Current Ethiopia is in an era of renaissance and struggling to overcome poverty.   For Ethiopia Taxation is Weapon that support this struggle and for this to happen a fair tax system is needed.  This study was conducted to identify factor affecting fairness of taxation.  The study used a cross-sectional survey design. It used both primary and secondary data and adopted mixed research approach. To get the primary data interview and questionnaire were used.  To conduct the survey, from three sub-cities 290 respondents from Category “B” tax payers’ and tax authority employees were selected by applying systematic random sampling technique.  The findings show that fairness of taxation directly related with attitude of tax payers. The tax rule and regulation is written down on the paper is fair but the way it is implemented affect its fairness. Fairness of taxation also directly related with Educational level of tax payers. Well educated tax payers’ have an understanding and know-how about tax rules and regulation related to income tax. By using their know-how to identify the gaps on tax rules and regulation are able to avoid tax. Strong administration system of tax authority enforces tax payers’ act according to the rules and regulation related to income tax.  The study showed that category “B” tax payers’ and the observed negative attitude they have  needs to be corrected  by giving training on the major points, importance’s of income tax to the country and for what purpose it is used and the like.  Thereby, enhancing fair tax collection and providing basis for further research in a broader scope.

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