Practices and Challenges of Value Added Tax Implementation in Ethiopia

The introduction of a VAT can facilitate a substantial improvement in overall tax administration, and indeed adoption of the VAT is often see as an opportunity for overall tax administration modernization. The introduction of the VAT tax, however, has occasionally disrupted the functioning of an existing administration because of inadequate preparation, lack of uniformity in application, lack of awareness by the side of the Taxpayer, application contrary to the law and problems related with institutional capacity. Since the VAT is a tax that is levied on the consumer, it does not constitute a tax on business. In this case the study is to examine the nature, practices, and challenges of VAT implementation in Ethiopia and identify and suggest solutions to help the successful achievement of VAT Objectives, in doing so, the paper further assesses the impact of VAT to gross domestic product and total government revenues. I think this research paper will enable the reader to observe the economic importance of Value Added Tax, highlight the major challenges of Value Added Tax in Ethiopia and its future implication and as a measure of success to The Ethiopian Tax Authority Organization.