Taxation and Good Governance: The Case of Value-Added Tax in Bangladesh

Author: Ahmed Munirus Saleheen

Saleheen, Ahmed Munirus, 2013 Taxation and Good Governance: The Case of Value-Added Tax in Bangladesh, Flinders University, School of Social and Policy Studies

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Inspired by the new fiscal sociological approach which sees taxation as binding a contract between the state and its citizens and engaging the latter in a revenue bargain, this study explores the extent a tax system works as a tool for good governance in a social milieu characterized both by a poor state of governance and poor tax to GDP ratio. This is one of the first empirical studies of VAT from an interdisciplinary approach with special focus on a political science perspective. The context is Bangladesh which adopted a sophisticated modern consumption tax - VAT- in 1991 to maximize internal resources by broadening the tax base and simplifying the tax structure. In contrast to the traditional role of revenue which has dominated the tax literature until the 1980s, the role of taxation in state-building has captured the attention of political scientists who consider taxation as a political process through which citizens can demand more accountability and responsiveness from the state. Stemming from this premise good governance, taxation and development become interdependent. Participation, transparency and accountability improve mutual trust between taxpayers and the government, and ensure better control and enforcement by the tax authority. The combined impact of these two aspects contributes to more and better voluntary tax compliance. Maximization of tax revenue is enhanced by the degree of voluntary tax compliance, which, in turn, contributes to development. This relationship is dynamic rather than linear as development generally ensures improved governance. This thesis attempts to contribute to that understanding. Based on this conceptual framework, this qualitative case study research has employed a variety of research methods such as interview and focus group discussion and questionnaire survey involving 214 respondents representing the different segments of stakeholders. The quantitative method of survey questionnaire for a number of respondents has been used to triangulate the qualitative data.

Keywords: Bangladesh,developing countries,taxation,good governance,value-added tax,tax transparency,accountabilty,participation,revenue bargain,social contract,fiscal sociology,voice and exit,tax ombudsman

Subject: Politics thesis

Thesis type: Doctor of Philosophy
Completed: 2013
School: School of Social and Policy Studies
Supervisor: Dr Noore Alam Siddiquee