• ISSN: 2010-023X (Print)
    • Abbreviated Title: Int. J. Trade, Economics and Financ.
    • Frequency: Quaterly
    • DOI: 10.18178/IJTEF
    • Editor-in-Chief: Prof.Tung-Zong (Donald) Chang
    • Managing Editor: Ms. Shira. W. Lu
    • Abstracting/ Indexing:  Crossref, CNKI, EBSCO
    • E-mail: ijtef.editorial.office@gmail.com
IJTEF 2011 Vol.2(5): 437-442 ISSN: 2010-023X
DOI: 10.7763/IJTEF.2011.V2.145

Incidence of Value Added Tax (Vat) in the Developing Countries: A Case in Bangladesh

Nahida Faridy and Tapan Sarker

Abstract—VAT is a broad-based tax levied at multiple stages of production (and distribution) with – crucially taxes on inputs credited against taxes on output. Bangladesh introduced VAT in 1991 replacing the previous taxes like sales tax, excise duty and business turnover taxes. In last two decades VAT has become an all encompassing domestic tax covering the domestic manufacturing, wholesale, retail and all the service sectors in the country. This paper is a first attempt to measures the incidence of Value Added Tax (VAT) in Bangladesh. The results show that the VAT incidence varies for people in different income groups. For instance, the VAT incidence for the lowest income group is 6.92 percent whereas for the highest income group it is only 4.56 percent. The higher income groups are also enjoying fewer burdens than the lower income groups. Comparing the results with and without VAT exemptions, the study finds that overall the VAT in Bangladesh is regressive. The study provides some policy recommendations that could help design a better VAT system in the developing countries with a particular case in Bangladesh.

Index Terms—Tax incidence, Value Added Tax, progressivity, empirical study, Bangladesh.

Corresponding author, Tel. +61737353249, Fax: +61737353272, (Email:tapan.sarker@griffith.edu.au).


Cite:Nahida Faridy and Tapan Sarker, "Incidence of Value Added Tax (Vat) in the Developing Countries: A Case in Bangladesh," International Journal of Trade, Economics and Finance vol.2, no.5, pp. 437-442, 2011.

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