The State and Drivers of Corruption in the Ethiopian Revenue Sector

Abstract

This study was initiated with the objectives of identifying the prevalence and drivers of corruption in the tax revenue sector in Ethiopia. The study adopted a combination of descriptive and explanatory research designs. Primary data were collected from 747 taxpayers drawn using stratified sampling procedure. Thirty-six key informants working in sector were interviewed. Qualitative data were analyzed using thematic analysis and narration stories. Quantitative data were analyzed using mean, frequency, standard deviation and the ordered logit model. Corruption is prevalent in the tax revenue sector in Ethiopia. About 78% of the respondents rated the prevalence in a range of severe to extremely severe. About 58% of the firms reported that they paid a bribe to receive services from public servants. From this proportion, 65% of the taxpayers were supply-side bribers, and 35% of them were demand-side bribers. None of the business firms were incorruptible taxpayers. Lack of transparency, limited accountability, informal competition, using own source of money for working capital, profit level of firms and greed of public servants for money significantly increased prevalence of corruption. Improving transparency of the tax system; making public servants and business owners accountable; and working to create corrupt-free citizens who will be tomorrow’s public servants and business owners are recommended.