The Devil is in the Detail: An Analysis of VAT Compliance Costs for SMEs in a Developing Nation

(2017). New Zealand Journal of Taxation Law and Policy, 23(2): 176-203

28 Pages Posted: 23 Aug 2017

See all articles by Nahida Faridy

Nahida Faridy

Griffith University - Department of Accounting, Finance and Economics

Brett Freudenberg

Griffith University - Griffith Business School; Griffith University - Griffith Law School

Tapan Sarker

University of Southern Queensland; University of Southern Queensland

Date Written: August 20, 2017

Abstract

Higher compliance costs for a value-added tax (VAT) through excessive government regulations are often portrayed as one of the important factors that affect small and medium enterprises (SME), resulting in potentially significant non-compliance and under representation in terms of their registration for VAT and their contribution to the VAT revenue collected. However, while the existing literature makes reference to estimating VAT compliance costs for SMEs in developed economies, there is little detailed evidence of its impacts on developing economies such as Bangladesh. This study utilises a mixed methods approach involving both compliant and non-compliant VAT payers to estimate the VAT compliance costs for SMEs in Bangladesh across a number of characteristics. The results demonstrate that VAT compliance costs for Bangladeshi SMEs are regressive and that manufacturers have a higher burden of monetary compliance costs followed by those in the trading sector. The study also finds that as the size of business increases, the VAT compliance costs for compliant taxpayers increase as compared to non-complaint taxpayers. The analysis and policy recommendations emerging from these findings may provide some useful lessons for Bangladesh and other developing countries in designing a better VAT regime for SMEs.

Keywords: GST, VAT, compliance cost, Bangladesh, SME

JEL Classification: K34, H25, H221

Suggested Citation

Faridy, Nahida and Freudenberg, Brett and Sarker, Tapan, The Devil is in the Detail: An Analysis of VAT Compliance Costs for SMEs in a Developing Nation (August 20, 2017). (2017). New Zealand Journal of Taxation Law and Policy, 23(2): 176-203, Available at SSRN: https://ssrn.com/abstract=3023066

Nahida Faridy

Griffith University - Department of Accounting, Finance and Economics ( email )

PMB 50
Gold Coast Queensland 9726
Australia

Brett Freudenberg (Contact Author)

Griffith University - Griffith Business School ( email )

Brisbane, Queensland 4111
Australia

Griffith University - Griffith Law School ( email )

Nathan Campus, GU
Nathan 4111
Australia

Tapan Sarker

University of Southern Queensland ( email )

Springfield Central
Springfield
Brisbane, Queensland 4111 4300
Australia

University of Southern Queensland ( email )

P.O.Box 238 Darling Heights
Toowoomba, Queensland 4350
Australia

HOME PAGE: http://https://staffprofile.usq.edu.au/Profile/Tapan-Sarker

Do you have negative results from your research you’d like to share?

Paper statistics

Downloads
173
Abstract Views
1,047
Rank
314,280
PlumX Metrics