goods and services increases as they charge hands in course of production, distribution and final sales to the consumer. Ethiopia has implemented the Value Added Tax in January, 2003 primarily to raise more revenue, modernizing its tax administration and encourage investment and trades. The Ethiopian Customs and Revenue Authority (ERCA takes the responsibility), and is facing with a substantial problem of VAT revenue collections efficiency. So in this study, the efficiency of VAT over time and determinants of productivity of VAT in Ethiopia at macro level from 2003-2016 has been given focus. To achieve this objective, the researcher used quantitative research designs using secondary data from the data sources (i.e. ERCA, NBE, and WB). Some statistical graphs, tables and percent are used, and also Autoregressive Distributed Lag (ARDL) Approach model is applied in order to investigate the long-run effect of determinants of productivity of VAT revenue. The study concludes that productivity of VAT in Ethiopia is less efficient over time which is 18% on average and, very responsive to changes in its determinants (specifically GDPcG, inflation, import, population, and corruption). So this investigation provides decision makers with an analytical framework which can be used to estimate the associated VAT revenues productivities in Ethiopia.
Table of Contents
1. Introduction
1.1. Background of the Study
1.2. Statement of the Problem
1.3. Objective of the Study
1.3.1. General objective
1.3.2. Specific objectives
1.4. Research Questions
1.5. Significance of the Study
1.6. Scope of the Study
1.7. Limitations of the Study
2. Literature Review
2.1. Theoretical Literatures
2.2. Empirical Literature
3. Research Methodology and Model specification
3.1. Research Method of Analysis
3.2. Data Collection and Source
3.3. Model Specification
3.3.1. Unit Root Test
3.3.2. Estimation procedure
4. Data Presentation and Analysis
4.1. Descriptive Analysis
4.1.1. VAT revenue collection productivity in Ethiopia over (2003-2016)
4.1.2. Corruption in Ethiopia over (2003-2016)
4.1.3. Economic growth in Ethiopia over (2003-2016)
4.1.4. Gross VAT collection in Ethiopia over (2003-2016)
4.1.5. Import expenditure of Ethiopia over (1977-2016)
4.1.6. Inflation in Ethiopia over (2003-2016)
4.1.7. Population in Ethiopia over (1960-2016)
4.1.8. Total consumption expenditure in Ethiopia over (2003-2016)
4.2. Econometric Analysis
4.2.1. Test analysis
4.2.2. Estimation procedure
4.2.3. Stability of the model and coefficients
5. Summary, Conclusion and Recommendation
5.1. Summary
5.2. Conclusion
5.3. Recommendations
Research Objective and Focus
The primary objective of this study is to investigate the determinants of VAT revenue productivity in Ethiopia from 2003 to 2016, utilizing quantitative research methods and an Autoregressive Distributed Lag (ARDL) model to assess long-run effects and policy implications for revenue efficiency.
- Analysis of VAT efficiency trends in Ethiopia over the specified period.
- Evaluation of macroeconomic determinants including GDP per capita, inflation, and import expenditures.
- Impact assessment of governance factors such as the Corruption Perception Index.
- Estimation of long-run relationship between VAT productivity and demographic changes.
Excerpt from the Book
1.1. Background of the Study
VAT is an indirect tax on the consumption of goods and services. Compared with single-stage sales taxes, which are levied on the actual value of output at each stage of the productive process, VAT relates to the value added to the goods or services at each individual stage, and amounts to the difference between output tax and input tax. Output tax is the VAT that is chargeable at the appropriate rate on the sale of taxable commodities by a taxable person. An entrepreneur has to be registered for VAT, and calculate the output tax when his taxable turnover has exceeded the threshold for compulsory VAT registration. Meanwhile the input tax is the VAT added to the price of commodities liable to VAT, which are purchased by the entrepreneur. It can be deducted (Zolotukhina, 2017).
A value-added tax (VAT) is a form of consumption tax. From the perspective of the buyer, it is a tax on the purchase price. From that of the seller, it is a tax only on the “value added” to a product, material or service, from an accounting point of view, by this stage of its manufacture or distribution. The manufacturer remits to the government the difference between these two amounts, and retains the rest for themselves to offset the taxes they had previously paid on the inputs. The “value added” to a product by a business is the sale price charged to its customer, minus the cost of materials and other taxable inputs. A VAT is like a sales tax in that ultimately only the end consumer is taxed. It differs from the sales tax in that, with the latter, the tax is collected and remitted to the government only once, at the point of purchase by the end consumer. With the VAT, collections, remittances to the government, and credits for taxes already paid occur each time a business in the supply chain purchases products (P. Sivasakkaravarthi and D. Ganesan, n.d).
Chapter Summaries
1. Introduction: This chapter provides an overview of Value Added Tax concepts, identifies the specific research problems regarding VAT efficiency in Ethiopia, and outlines the objectives and significance of the study.
2. Literature Review: This section covers theoretical frameworks of consumption taxes and VAT, alongside a review of empirical studies regarding VAT performance and determinants in various national contexts.
3. Research Methodology and Model specification: This chapter explains the quantitative research design, data sources, and the mathematical specification of the Autoregressive Distributed Lag (ARDL) model used for the empirical analysis.
4. Data Presentation and Analysis: This chapter details the descriptive statistics of the variables and presents the results of the econometric estimations, including unit root tests and the final regression analysis.
5. Summary, Conclusion and Recommendation: The final chapter synthesizes the main findings, concludes on the impact of various economic determinants on VAT productivity, and provides policy recommendations for the Ethiopian tax authorities.
Keywords
Value Added Tax, VAT Productivity, C-Efficiency Ratio, Ethiopia, Autoregressive Distributed Lag (ARDL), Economic Growth, Inflation, Import Expenditure, Corruption Perception Index, Tax Revenue, Tax Administration, Macroeconomic Determinants, Time Series Analysis, Tax Compliance, Revenue Performance.
Frequently Asked Questions
What is the primary focus of this research?
The research focuses on investigating the determinants of VAT revenue productivity in Ethiopia at the macro level during the period from 2003 to 2016.
What are the central thematic areas of the study?
The study examines VAT efficiency, macroeconomic indicators like GDP growth and inflation, and the impact of corruption and demographic factors on tax collection performance.
What is the core objective of the research?
The objective is to identify and analyze the major determinants that affect VAT revenue productivity to provide an analytical framework for policymakers.
Which scientific methodology is employed in the work?
The researcher uses a quantitative research design and an Autoregressive Distributed Lag (ARDL) model to perform time series analysis on secondary data.
What topics are covered in the main section of the paper?
The main sections cover theoretical and empirical literature, detailed methodology, descriptive analysis of economic data, and econometric regression results.
Which keywords best characterize the study?
Key terms include Value Added Tax, VAT Productivity, C-Efficiency Ratio, Ethiopia, ARDL model, and macroeconomic determinants.
How does the Ethiopian VAT productivity compare internationally?
The study concludes that Ethiopia's VAT productivity is relatively low, averaging 18%, which is below the averages observed in many other regions, including other parts of Sub-Saharan Africa.
What impact does corruption have on VAT revenue?
The research finds a negative and statistically significant relationship between corruption and VAT productivity, suggesting that higher levels of corruption correlate with lower revenue efficiency.
How does import expenditure affect VAT performance in the model?
The analysis indicates that import expenditure has a negative effect on VAT productivity, as price volatility and external factors in the world market complicate tax collection.
- Citar trabajo
- Molla Dessie (Autor), 2018, The main determinants of VAT revenue productivity in Ethiopia. A research, Múnich, GRIN Verlag, https://www.grin.com/document/935429
