The task of mobi l i zing r esources f or publ ic sector outlays iB a maJorrnconce rn of e conoml C policy ln Ethi opia. This is es pec i ally t r ue l n postrrnevolution Ethiopi a , wher e t he soc i c-pol it i cal changes that have taken place havernhave caused the nat i on t o r e l y heavily on the public sector f or i t s socialrnand economic devel opments .rnTaxati on i s the pri mary means of mobil izing r esour ces in the country .rnA str ong tax per f ormance is thus an indispensable condit i on i nor der for t herngove r nment to s t ep up its devel opment expenditur es .rnThe ob j ective of thi s study was to ascer tai n the compat i bili ty of thernt ax sys t em wi t h the goal of resource mobili zation. Towards this end thernstructure of t he t ax r evenue was analysed and its impact on the r evenuernr alslng capabili ty of the tax system examined . Mor eover , t he magnitude ofrnt he t f:l.X r evenue r a i sed ,vas eval uated by compar ing it with the t axabl e capacityrnof t he count ry , and r evenue needs of the gover nment . Final ly~ the t axrneffort made l n the past was assessed, and the ~otent i ali ty of the t ax systemrnt o mobi l i ze an increasing share of the nati onal lncome ln the f ut ur e examined.rnThe outcome of the study indicat ed that despite the inc r eased effortsrnmade t o i mpr ove the effectiveness (If the tax system, tax revenue l n Ethi opi arnr emalns i nadequate (skimp) , unstable; and in f l exible . The cause of suchrnanomal ous conditions wer e attributed to among others , faulty t ax ploi cy , andrnweakness i n impliment at i on of the tax laws .rnIt was suggested that a synchronized action both at pol icy and executi onrnas pect of the taxation pr ocess can impr ove the pe r fo r mance of the t ax system .