An Analysis of New VAT Law in Bangladesh: Changes &amp;amp; Challenges

Taslima Khanam,Anju Man Ara Begum,Fatema-Tuj- Zuhra,Sufia Khanam

doi:10.4236/blr.2021.123044

Abstract

With the adoption of the Sustainable Development Goals (SDGs), taxation has once again taken up a central spot on the international development agenda. Value Added Tax (VAT) makes up most of the revenue from taxes in Bangladesh who was one of the first two South Asian countries to adopt VAT. Although the introduction of VAT in Bangladesh has proved to be comparatively successful in terms of increasing tax revenues, the effectiveness of the tax has been seriously eroded due to a number of deviations from the standard principles of VAT which have crept into the tax system in the last three spans. Hence the new “The VAT and Supplementary Duty Act, 2012” emerges with vast hope and prospect and also with challenges of implementation. This study aims to review the basic structure of VAT system under the new law and the major changes thereon through a qualitative approach based on document analysis. Findings reveal the nonconformity with the objectives of the law and suggest the deviations back on track with a boost in tax administration and a political influence free environment in Bangladesh context.

Highlights

Bangladesh, a relatively young country in the South Asian subcontinent, emerged with high expectations of establishing an effective system of government by resolving the problems that had been hindering its development
This study aims to review the basic structure of Value Added Tax (VAT) system under the new law and the major changes thereon through a qualitative approach based on document analysis
Following findings are based on The VAT and Supplementary Duty Act, 2012 and the changes made by the Finance Act, 2019 and the VAT rules thereon which are given effect for the implementation of the new VAT laws in Bangladesh

Summary

Introduction

Bangladesh, a relatively young country in the South Asian subcontinent, emerged with high expectations of establishing an effective system of government by resolving the problems that had been hindering its development. Bangladesh adopted value added tax (VAT) in 1991, replacing its age-old excise duty on domestically produced goods and services and sales tax at the importation stage, with the express aims of expanding the tax base, simplifying the tax collection procedure, and curbing tax evasion (Saleheen, 2013). The purposes of the introduction of the new VAT were to replace the old age sales tax, mobilize more internal revenue, to introduce a single flat rate covering a wide range of goods and services production, and ensure equity by bringing transparency and accountability in the taxation system of Bangladesh (Lalarukh and Salahuddin, 2013). The National Board of Revenue (NBR) is the central authority for tax administration in Bangladesh It was established by President’s Order No 76 of 1972.

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