The study aims at the assessment of tax practice and its administration in Dilla town. Both primary as well as secondary data’s were used. Primary data was collected from tax payers and employees of Dill revenue authority office through questionnaire. Were as secondary data from books, internets and other written materials related with the study. Simple random sampling technique was employed to select the sample from the available total population. Descriptive method was used to analysis the collected data. The research finding shows that the tax payers have knowledge about why they are paying tax but they perceive it as debt and obligations, unfair tax rate and even the collected tax was not properly allocated for its intended purposes. The tax payers faces problems like waiting time, unfair treatments by the officials and employees are slow in processing the activities was to slow and even miss treatment of the tax payers or creating difference. Tax authority faced the problems like lack of awareness by tax payers, tax avoidance and evasions. Moreover; the effectiveness of the tax administration was affected by poor technology application, low level of the tax payers awareness about the tax generally and poor skill and commitment employees of the tax authority.

Tax, Tax Administration, Challenges