This research sought to obtain opinions about tax compliance behaviour of small and mediumrnbusiness profit taxpayers in Addis Ababa. The study has employed a descriptive survey design. Inrnorder to gather the required data, questionnaire and key informant interview have been used. Arnsample size of 230 were used from a population of 147,795 small and medium business operatorsrnin Addis Ababa. To ensure the representativeness of different business sectors of taxpayers,rnstratified sampling technique was adopted. Data for this study was collected using self-rnadministered questionnaires to small and medium business profit taxpayers and interviews to taxrnconsultants and staffs of ERCA. Responses of survey data were analyzed using SPSS software (V.rn20) and the findings were presented using tables and figures. The results showed that socialrnservices positively influence tax compliance of taxpayers. With regard to cost of tax compliance,rnthe study result revealed that small and medium businesses incur different costs such as salary ofrnaccountants, fees to tax consultants, cost of stationaries, etc. that contributed for their non-rncompliance. Lack of knowledge of tax rules contributed to the inability to calculate taxablernincome and tax liability is another form of non-compliance. The findings of this study furtherrnrevealed that perception of small and medium businesses about the services provided by therndifferent branches of ERCA contributed for their tax non-compliance decisions. The researcherrnthen recommended that ERCA should educate the taxpayers and disseminate information on taxrnupdates more frequently to create the necessary awareness on tax laws to improve taxrncompliance. ERCA should simplify filling and tax collection procedures by opening new taxrnoffices, reducing frequency of tax filling procedures to save time and money of small and mediumrnbusiness profit taxpayers. It should improve the facilities of offices (internet connections,rnparking, etc.) and retain experienced staffs so as to provide quality & timely services torntaxpayers to improve the level of their tax compliance and to generate more revenues.rnKey Words: Addis Ababa, ERCA, small and medium business profit taxpayers, tax compliance