Governments whether in a developed or developing countries generate most of their income from taxes.? Taxes that are directly related to tax payers are direct taxes and those that are paid by an individual through purchase of goods and service are indirect taxes.? As it is well known Ethiopia implements VAT in January 2003 G.C to raise more revenue and encourage investment and funds.?

VAT is a broad tax imposed on consumption of goods and series.? It is collected at all stage in the production and distribution process.? VAT is the principal source of revenue for the Ethiopian government. VAT is imposed only on the value created up on production and distribution but not on the cumulative return. ORCA who has the responsibility for this task is facing with a tremendous problem of VAT administration practices.

?The main objective of this study is to assess the VAT administration practices in Nekemet revenue and custom office for the last five years i.e. 2005 E.C-2009 E.C. To fulfill the mentioned objective both primary and secondary data were used. In order to answer the research questions the study has done extensive literature review and follow a systematic research methodology.

A total of 169 questionnaires were distrusted to all participants I.e. employees and tax payers in Nekemet revenue and custom office and 127questionnaires were returned and used for data analysis. Semi structured interview was used as data collection instrument.

The researcher used both qualitative and quantitative descriptive research design and a sample of taxpayers and employees of the branch were selected using Stratified random sampling technique to assess the VAT administration practices.? The outcome of finding showed that the VAT administration practices are not effeictve. In the VAT administration practices several problems were identified.?

Discussion explained the significance of VAT administration practices in supporting the office in Nekemet.? Eventually conclusion and recommendation were mentioned.\

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