This study investigates the challenges of Value Added Tax (VAT) collection performance in case of Hawassa City Revenue Authority. The study adopted a mixed research method approach to answer the research questions. Survey data was collected from 94 VAT registered businesses of which 78 were addressed through distribution of self-administered questionnaires and in-depth interviews was conducted with tax officials.
The interviews were conducted with three tax officials at different times to check the consistency of information. Besides primary sources, secondary sources of data were collected from the annual report of Hawassa City Revenue Authority from the year 2008 up to 2013. Findings from this mixed approach portrayed both tax payer community and customers as misunderstanding VAT, in combination with administrative incapability challenging the effective collection of VAT in Hawassa city. Failure to issue invoices after selling and customers’ lack of initiative to ask for receipts after shopping and getting services also increases the prevalence of un-collectability of VAT in the city.