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The effects of standard assessments of income tax on Small and medium size tax payers business activities , emphasizing on the case of retail shops and hotels found in Adama Town .The problem of standard assessments of taxation using subjective criteria to impose taxes on tax payers causes unfair taxation on the business and it may discourages the business activities to the extent of being closed and shifting of their business.The causes for adverse effects of standared assessments taxation on the business activities and the government revenue could be occurred from both tax payers and tax collectors. One means of reducing the subjectivity of standard assessments of taxation that suggested by this study was self- assessments of taxation system and the other solution should be stated in recommendation.