E-VAT Adoption and VAT Revenue Performance in South Asia: Evidence from Bangladesh
DOI:
https://doi.org/10.54536/ajase.v5i2.8286Keywords:
BEVAF, Digital Tax Administration, E-Governance, E-VAT, Revenue Mobilization, SME, South Asia, TAM, VAT Compliance BangladeshAbstract
Electronic Value Added Tax (E-VAT) schemes play an important role in the process of tax administration modernization in South Asia but have vastly varying revenue effects in countries that have broadly similar tax policy goals. The objective of this study is to elaborate maturity of E-VAT system, performance of the VAT/GST revenue in six selected South Asian economies (S.A.E.) particularly in Bangladesh, taxpayer’s behavior and challenges of implementing E-VAT system in selected S.A.E. It features a sequential explanatory mixed methods design that consists of secondary country-year data for fiscal years 2019-2024 and 25 semi-structured interviews with 5 NBR officials, 10 VAT consultants and 10 VAT-registered SME taxpayers. Due to the small panel sample (n = 25), this exploratory OLS regression analysis is not meant to uncover exact causal relationships. Although the rate of the standard VAT rate in Bangladesh is 15%, and the E-VAT platform has been operational since 2019, Bangladesh has a low VAT-to-GDP ratio of about 3.6%, compared to Nepal (5.3%) and India (6-7%) and the Maldives (approximately 12%). Furthermore, interview evidence showed there are institutional and operational issues in the real-life implementation of the e-invoice tool, including: Different revenue databases exist; The portal cannot always be relied upon when a large volume of e-invoicing occurs; There are low levels of taxpayer training; Taxpayer grievance mechanisms are weak; and E-invoicing is not mandatory. The study proposes the “Bangladesh E-VAT Adoption Framework (BEVAF)” which is an attempt to relate the institutional enablers with technology platform maturity, behavioral compliance results from an institutional perspective. The results validate a plan for the staged implementation of a reform program, touching on the following aspects: e-invoicing, database integration, assistance for taxpayers, audit risk scoring, mobile access to invoices, and penalty procedures reform.
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