THE IMPACT OF CORRUPTION ON TAX MORALE: A STUDY OF SELECT BUSINESS ORGANIZATIONS IN ADDIS ABABA, ETHIOPIA

Abstract

The overall purpose of this study is to assess the impact corruption on tax morale. The researcher used survey method for the study. Data for the survey study were collected from the target populations by means of self-administered questionnaire. From the populations, the sample was select by using stratified sampling to obtain a representative sample from taxpayers of business organization. An ordered probit model is employed to analyze the impact of corruption on tax morale. The results showed that tax morale (dependent variable) is correlated at -0.3093 with corruption at 5 percent significance level and there is a significant negative correlation between corruption and tax morale at a p value of 0.048. Citizens feel cheated if corruption is widespread, their tax burden is not spent well, and that they are not protected by the rules of law. Therefore, the government should work a lot to combat corruption and balance government service and the paid tax.

Keywords

• Tax morale, Corruption

References

1. fourth columns, there are associated standard errors and z-statistics for each variable
2. respectively. The statistical significances of the variables are determined by using the z-statistics.
3. It needs the marginal effects to interpret the results of ordered probit effectively. The marginal
4. effects show how the probabilities of each outcome change with respect to changes in regressors.
5. It shows the change in probability when the predictor or independent variable increases by one
6. unit. Therefore, the marginal effects are calculated in table 4.2.1 in different outcomes.
7. Moreover, the prob > chi2 are given at the upper section of the coefficient shows that the model
8. is statistically significant since the probability value of chi-square is much less than 0.01.

9. The findings indicate that there is a significant negative correlation between corruption
10. and tax morale. An increase in the corruption scale by one point decreases the share of subjects
11. indicating the lowest tax morale by more than -.0253779 percentage points. This result is
12. consistent with Fjeldstad (2005) argument’ that the presence of corruption undermines tax
13. morale of the citizens who become frustrated and undermines confidence in the tax system,
14. affects willingness to pay taxes, and reduces a country’s capacity to finance government expenditures.
15. 3 Hypotheses Testing
16. No statistically significant relationships exist between corruption and tax morale.
17. As can be seen from table 4.2.2 above, there is a significant relationship between corruption and
18. tax morale at a p value of 0.048. By this result, we reject the null hypothesis and accept the
19. alternate. In other words, we accept that there is a statically significant relationship between
20. corruption and tax morale.
21. CONCLUSION AND RECOMMENDATION
22. The findings show that there is a significant negative correlation between corruption and tax
23. morale. The majority of the respondent believes that as most public officials are engage in
24. corruption and bribe taking. Citizens feel cheated if corruption is widespread, their tax burden is
25. not spent well, and that they are not protected by the rules of law. Therefore, the government
26. should work a lot to combat corruption and balance government service and the paid tax.
27. Taxpayers are more inclined to comply with the laws if the relation between the paid tax and the
28. performed government services is found to be equitable.
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