The Impact of Electronic Cash Register M
The Impact of Electronic Cash Register M
The Impact of Electronic Cash Register M
3506
ABSTRACT
Article History: The study-examined the impact of electronic cash register machine on
Received 22nd April 2016 awareness of tax payers to cash register machine, administration cost,
Received in revised form 1st May compliance cost, the extent of tax evasion while using electronic cash register
2016 machine and audit follow up affects the VAT income in the city of Hawassa.
Accepted 05.05.2016 Data were collected through questionnaire from fifty VAT registered
Published on 011.05.2016 organizations. The data collected from organizations were analyzed using
percentage analysis method and regression method, to see the impact of
Keywords: Electronics cash register explanatory variables on VAT income as well as the relationship between
Machine, Hawassa city and VAT explanatory variables and VAT income. The study found that Audit follow
income. up, tax evasion and administration costhas positive and significant impact on
VATincome while, compliance costand Awareness of tax payers to cash
Corresponding author: register machine have no significant impact on VAT income. This study
[email protected] serve as stepping stone for further study on similar topics and it may fill the
literature gap.
It follows that optimality in a tax system requires The main objective of the study is to assess the
absence of distortion in any economic activity impact of Cash register machine on value added tax
(Hancok, 1995 ). It is expected that people‟s tax collection in Hawassa City.
payments is in line with their income and they are 1.1.2. Specific Objectives
required to pay a tax in proportion to their level of
This study also attempts to achieve the following
income. On the part of the tax collectors, collection
specific objectives:
of tax should be time conscious and convenient and
the cost of collecting the taxes should not be high to 1. To see the impactof cash register machine
discourage business. Alternatively, this means that on income from Value added tax
the ideal tax system in developing countries should 2. To measure the impact of cash register
raise essential revenue without excessive government
machine on tax evasion
borrowing and should do so without discouraging
economic activity and without deviating too much 3. To see the impact of cash register machine
from tax system in other countries (Tanzi, 2001). on compliance cost and
Considering the significance of VAT administration, 4. To see the effect of cash register machine
many studies have been conducted in some
on administration cost
developing and transitional countries with respect to
the main VAT administration tasks and its problem. 5. To see the impact of cash register machine
These studies include (Abraham, 2003),(Herouy, on audit follow up
2004), (Kerver,2008), ( Clement,2009) ,(Wollela
A.,2008). These papers assessed the VAT
administrators in developing and transitional
4
Kassahun Bekele / Management, Science and Technology /(2016)40-
1.2. Research hypotheses 2.3. Study design
After reviewing related empirical studies on how Sampling is important because, in almost all cases,
cash register machine, VAT evasion while using it is not practical to study all the members of a
cashregister machine, Audit follow up, compliance
population (Vanderstoep, Johnston, 2009). In a
cost and administration cost affect the VAT income.
population of several thousand a sample of a few
This study has developed four directional hypotheses
hundred can be representative and (especially in self-
as follows:
completion surveys), researchers can „over-sample‟
H1: Awareness of tax payers to cash register
to compensate for non-response. In groups likely to
machine has significant impact on VAT
be under-represented additional „booster samples‟
income can be taken (Williams, 2003). A common goal of
H2:Tax Evasion has significant impact on VAT survey research is to collect data representative of a
income population. The researcher used information gathered
H3:Administration cost has a significant impact from the survey to generalize findings from a drawn
on VAT income sample back to a population, within the limits of
random error (Wunsch, 1986). Within a quantitative
H4: Compliancecost has a significant impact on
survey design, determining sample size and dealing
VAT income
with nonresponse bias is essential. “One of the real
H5: Audit follow up has significant impact on
advantages of quantitative methods is their ability to
VAT income
use smaller groups of people to make inferences
2. MATERIALS AND METHODS about larger groups that would be prohibitively
2.1. Description of the study area expensive to study” (Holton & Burnett, 1997, p. 71).
Hawassa is the capital city of S/N/N/P regional The traditional method of increasing reliability of
state. According to the 1999 population census, the estimates is to increase sample size. But increasing
resident of the city is about 350,000. The study area the sample size has its own problems as reported by
is Hawassa city administration. Hawassa city is (Bakan, 1966).
chosen for the reasons that tax registered enterprises The target population that is value added tax
are densely populated.
registered organization operating in the city of
2.2. Study subject Hawassa. Currently, the value added tax registered
The main aim of this study is to look into the organizations in Hawassa city as of July 07/2015 are
impact of electronic cash register machine on VAT 2500 as a total population. It is assumed that the
income. The study was only focus on those business sample should have 90% reliability and a sampling
enterprises register for tax operating in the Hawassa error of 10% or 0.1. The sample size is determined
city. Since September 2015 there are around 2,500 by using mathematical formula (Yamane, Taro,
VAT registered organizations operating in the city of 1967) is as follows.
Hawassa.
4
Kassahun Bekele / Management, Science and Technology /(2016)40-
and direction of relationship among variables.
Therefore,n = N = 2500 = 96 Inferential statistics is used to test hypotheses.
4
Kassahun Bekele / Management, Science and Technology /(2016)40-
Table 1: Time starting collection of VAT before cash register machine
When did your organization Started to using cash Before five year 25 50.0
Total 50 100.0
1 2 3 4 5 6
VAT AWE EVA ADM COM AUD
1 PRO 1
2 AWE .28 1
3 EVA .11 .19 1
4 ADM .28 .01 .16 1
5 COM .58 .25 .08 .23 1
6 AUD .61 .10 .03 -.26 .52 1
3.3.Checking Ordinary Least Square (OLS) researcher tests these four assumptions whether they
Assumption are met in the model.
There are several classical linear regression model Multicollinearity
(CLRM) assumptions, which are subject to test in
data, especially, multicollinearity, normality, This assumption is tested by variance inflation
linearity and autocorretion. Accordingly, the factor (VIF) as per this method, if the variance
inflation factor on each variable is less than ten and 1
/ VIF exceed 0.1, multicollinearity is not a serious
4
Kassahun Bekele / Management, Science and Technology /(2016)40-
concern in the model. The present findings indicate The result in table 4, demonstrates that awareness
that the tolerance values for the independent of tax payer(AWE) does not affect the VAT income
variables are quite respectable and the VIF values of tax Authority.The study shows that taxevasion
range from 1.147 to 2.047, which are well below the (EVA) influences the VAT income positively and
threshold of 10. significantly (β =0.349, t = 2.402, p < 0.05).
Table 3: the degree of multicollinearity in the model Administration cost (ADM) affect the VAT income
positively and significantly (β =0.816, t = 2.359, p <
0.05), compliance cost (COM) influence the VAT
income positively and significantly (β =.405, t =
Variables Tolerance VIF 3.428, p < 0.05). Audit follow up (AUD) has positive
significant impact on VAT income (β =.408, t =
AWE .724 1.381 2.299 p < 0.05.
4
Kassahun Bekele / Management, Science and Technology /(2016)40-
A significant positive coefficient (β = .816, t =
2.402, p < .05) on administration cost shows the city
tax authority incurs high amount of administration
Table 4: Results of Regression Analysis
cost which affects the VAT income. Therefore, the sector costs, and again, simply stated, they
researcher accepts the alternative hypothesis and comprise the costs to taxpayers and third parties
rejects the null hypothesis. “in meeting the requirements laid upon them in
H0 (4): Compliance cost has no a significant complying with a given structure and level of tax”
impact on VAT income (Sandford, Godwin and Hardwick, 1989, p.
10).This result not supports the alternative
Table 4 shows compliance cost(β =.146, t =
hypothesis. Therefore, the researcher fails to reject
1.450) statistically insignificant influence on VAT
the null hypothesis.
income (p > .1). Compliance costs are private
4
Kassahun Bekele / Management, Science and Technology /(2016)40-
H0 (5): Audit follow up has no significant Hosking.SG and Preez.MD, (2003) „Application
impact on VAT income for CV Study to Estimate Recreational Value
for fresh Water‟ Neilson Mandela
As shown in table 4 audit follow up (β =.405, t
Elisabeth University South Africa.
= 3.428) positively and significantly influences
J.Hair .J, Anderson .R, Tatham.R and Black WC
VAT income at (p < 0.01). It implies that
1998, Multi variant Data Analysis, 5th ed, 20th
afrequency of audit inspection increases VAT prints/Hall Inc., upper sadleriver,NJ
income. Accordingly, the researcher accepted the
John W. Creswell,2003,, Research Design
alternative hypothesis that predicts positive and Qualitative, Quantitative, and mixed methods
significant association between audit follow up and approaches,2nd ed.
VAT income of tax authority. Therefore, the null Mark E. Schaffer and Gerard Turley ,2001,
hypothesis is rejected. Effective versus statutory taxation: measuring
effective tax administration in transition
References
economies;
Abraham Tesfaye,2003, Problems and Prospects of Olaoye Clement,2009.A Review of VAT
implementing VAT in , EthiopiaAddis Ababa, Administration in Nigeria, Nigeria,
Ethiopia MedwellJournals
Aczel, D, A., 1999. Complete Business Statistics. Paler-Calmorin, L &Calmorin, M.A.,
4th ed. Boston: McGraw-Hill Companies, Inc. 2006.Methods of Research and Thesis
Bakan, D. (1966). The test of significance in Writing.Manilla, philipins; Bookstore Inc.
psychological research. Psychological Bulletin, Tanzi, Vito and Howell Zee, Tax Policy For
66(6), 423-437. Developing Countries. IMF. www.imf.org
BekureHerouy ,2004, The VAT Regime Under WollelaAbehodieYesegat, 2008, Value Added Tax
Ethiopian Law with Special Emphasis on Tax Administration in Ethiopia:
Exemption: Addis Ababa ,CRDA
Chris Evans,2003, Counting the costs of taxation:
an exploration of recent developmentsChris
Brooks,2008, Introductory Econometrics for
Finance, 2nd ed, Cambridge University Press,
New York
Exhibit Companion , March 29 to July 7, 1996,
The Abacus: Precursor to the Cash Register.
Federal Democratic Republic of Ethiopia, 2002,
VAT Proclamation No 285/2002
George. A, & Nancy, L., 2004. SPSS for
Introductory Statistics: Use and Interpretation.
2nd ed. New Jersey: Lawrence Erlbaum
Associates, Inc.
G.S.Maddala,1992, Introduction to Econometrics,
2nd ed, Macmillan publishing Inc; New York