Tax Innovation or Excise Duty in Disguise? Deviations and Distortions in Value-Added Tax in Bangladesh

The article examines and analyzes the nature of deviations and distortions in the VAT system in Bangladesh. The article argues that the Bangladesh VAT introduced in 1991—with a view to maximize tax revenue by broadening tax base and curbing tax evasion while simplifying the process—has deviated significantly from standard and international best practices. It further argues that most of the deviations have their roots in the excise system of taxation that VAT has replaced and, while some of them produce ad hoc benefits in terms of generating revenue and easing compliance, most of them, besides eroding the coherence of the tax system, defeat the core principle of VAT—self assessment. The article concludes that if the process of adulterating VAT with so many ingenious adaptations and deviations is allowed to continue, the objective of VAT to evolve as an efficient tool for maximizing revenue will remain elusive.