Asian Journal of Economics, Business and Accounting

Value Added Tax is Ethiopia's primary source of domestic revenue, yet local-level administrative challenges remain poorly documented. This study examines VAT administration challenges and taxpayer compliance behavior at the Negele Town Revenue Authority in Oromia Regional State, Ethiopia. Using a descriptive mixed-methods design, the study randomly sampled 290 VAT-registered taxpayers from 1,061 registrants and purposively selected 48 tax officials from assessment, collection, enforcement, and audit departments. Data were collected through questionnaires, interviews, and document reviews, with quantitative analysis performed using SPSS Version 21 and qualitative data analyzed thematically. Despite apparent revenue growth between 2018 and 2022, the findings reveal deep-rooted challenges: flawed taxpayer identification, where many eligible businesses remain unregistered; inadequate staff capacity, including officials' lack of skills and intentional omission of taxpayers; ineffective audits, with both officials and taxpayers lacking confidence in audit effectiveness; weak information systems undermining database reliability; and poor voluntary compliance, characterized by unwillingness to register without penalty threats and widespread sales without invoices among registered businesses. The study concludes that revenue growth masks systemic weaknesses in administrative processes. Recommendations include strengthening staff technical capacity, implementing robust oversight to address intentional under-registration, adopting risk-based audit programs, enhancing SIGTAS proficiency, improving service delivery, and addressing unfair competition to foster voluntary compliance.