Beruflich Dokumente
Kultur Dokumente
Taxes in Bangladesh
Submitted to:
Mahathey Hasan Jewel
Lecturer
Dept. of marketing
Submitted by:
Team Market Tracker
4th batch
JAGANNATH UNIVERSITY
GROUP PROFILE :
I.D
07882891
01.
02.
105437
03.
Kazi arafat
105415
04.
091741
05
091659
06
105480
07
Al Imran
091762
08
105438
09.
091737
10.
Mohammad Ali
105500
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LETTER OF TRANSMITTAL
Dear Sir,
Here is the report you asked us to prepare on Reasons of Avoiding Taxes in Bangladesh. After
researching and studying the assignment, we made a copy of it.
All of the major points associated with Socio cultural effects, Ethical issues , Environmental and
political issues are included here.
Thank you again for giving us the opportunity to do this task.
Please contact us when you have finished reading the report or if you have any questions.
Hope to hear from you soon.
Sincerely,
Md. Sheikh Ariful Islam( G.L )
On behalf of team Market Tracker
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Table of Contents
SUMMARY ..................................................................................................................................................... 6
INTRODUCTION ............................................................................................................................................. 7
HISTORY ........................................................................................................................................................ 7
DEFINITION OF TAX ....................................................................................................................................... 9
TAX ADMINISTRATION IN BANGLADESH ...................................................................................................... 9
MAIN FEATURES OF BANGLADESH TAX STRUCTURE .................................................................................... 9
OVERVIEW OF BANGLADESH TAX LAWS..................................................................................................... 12
REASONS FOR AVOIDING TAX IN BANGLADESH ......................................................................................... 13
SOURCES ..................................................................................................................................................... 19
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SUMMARY
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INTRODUCTION
Bangladesh, as an emergingg de
developing country, is committed to augme
gmenting revenue
and achieving fiscal discipline
line with a view to increasing self-reliance.
nce. The external
environment influencing thee ta
tax performance of Bangladesh has changed
ged remarkably as
the country became increasing
singly integrated with the global economy during
dur
the 1990s
(McCarten, 2005). In recentt ye
years, the Government of Bangladesh has
as initiated
i
some
administrative and policy refor
eforms in the tax system. An improved tax administration
adm
in
association with some prag
pragmatic policy initiatives has resulted
d in
i a modest
improvement in the tax-GD
GDP ratio of late. However, the perform
formance is still
unsatisfactory as compared
ed to other countries at a similar stage
age of economic
development.
HISTORY
The first known system of taxa
taxation was in Ancient Egypt around 3000
0 BC - 2800 BC in
the first dynasty of the Old King
Kingdom. The earliest and most widespread
d form
fo of taxation
was the corve and tithe.. Th
The corve was forced labour provided to the state by
peasants too poor to pay oth
other forms of taxation (labour in ancient
ent Egyptian is a
synonym for taxes). Recordss fro
from the time document that the pharaoh
h would
wo
conduct a
biennial tour of the kingdom
om, collecting tithes from the people. Othe
ther records are
granary receipts on limestone
ne fflakes and papyrus. Early taxation is also
o described
de
in the
Bible. In Genesis (chapter 47, verse 24 - the New International Version
on), it states "But
when the crop comes in, give
ve a fifth of it to Pharaoh. The other four-fifths
fths you may keep
as seed for the fields and
d aas food for yourselves and your househo
seholds and your
children". Joseph was tellingg th
the people of Egypt how to divide their crop,
cro providing a
portion to the Pharaoh. A shar
share (20%) of
the crop was the tax.
Egyptian peasants seized
ed for
payment of taxes. (Pyramid Age
Age)
non-
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the Satrap to collect the due amount and to send it to the emperor, after deducting his
expenses (the expenses and the power of deciding precisely how and from whom to
raise the money in the province, offer maximum opportunity for rich pickings). The
quantities demanded from the various provinces gave a vivid picture of their economic
potential. For instance, Babylon was assessed for the highest amount and for a startling
mixture of commodities; 1,000 silver talents and four months supply of food for the
army. India, a province fabled for its gold, was to supply gold dust equal in value to the
very large amount of 4,680 silver talents. Egypt was known for the wealth of its crops; it
was to be the granary of the Persian Empire (and, later, of the Roman Empire) and was
required to provide 120,000 measures of grain in addition to 700 talents of silver. This
was exclusively a tax levied on subject peoples. Persians and Medes paid no tax, but,
they were liable at any time to serve in the army.
The Rosetta Stone, a tax concession issued by Ptolemy V in 196 BC and written in three
languages "led to the most famous decipherment in historythe cracking of
hieroglyphics".
In India, Islamic rulers imposed jizya (a poll tax on non-Muslims) starting in the 11th
century. It was abolished by Akbar.
Numerous records of government tax collection in Europe since at least the 17th
century is still available today. But taxation levels are hard to compare to the size and
flow of the economy since production numbers are not as readily available, however.
Government expenditures and revenue in France during the 17th century went from
about 24.30 million livres in 1600-10 to about 126.86 million livres in 1650-59 to about
117.99 million livres in 1700-10 when government debt had reached 1.6 billion livres. In
178089, it reached 421.50 million livres. Taxation as a percentage of production of final
goods may have reached 15%20% during the 17th century in places such as France, the
Netherlands, and Scandinavia. During the war-filled years of the eighteenth and early
nineteenth century, tax rates in Europe increased dramatically as war became more
expensive and governments became more centralized and adept at gathering taxes. This
increase was greatest in England, Peter Mathias and Patrick O'Brien found that the tax
burden increased by 85% over this period. Another study confirmed this number,
finding that per capita tax revenues had grown almost six fold over the eighteenth
century, but that steady economic growth had made the real burden on each individual
only double over this period before the industrial revolution. Average tax rates were
higher in Britain than France the years before the French Revolution, twice in per capita
income comparison, but they were mostly placed on international trade. In France,
taxes were lower but the burden was mainly on landowners, individuals, and internal
trade and thus created far more resentment.
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DEFINITION OF TAX
To tax (from the Latin taxo; "I estimate") is to impose a financial charge or other levy
upon a taxpayer (an individual or legal entity) by a state or the functional equivalent of
a state such that failure to pay is punishable by law. Taxes are also imposed by many
subnational entities. Taxes consist of direct tax or indirect tax, and may be paid in
money or as its labor equivalent (often but not always unpaid labor).
A tax may be defined as a "pecuniary burden laid upon individuals or property owners to
support the government. A tax "is not a voluntary payment or donation, but an enforced
contribution, exacted pursuant to legislative authority" and is "any contribution
imposed by government whether under the name of toll, tribute, tallage, gabel, impost,
duty, custom, excise, subsidy, aid, supply, or other name."
TAX ADMINISTRATION IN BANGLADESH
National Board of Revenue (NBR) is the central authority for tax administration in
Bangladesh and collects almost 75.37 percent of total revenue for the country, non tax
revenue 20.88%, revenue beyond NBR 3.76%. It was 78% in 2000. Tax revenue
constitutes around 80 percent of total internal resources in the country. The NBR under
the Internal Resources Division of the Ministry of Finance is the apex tax authority of
Bangladesh and collects about 95 percent of the countrys total tax revenue. The nonNBR portion of tax mainly includes narcotics duty, land revenue, non-judicial stamp,
registration fee and motor vehicles tax.
MAIN FEATURES OF BANGLADESH TAX STRUCTURE
1. Tax-GDP ratio is very low
In FY 1999-00, revenue/GDP ratio was 8.47 percent, which gradually rose to 10.79
percent in FY2005-06. In FY 2007-08 the revenue/GDP further rose to 11.17 percent and
the increasing trend of revenue-GDP ratio further enhanced to 11.24 percent in FY200809. Table 1 shows tax and non-tax revenue receipts and tax-GDP ratio during the period
from FY1999-00 to FY2008-09. As Table 1 shows, the tax GDP ratio in Bangladesh is very
low, it is less than 10%. Though tax-GDP ratio has risen from 5% in the early 1980s, it is
still very low compared to even the neighboring countries. It is also lowest among the
developing countries.
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Non-tax Revenue
as % of GDP
1.69
1.8
2.4
2.05
2.13
1.96
2.09
2.18
2.34
2.22
2.20
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Source: NBR, cited from Bangladesh Bank, Working Paper Series: WP0715, June 2007
Among the indirect taxes, VAT constitutes 39 percent of total tax revenue for FY09,
followed by supplementary duty as shown in figure 1. Taxes on Income and Profit
occupies major share of direct taxes, with 26 percent of total tax revenue in FY09.
The sources for such high growth of revenue collection in the recent years are the
increase in income tax and value added tax (VAT) at local stage which grew by 20.83%
and 25.60% respectively. A slow move towards increasing the income tax is being
observed recently. The proportion of tax is targeted at 29% and of VAT by 35% in FY11.
In an effort to improve the revenue scenario revenue tax-GDP and revenue-GDP ratio
have been targeted to be to 9.3% and 11.6% respectively in FY11 as opposed to 8.8%
and 11.5% respectively in FY10.
Table 3: Composition of Tax Revenues in Bangladesh-FY 2008-09
Vat
Supplementary duty
Excise Duty
Income Tax
Other taxes and duties
Import Duty
Percentage
39%
16%
0%
26%
1%
18%
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aids from foreign country but after 40 years of liberation war our country doesnt
progress a lot through we have more potentiality then any other country in this point a
question arise:
Why we are lagging behind?
Where is the problem?
Revenue collection is not a problem these days. Revenue collection has
always been a problem in Bangladesh. People in Bangladesh want to get
everything for free. So it is time to change that mentality. The problem is with the
attitude and mentality .Our country is mostly depended on VAT rather than Tax though
tax is the main source of r e v e n u e c o l l e c t i o n o f a n y c o u n t r y . I n B a n g l a d e s h
t h e r e a r e 2 0 l a c t a x i d e n t i f i c a t i o n number (TIN) holders, though it is
unfortunate that most of the TIN holder dont give the actual amount of Tax they have
to pay to the government. So why people don't pay Tax there are some obvious reasons
behind this, those reasons are given below:
1. Defective systems
The system is defective. It is defective because of two reasons. One is, we have
inconsistencies in our structure. Secondly, the system has given too much discretion
to the officers. As a result, many, not all. Of them take advantage and that leads to
corruption.
2. Inconsistencies structural
There are lots of inconsistencies in the structure of the payment of tax. When san
ordinary person wants to go pay his tax in NBR it is quite impossible for him to
identify to whom his tax payment will concern.
3. Discretion among the amount
There are a lot of discrimination between the actual amount of money the
people have and the amount what they express. The people think that if
they disclose their actual amount they will suffer in the future by the
government authorities and the others.
Like in United States, people submit their tax form; they receive whatever they have
to. If there is any discrepancy, people receive a letter. In our country, people
have to appear. They have to hire a tax lawyer, another burden.
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4. Client-bureaucracy interface
Due to the interference there are a lot of complaints from the tax payers. In fact they
are afraid of tax collectors, tax officials. Nothing is happening. When a
person want to give his tax the Tax officer asked for bribe so the ordinary
people they become afraid of it if they don't give this they may suffer in the
future for unavoidable situation.
5. Narrower the tax base
The base of tax is much narrower because there are many
c r i t i c a l f a c t o r s i n t h e bureaucracy so the time has changed but the pattern
does not change at all.
6. Listening to the powerful people
The tax officer pays more attention to the big corporation, because they
take a higher amount of money from the corporation. When a trader goes
to pay his tax he makes a little attention by the officer. It is a biggest problem of
our burro racy.
7. Improvements in the system
The tax taken system is not improved this question raised several times in
the NBR, the system is so much critical that any new people go to the tax office he
will not be able to give the tax. He or she must take the help of the others or
he or she kept a permanent lawyer for himself, which is also costly.
8. Old structure of laws, rules, working procedures and overall tax structure
It is an unfortunate factor to the Bangladeshi people that the
s t r u c t u r e , r u l e s w o r k i n g procedure is not well developed, broader
environment of hostility between the tax- payers and the tax collectors conflict
of interests in the NBR: The tax payers and the tax collectors have a lot of
conflict among them. The tax payers like a ordinary person it is quite difficult
for him to make a proper adjustment in the tax payment so the tax collectors take
the advantage and intentionally make a critical situation for the tax payer so that he
can take bribe from the particular person. Example, someone who has worked for
income tax knows the income tax ordinance and rules, so he can quickly refer to a
rule of a section of the law which obviously other can't. We have to open the book,
ask someone. But decision making is a totally different thing. We don't do
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assessment of income tax returns. We the people just make the statement
of our income.
9. Corruption of tax collectors
The tax collector take the bribe from the people, in our country a TIN holder first
appoint lawyer for calculating his tax then he gives his tax at the Bank then also pay
bribe to the tax collector for approving the payment so it is vary
unfortunate for the people that they have to pay the more money for the
payment, sometimes it is much higher then the actual tax payment. So the
collectors also play a bigger role for the non payment of tax.
10. Poor amount of direct tax collection
The taxable annual income in Bangladesh starts at Taka 165,000. For
women and those above 70 it starts at Taka 180,000. In India it starts at
Rupees 150,000. For women it starts at Indian Rupees 180,000 and for those
above 65 at Rupees 225,000. The higher tax rates in Bangladesh show that the
Bangladeshis pay more tax than the Indians. The gap in the tax rates for men and
women is also narrower than that of India.
11. Cultural problem.
Tax evasion is a cultural problem. I personally feel it is very sad but my realization is
that this is the truth. We want to get rich overnight by hook or by crook. In
the process, we don't mind trampling the rights and interests of others,
defrauding the government...cheating the customers. We are ready to do it as
long as our bank account keeps going up.
12. Lack of respecters
The government officer doesn't respect to the citizen though they are paid by the
citizen's money but when they want to pay the tax the officer just treated them
badly.
How the National Board of Revenue could handle this problem.
Boarding the tax base so that everyone can makes some contribution to pay
their tax
keeping tax rate as low as possible so that all kinds of people can contribute
In the past 2yars when the caretaker government is their so much
initiative was t a k e n t o i n v o l v e p e o p l e t o p a y t a x . M o r e o r l e s s
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CONCLUDING REMARKS
This article has tried to analyze the existing situation of tax incidence of income taxation
in Bangladesh. Like many other developing countries, the administration of income
taxation in Bangladesh is very poor. There is rampant evasion and allegation of
corruption is widespread. We should understand the fact that any tax reform must go
hand in hand with cutting wasteful government consumption; so that taxpayers do not
feel they are sitting ducks for the exchequer to rip them off. Thus the government must
be very cautious in taxing people so that the burden of taxes could be justified.
SOURCES
1. Black's Law Dictionary, p. 1307 (5th ed. 1979).
2. "luxury tax Britannica Online Encyclopedia". Concise.britannica.com.
Retrieved 2009-03-27.
3. Fahmida Khatun, Meeting the Major Targets, Forum, A monthly publication of
Daily Star, July 2010
4. A Panel Study on Tax Effort and Tax Buoyancy with Special Reference to
Bangladesh, Lutfunnahar Begum, Policy Analysis Unit Bangladesh Bank,
Working Paper Series: WP0715, June 2007
5. Fahmida Khatun, Meeting the Major Targets, Forum, A monthly publication of
Daily Star, July 2010
6. Bangladesh an Agenda for Tax Reform: Vol.3: Direct Taxation: Policy and
Administration, World Bank 1989
7. Wajid Hasan Shah, Enlistment of MNCs in Capital Market, Tax Rebate and
Government Tax Loss: An Analysis, Issue: 24, BIDS, Dhaka
8. Wajid Hasan Shah, Enlistment of MNCs in Capital Market, Tax Rebate and
Government Tax Loss: An Analysis, Issue: 24, BIDS, Dhaka
9. http://unpan1.un.org/intradoc/groups/public/documents/UNPAN/UNPAN014
405.pdf
10. Tapan K Sarker, incidence of income taxation in Bangladesh,
http://unpan1.un.org/intradoc/groups/public/documents/UNPAN/UNPAN014
405.pdf