Consumption Taxes in Developing Countries - The Case of the Bangladesh VAT

36 Pages Posted: 27 Mar 2012 Last revised: 25 Feb 2015

See all articles by Andrew M. C. Smith

Andrew M. C. Smith

Victoria University of Wellington - Te Herenga Waka - School of Accounting and Commercial Law

Ainul Islam

Victoria University of Welington - School of Accounting and Commercial Law

M. Moniruzzaman

affiliation not provided to SSRN

Date Written: December 1, 2011

Abstract

In common with many developing countries, Bangladesh faces problems in raising sufficient tax revenues to fund its economic and social development. To address this problem and to improve economic efficiency and growth, a major tax reform program was initiated in 1991 which centred on the introduction of a valued-added tax (VAT) to replace a range of narrowly-based consumption taxes.

This paper revisit the basic structure of VAT system of Bangladesh and attempt to analysis the contribution and performance of VAT in Bangladesh as comparing to other developing countries and also attempt to identify and provide some suggestions in possible area where attention and improved performance are required to enhance the contribution of VAT in economic development of Bangladesh.

The relevant data shows that the performance of VAT was quite satisfactory in the initial years - but subsequently VAT collection has remained stagnant at a certain level. As a result, VAT is unable to meet the objectives for which it was introduced. The reasons behind this performance are many, such as: a relatively small number of VAT tax-payers, a general lack of awareness, and a weak monitoring system etc. There is still scope for improving the revenue collection from VAT: by increasing the number of VAT taxpayers; reforming the VAT administration; creating intensive awareness among the people, revisiting the list of VAT exempted items and increasing the efficiency of the monitoring system.

Keywords: Value added tax, direct tax, indirect tax

JEL Classification: E63

Suggested Citation

Smith, Andrew M. C. and Islam, Ainul and Moniruzzaman, M., Consumption Taxes in Developing Countries - The Case of the Bangladesh VAT (December 1, 2011). Available at SSRN: https://ssrn.com/abstract=2028663 or http://dx.doi.org/10.2139/ssrn.2028663

Andrew M. C. Smith (Contact Author)

Victoria University of Wellington - Te Herenga Waka - School of Accounting and Commercial Law ( email )

New Zealand

Ainul Islam

Victoria University of Welington - School of Accounting and Commercial Law ( email )

PO Box 600
Wellington, 6140
New Zealand
+6444636107 (Phone)
+6444635076 (Fax)

M. Moniruzzaman

affiliation not provided to SSRN

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