Tax evasion attitude and taxpayers’ perception of government legitimacy: evidence from Southern Ethiopia

Tariku Lorato, Yonas Sendaba and Tasew Tadesse

Cogent Economics & Finance, 2024, vol. 12, issue 1, 2371944

Abstract: Tax evasion, a global concern, undermines government revenue, public services, and societal trust. It occurs when taxpayers deliberately avoid their tax obligations. This study primarily explores the link between government legitimacy and tax evasion decisions in Ethiopia. Aside from bridging the knowledge gap in tax evasion, the findings are instrumental for policymakers to develop more effective approaches to tax collection and promote a culture of voluntary tax compliance in Ethiopia. Using survey data from 768 respondents across five administrative zones in Southern Ethiopia. The research examines how taxpayers’ perceptions of government legitimacy influence their attitudes toward tax evasion. Methodologically, the study employed one-way ANOVA and a logistic regression model to analyze the collected data. The findings reveal a significant negative association between government legitimacy and tax evasion. Taxpayers who view the government as legitimate are less likely to consider evasion. However, other factors also play a role. The study identifies age, perceived corruption, penalty severity, and tax system complexity as positively influencing tax evasion attitudes, while education level has a negative effect. Based on these findings, the study recommends strategies to improve government legitimacy and strengthen tax compliance. these include promoting accountable and transparent governance, enhancing public service delivery, simplifying the tax system, increasing penalties for evasion, and tackling corruption. By addressing these aspects, Ethiopia can foster trust in institutions and ultimately reduce tax evasion.This study examines the link between government legitimacy and tax evasion decisions in Southern Ethiopia. Using survey data from 768 respondents across five administrative zones in Southern Ethiopia, the research examines how taxpayers’ perceptions of government legitimacy influence their attitudes toward tax evasion. Methodologically, we employed one-way ANOVA and a logistic regression model to analyze the effect of government legitimacy on the tax evasion decisions of taxpayers. Our findings reveal a significant negative association between government legitimacy and tax evasion. Taxpayers who view the government as legitimate are less likely to consider evasion. Moreover, the study finds that the likelihood of tax evasion increases with age, perception of the presence of corruption, penalty severity, and tax system complexity, while education level is found to have a negative effect. This study not only improves our understanding of tax evasion in Ethiopia but also provides valuable insights for policymakers to design more effective tax collection strategies and promote a culture of honest taxpaying. It holds significance for two main reasons. First, it fills the knowledge gap. Tax evasion is a global problem, but understanding its causes can differ across and within countries. This study specifically explores the phenomenon in Southern Ethiopia, where the issue is not well documented. Accordingly, examining the link between government legitimacy and tax evasion contributes to a more comprehensive understanding of tax compliance behavior. Second, in terms of policy implications, this study goes beyond simply identifying the factors affecting tax evasion. It uses the findings to recommend workable strategies for Ethiopian policymakers. These recommendations target not just tax collection methods (simplifying the system, increasing penalties) but also the root causes of tax evasion (improving government transparency, tackling corruption). By addressing these areas, policymakers can create a system that fosters trust and encourages voluntary tax compliance, ultimately leading to increased government revenue in the region and improved public services.

Date: 2024
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DOI: 10.1080/23322039.2024.2371944

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