The Genesis of Tax system

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LETTEROF TRANSMITTAL

04th April 2007

Ms.Rehana Fowzia (Lecturer)

Department of Business Administration

Stamford University Bangladesh

Subject: Submission of report on Ascertain the position of cannons of taxation in tax system

of Bangladesh.

Dear Ms.Rehana Fowzia madamWe are pleased to submit this report on Ascertain the position of cannons of taxation in tax

system of Bangladesh for particular fulfillment of BBA Degree.

This research program was taken by the help of Three tax system of Bangladesh, written by

M.A. Akkas & Income Tax written by Mahmud, Purohit, Bhattacharjee. Here is the report

on the observational study of Tax System Of Bangladesh you asked us to conduct last month.

We honestly believe that this report will fulfill the requirements of the project report for BBA,

which will help us a lot to gain sufficient knowledge about the Tax System Of Bangladesh.

We appreciate having this assignment. If you should need any assistance in interpreting this

report or in implementing our recommendations, please contact us

[email protected], Contact No. 01718330355

Sincerely,

01. Mezbah Uddin Ahamed BBA02707126

02. Subbir Ahmed BBA02707121

03. Md. Mahmud Hossain BBA02707154

04. Subroto Biswas BBA02707125

05. Shamol Kanti Sarkar BBA02707112

06. Md. Mahfujul Alam BBA02707153

Program: BBA, Batch: 27 (J), Stamford University Bangladesh.
mailto:[email protected]:[email protected]


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ACKNOWLEDGEMENT

Education involves not only reading books and doing exercises but also acquiring knowledgethrough doing something practically. This report has designed only for considering that

objective. In this period of time, we enjoyed the study of tax system of Bangladesh in various

aspect of tax.

First of all, we are indebted to our guide teacher Ms.Rehana Fowzia Lecturer, Department of

Business Administration, Stamford University Bangladesh. His views, suggestions save us

from more difficulties.

We are also grateful to our group members most valuable cooperation, inspiration and

suggestions.


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TABLE OF CONTENTS

Heading Page No.

LETTER OF TRANSMITTAL

ACKNOWLEDGEMENT

EXECUTIVE SUMMARY

A. Objective of this study - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -05

B. Limitation of this study- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 05

C. Methodology of study - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 06

D. About tax- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -07

E. Tax system of Bangladesh: - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 08

Major heads of tax-revenues of Bangladesh - - - - - - - - - - - - - - - - - 08

Major heads of non-tax revenues of Bangladesh - - - - - - - - - - - - - -08

The characteristic of Bangladesh Tax System - - - - - - - - - - - - - - - -09

G. Tax structure of Bangladesh - - - - - - - - - - - - - - - - - - - - - - - - - - - - 15

H. Canon of taxation- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 18

I. Application of canon in the tax system of Bangladesh - - - - - - - - - - - 21

J. Conclusion - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -23

k. Recommendation- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 24

L. Bibliography- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -25


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EXECUTIVESUMMARY

This dissertation report highlights on our practical experience in different types and categoriesTax System especially Tax System Of Bangladesh. During our short working period, we tried

to gather information from News Paper, web sites. But the NBR does not provide information

in the web site directly and even it does not publish tax structure implement in Bangladesh. So,

we take much information about tax in our personal concept and view of Tax System of

Bangladesh.

To complete this report, we have gained practical knowledge about various type of Tax System.For example, Tax System Of Bangladesh, canon of taxation and implementation the canon of

Bangladesh in Tax System Of Bangladesh.

In this way, we are getting knowledge not only the tax system but also the implementation of

canon on tax system of Bangladesh.

As, tax is an important part of our country development. so, day by day, people are gettingmore conscious and informed about tax.


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OBJECTIVEOFTHISSTUDY

We can gain knowledge about the tax system of Bangladesh by studying this topic. As

following aspects of tax we can learn from this study:

1. To get the idea about the collection of revenue, as context of Bangladesh.

2. How distribute the income of people in Bangladesh is allocated.

3. How economic control to achieve their micro economic control.

4. Effect of the tax system of Bangladesh to economic development.

5. How national income is raised in desired level.

LIMITATIONOFTHISSTUDY

There are some limitations of this study. Therefore the assignment may lack some crucial data.

1. Necessary data and information an neither adequate nor well finished.

2. The duration that is for assignment program is not enough to learn about the tax system

of Bangladesh.

3. This assignment does not analyze the critical analysis of different sectors in the tax

system of Bangladesh in details.

The assignment has encountered these limitations that may have hinder progress. But with

constant effort, our goal was to minimize the negative efforts of these limitations.


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METHODOLOGYOFTHIS STUDY

Basically there are two types of methodology. One is Primary sources and another is secondary

sources.

Primary source:

Primary source are those type of source that we collect information or survey directly from the

organization.

Secondary source:

Secondary source are those type of source that we collect information from online or any

reference books.

To make this overall assignment we followed the secondary sources like, online, reference

book, and journal.

ABOUTTAX


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Tax is a compulsory levy imposed by the Government. People pay taxes to the Government on

the basis of what they earn, what they own and what they purchase.

A tax is a compulsory payment levied on the persons or companies to meet the expenditure

incurred on conferring common benefits upon the people of a country.

Two aspects of taxes follow from this definition:

A tax is a compulsory payment and no one can refuse to pay it.

Proceed from taxes are used for common benefits or general purposes of the state.

Classification of Tax:

On the basis of tax rate

Progressive Tax

Proportional Tax

Regressive Tax

On the basis of impact and incidence

Direct Tax

Indirect Tax

On the basis of base

Single Tax

Multiple Taxes

Taxation and its history


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Taxa t ion i s

o n e o f th e ma jo r s o u rces o f pu b l i c r ev en u e to mee t a co u n t ry ' s

reve nue and devel opmen t expenditures with a v iew to accomplishing some

economic and social objectives, such as redis tr ibution of income, price

stabilization and discouraging harmful consumption. It supplements other sources

of public finance such as issuance of currency notes and coins, charging for public goods andservices and borrowings. The term Tax has been derived from the French word Taxes and

etymologically, the Latin word Tax are is related to the term 'tax', which means 'to

charge'. Tax is 'a contribution exacted by the state'. It is a non-penal but compulsory

and unrequited transfer of resources from the private to the public sector, levied based on

predetermined criteria. Accord ing to Ar ticle 152(1) of the Consti tut ion of

Bangladesh, taxation includes the imposition of any tax, rate, duty or impost, whether

general, local or special, and tax shall be construed accordingly. Rate is a local tax imposed by

local government on its residents or the property owners of the locality, a duty is a tax levied on

a commodity, and an impost is a tax imposed for an entry into a country. Under the provision

of article 83of the Const i tu t ion, "no tax shal l be levi ed or col l ect ed excep t

by o r und er th e au tho r i ty of an Act o f Parliament". Bangladesh inherited a systemof taxation from its past British and Pakistani rulers. The system, however, developed based

on generally accepted canons and there had been efforts towards rationalizing the

taxad ministration for optimizing revenue collection, reducing

tax evasion and preventing revenue leakage through system loss. Taxes include narcotics

duty (collected by the Department of Narcotics Control, Ministry of Home Affairs), land

revenue (administered by the Ministry of Land and collected at local Tehsil

offices numbered on average, one in every two Union Parishads), non-judicial stamp

(collected under the Ministry of Finance), registration fee (collected by the

Registration Directorate of the Ministry of Law, Justice and Parliamentary Affairs)

and motor vehicle tax (collected under the Ministry of Communication).

The tax structure in the country consists of both direct (income tax, gift tax, land

development tax, non- judicial stamp, registration, immovable property tax, etc)

and indirect (customs duty, excise duty, motor vehicle tax, narcotics and liquor

duty, VAT, SD, foreign travel tax, TT, electricity duty, advertisement taxed) taxes.

The present land revenue system of Bangladesh has its base in the East Bengal state acquisition

and tenancy act 1950 which established a direct contract between the taxpayer and the

government. The most important tax on the value of transferred property is the non-judicial

stamp tax (levied under the Stamp Act 1899), which has been in existence since January 1899.

Current rates of non-judicial stamp duty are provided in the First Schedule of the

Finance Act 1998, ranging from Tk. 4 to Tk. 10,000 in case ofabsolute rate, or from

0.07% to 1.5% of the value of consideration in case of ad valorem rate. The judicial stamp taxis being levied under the Court Fees Act 1870, although the levy of court fees

originated in the introduction of the Bengal Regulation No. 38 of 1795.The first sales tax

was introduced in the former Central Provinces of India in 1938. In Bengal, sales tax was

adopted in 1941. In 1948, sales tax was transferred as a central tax under the

General Sales Tax Act of1948. The Sales Tax Act 1951 came into force on 1 July 1951 by

repealing the Pakistan General Sales Tax Act of 1948. Until 1982, sales tax was being collected

under the 1951 Act, which was replaced by the Sales Tax Ordinance 1982. The VAT law

was promulgated by repealing the Business. Income tax was first introduced in the

subcontinent by the British in 1860 to make up the revenue defi cit caused by the

espy revolt, 1857. After independence of Bangladesh, income tax was made effective under

th e Income Tax Ac t 192 2 passed on th e bas i s o f th ereco mmen d a tions o f t h e A ll - I nd ia In co me Tax Committ ee appointed in


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1921. Curren tly, income tax has been imposed under the Income Tax

Ordinance1984 ( ITO) promulgated on the bas is o f recommendat i ons o f the

Final Report of the Taxation Enquiry Commission submitted in April 1979. Income

taxpayers (assesses) are classified as individuals,

partnershipfi rms , Hin du und iv id ed fami l i es ( HUF), associa t ions o f per sons

(AOP), companies (pub l i cl y tr ad ed an dprivate), local authorities, and otherartificial juridical persons. Tax rates and scope of taxable income differ based on residential

status ofan assesses (resident or non-resident).

F ro m f i s ca l o r a s s es s men t y ea r , (AY) 2 000 -01, th e re i s a f i l i n g th res h o ld

o f an n u a l to t a l in co me o f Tk .100,000 applicable for individuals (including

non-resident Bangladeshis), partnership firms, HUF, AOP and assesses other than

companies and local authorities. In case an identity of this group has a total

annual income less than this level, he is not required to submit tax return but if someone's

income is higher, he is to pay a minimum tax of Tk. 1,000.Bangladesh inherited a system of

taxation from its past British and Pakistani rulers.


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TAXSYSTEMOFBANGLADESH

Major heads of tax-revenues of Bangladesh are as follows:

A. Taxes on Income and Profit

1. Income tax-Companies

2. Income tax-Other than Companies

B. Taxes on Property & Capital Transfer

1. Estate Duty and Gift Tax

2. Wealth Tax

3. Narcotics Duty

4. Land Revenue

5. Stamp duty-non-judicial

6. Registration

C. Taxes on goods and services

1. Customs Duties

2. Excise Duties

3. Value Added Tax (VAT)

4. Supplementary Duty (On luxury items and in addition to VAT)

5. Taxes on Vehicles

6. Electricity Duties

7. Other Taxes and Duties (travel tax, turn over tax, etc.)

Major heads of non-tax revenues are as follows:


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D. Interest, Dividend and Profit

E. General Administration and Services

F. Social and Community Service

G. Economic Services

H. Agriculture and Allied Services

I. Transport and Communication

J. Other non-tax revenue

K. Capital Revenue

The characteristic of Bangladesh Tax System comprised of the

following factors:

(a) Revenue GDP Ratio:

A key component of fiscal policy of the government is to strengthen the effort to mobilize

domestic resources to generate a larger share of resources for investment. The strategy involves

both revamping tax management and providing the right incentives to stimulate domestic

savings. Domestic resource mobilization through the tax effort is not outstanding, but is a

significant improvement over the past. The following table gives the ratio of tax revenue, non-

tax revenue and revenue to GDP over the years.


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One exception to this pattern was the military-backed caretaker regime, which achieved its budgettarget of 10.8% revenue-to-GDP ratio in 2007-08. Of course, that revenue generation was achievedunder a state of emergency. And at this stage, it might be worth mentioning that it is possible tohave significantly more revenue relative to the economy without draconian measures underpinned

by radical political changes -- India raised revenue by 4% of GDP in the past decade, for example.

The current government seems to have reverted to the pattern of the last elected government.

Thus, in the FY10 Budget, revenue-to-GDP ratio was set at 11.6%, while the outcome was 10.9%.

Not deterred, the FY11 Budget raised the bar, with revenues projected to rise to 11.9% of GDP. And

remarkably, this lofty target has been revised up to 12.1% GDP in the revised Budget. Then, the

forecasts are for further rapid rise in revenue relative to the economy, with income taxes and VAT

projected to lead the revenue surge.

(b) Realization of taxes vis--vis budget:

The apex organization which controls the bulk of revenue receipts and taxes in Bangladesh is

the National Board of Revenue (NBR), which was established in 1972. In Bangladesh, it has


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been observed that over the years, realization of revenue (NBR portion) exceeds or comes

closer to budget target. The actual realization of revenue (NBR portion) was 2.16% higher than

the target. This may be seen clearly from the following table (1990-91 to 1994-95).

Actual Realization of tax revenue vis--vis target

Financial Year Realization of Target

1990-91 102.35%.

1991 -92 101.21%.

1992-93 101.04%

1993 - 94 97.78%

1994-95 102.16%

(c) NBR Tax Vis-a-vis Total Revenue:

(d) Trend of Revenue Receipts:

(e) Domination of Indirect Tax over Direct Tax:

Despite the progress for ensuring self-reliant development in a global climate of free economy,

a major thrust of fiscal policy in Bangladesh has to be on raising the revenue-GDP ratio.

Further, there is an urgent need for shift in the composition of revenues away from tax on

international trade, goods and services towards direct taxes on income and profit, whose share

95

96

97

98

99

100

101

102

103

Realization ofTarget(%)

1990-

91

1991-

92

1992-

93

1993-

94

1994-

95

Year

Realization of Target

Realization of Target


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in total revenue in Bangladesh is appallingly low, even compared to other developing countries

in Asia. This can be seen from the following table

Heads of Taxation Total Amount

(Corer Taka)

Percentage

(Rounded Off)

Customs duties (Export / import) 3,676.94 34%

VAT (Import) 2,215.23 21%

VAT (local production) 1.248.34 12%

Supplementary Duty (Luxury Items) 187.61 15%

Supplementary Duty (Luxury goods of local origin) 1,344.12

Excise Duty 177.82 2%

Income Tax 1,491.56 14%

Other Taxes 180.94 2%

Total 10,522.56 100%

Source: National Board of Revenue

* This is depicted in the following pie diagram:


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34%

21%12%

15%

0%2%14% 2%

Custom Duty

VAT (local production)

Supplementary Duty

(Luxury Items)

Supplementary Duty

(Luxury goods of local

origin)

Excise Duty

Income Tax

It will be seen that major share of tax revenue is attributed to indirect taxes. Out of the indirect

taxes, share of import-based taxes was the highest. Lack of progress in expanding the base for

direct taxes remains a major shortcoming of the tax reform agenda of Bangladesh.

(f) Forecast of Tax-Revenue:

The introduction of VAT in 1991 was a bold move. It now covers manufacturing at the

wholesale and retail stage and some selected services. Efforts are on to make VAT as

comprehensive as possible. Though VAT is now recognized as an efficient and non-distorting

means of taxation by economists and policy makers alike, its introduction in many countries is

held up due to political reasons. Thus Bangladesh can take credit of introduction of VAT

within so short a period of time. Due to computerization in progress at NBR, it is now possible

to predict revenues and their composition with much more precision than in the past.

Tax revenues have recently shown unusual buoyancy and responsiveness to tax reforms and

rate adjustments. Imports responded vigorously in 1994-95 to the sharp reductions in tariffs

yielding significantly higher revenues from import taxation with tariffs rates at an all time low.

As most revenue targets except those of direct taxes were exceeded in 1994/95, it warranted

upward revision of targets for the following year. This optimistic trend is expected to continue


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into the year 2000 with tax revenues posing a higher trajectory, than would have been the case

without tax-reforms.

TAXSTRUCTUREOFBANGLADESH

Below is a table of tax revenue collection of Bangladesh government for the financial year

2005-06 and budget estimate for the financial year of 2006-07.

Description Budget

(2006-07)

Budget

2005-06

(Revised)

Increase/

(Decrease) in

2006-07 over

2005-06 (Tk)

Increase /

(Decrease) in

2006-07 over

2005-06 (%)

Tax revenue:

National Board

of revenue(NBR

Portion)

Taxes on income

and profit

8500 6960 1540 22%

Value added

Tax(VAT)

14729 12398 2331 19%

Import duty 9485 8235 1250 15%

Excise duty 185 163 22 13%

Supplementary

Duty

7701 6394 1307 20%

Other taxes and

duty

455 306 149 49%

Sub total: NBR

portion

41055 34456 6599 19%

Non- NBR

Portion

1860 1719 141 8%

Total tax revenue 42915 36175 6740 19%

Total Non-tax

revenue

9625 8693 932 11%

Total revenue 52540 44868 7672 17%

(Source: Finance Ministers Budget Speech for FY 2006-07)


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1. DIRECT TAX CONTRIBUTES ONLY SMALL PORTION OF

TOTAL TAX REVENUE:

Tax revenue structure of Bangladesh can be divided into direct and indirect taxes. A direct tax

is paid by a person to the revenue authority. Direct tax is borne by the tax payer and can not be

passed on to any person, whereas indirect tax is passed on by the tax payer so that the burden of

the tax is ultimately borne by another, for example Value Added Tax(VAT) which, although

paid by the businessmen, is passed on to the customers. That is, indirect tax is charged on

consumption in one way or another. Indirect tax is regressive because it takes a higher portion

of a poor persons income than of a reach persons. VAT is the same for all people. Indirect

taxes do not develop any civil consciousness in the minds of tax payers because no body feels

that he is paying a tax as it is concealed in price, whereas direct tax create a civic consciousness

among the tax payer; they feel that they are contributing towards the state expenditure. In the

case of direct taxes, the relation between the tax payer and the revenue authorities is direct

personal. But there is an indirect relation between the tax payer and tax authorities in the case

of indirect taxes, for the taxes are collected unofficially through the agency of merchants.

2. PREDOMINENCE OF INCOME TAX AMON THE DIRECT

TAXES:

According to the income tax Ordinance, 1984, income may generate from different sources,

namely, salary, business & profession, house property, interest on security, agriculture, capital

gains, and other sources.

3. NEGLIGIBLE DIRECT CONTRIBUTION OF THE

AGRICULTURAL SECTOR TO TAX REVENUE:

Direct taxation on agricultural sector normally takes two forms; land revenue tax and tax on

agricultural income. This sector accounted for more than 50% of total direct tax revenue in the

early sixties, but now agricultural income tax is very negligible. It accounts for only 0.01% of


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the GDP, although the average contribution of agriculture to the GDP is 35%. Agriculture,

more specifically, non-farm activity, still remains an untapped source of revenue to the

government. In most cases, income from agriculture does not exceed the ceiling of non-taxable

limit primarily due to subdivision and fragmentation of holdings for which income is

distributed to different hands. Furthermore, tax administration is not expanded down to village,

and therefore, current information on this source of income cannot be easily collected for

making assessment. Placing more emphasis on the collection of income tax from agriculture

may augment the price of our main food and may create socio-political unrest. Government

does not like others to do politics with food. High cost of collection of agricultural tax may be

another consideration. All these factors may contribute to the poor tax performance of

agriculture sector.

4. HEAVY RELIANCE ON DIRECT TAX BASED:

Bangladesh relies too much on indirect taxes, which accounts for nearly 80% of the total tax

revenue. On the other hand, the developed countries rely less on indirect taxes and more on

direct taxes. For example, indirect taxes account for 45% of total tax revenue of UK (Stain,

1997). Our dependence on indirect taxes is increasing gradually. Indirect tax is comprised of

mainly three types: Value Added Tax (VAT), Customs Duty, and Excise duty. The government

of Bangladesh introduced the VAT system in 1991-92. It was imposed at the import cum

manufacturing stage and replaced the prevailing excise duty on domestic production at the

production stage and sales tax on imports at the import stage. It is also imposed on domestic

services and its coverage of domestic goods has gradually increased in the recent times. Value

added is defined as the difference between the value of a firms sale (outputs) and purchases of

inputs.

5. IMPORT DEPENDENCY OF INDIRECT TAX BASE:

Our tax structure is heavily dependent on imports. It is, however, obvious that the indirect taxes

on international trade composed almost entirely of taxes on imports, account for the lions

share of our tax yield. That is, the system of indirect taxation in Bangladesh is heavily


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dependent upon import trade. Total import-based indirect tax is around 50% of total tax

revenue.

6. POOR TAX- GDP RATIO:

The ratio of tax revenue to GDP is an indicator of the governments performance in generating

resources at its disposal through the taxation machinery. The higher this ratio, the higher the

effectiveness of the taxation system in terms of revenue yields. The contribution of tax revenue

to the GDP of Bangladesh was less than 4% in FY 1972-73 against 9.35% in 1995-1996. As

per Periodic Economic Update of the World Bank of June 2002, tax revenue GDP ratio of

Bangladesh is 9.7% in FY 2001-02. The Government claims that the current tax revenue- GDP

ratio is 10.40% and is expected to increase to 12% within the FY 2004-05.

CANNONOF TAXATION

The four canons of taxation as prescribed by Adam smith are the following:

1. Canon of equality:

The subjects of every state ought to contribute towards the support of the government, as

nearly as possible, in proportion to their respective abilities; that is, in proportion to the revenue

which they respectively enjoy under the protection of the State. This cannon tries to observe

the objective of economic justice. It dictates that in absolute terms the richer should pay more

taxes because without the protection of the State they could not have earned and enjoyed that

extra income. If we interpret this principle in terms of disutility which the tax-payers suffer by

paying taxes, it follows that the tax should impose equal marginal disutility upon every tax-


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payer. Two possibilities emerge in this case. If incomes are subject to constant marginal utility,

then both the rich and the poor should be subjected to proportional taxationeach person

paying a given percentage of his income as tax. On the other hand, if we agree with the more

realistic proposition that income is subject to diminishing marginal utility, then the richer

should pay a larger proportion of their income as taxes (that is, the taxes should be

progressive).

2. Canon of Certainty:

This canon is meant to protect the tax-payers from unnecessary harassment by the tax

officials. The tax which each individual is bound to pay ought to be certain, and not arbitrary.

The time of payment, the manner of payment, the quantity to be paid, ought all to be clear and

plain to the contributor, and to every other person. The tax-payers should not be subject to

arbitrariness and discretion of the tax officials, since that breeds a corrupt tax administration.

With a scope for arbitrariness even honest tax machinery will become unpopular. Smith is so

emphatic about this principle as to claim that a very considerable degree of inequality is not

near so great an evil as a very small degree of uncertainty.

3. Canon of Convenience:

The mode and timings of tax payment should be, so far as possible, convenient to the tax-payer.

This canon recommends that unnecessary trouble to the tax-payer should be avoided; otherwise

various ill-effects may result.

4. Canon of Economy:

This canon recommends that cost of collection of taxes should be the minimum possible. It is

useless to impose taxes which are too widespread and difficult to administer. These taxes entail

an unnecessary burden upon the society in the form of additional administrative expense. The

productive efforts of the people suffer due to this wastage. Realizing that the tax collections are

being wasted, the tax-payers also tend to evade them.

These canons of taxation have a sound philosophy behind them and exhibit an insight into the

practical aspects of tax administration and its effect. However, in view of developments in


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economic philosophy and problems of a modern state, a few additional principles were also

suggested by latter writers. A brief description of these is as follows:

5. Canon of productivity:

It is also called the canon of fiscal adequacy. According to this principle, the tax system should

be able to yield enough revenue for the treasury and the government should have no need to

resort to deficit financing.

6. Canon of Buoyancy:

The tax revenue should have an inherent tendency to increase along with an increase in national

income, even it the rates and coverage of taxes is not revised.

7. Canon of Flexibility:

It should be possible for the authorities, without undue delay, to revise the tax structure, both

with respect to its coverage and rates, to suit the changing requirements of the economy and of

the treasury.

8. Canon of Simplicity:

The tax system should not be too complicated. That makes it difficult to understand and

administer and breeds problems of interpretation and legal disputes.

9. Canon of Diversity:

It is risky for the State to depend upon too few a source of public revenue. Such a system is

bound to breed a lot of uncertainty for the treasury. It is also likely to be inequitable as between

different sections of the society. On the other hand, if the tax revenue comes form diversified

sources, and then any reduction in tax revenue on account of any one cause is bound to be very

small. However, too much multiplicity to taxes is also to be avoided. That leads to unnecessary

cost of collection and violates the canon of economy.


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In general, we must remember that the tax structure is a part of the economic organization of a

society and should, therefore, fit in its overall economic philosophy. No tax system that does

not satisfy this basic condition can be termed a good one. Over time, therefore, ideas regarding

what should form a good tax system have undergone an evolution. In the following section we

would briefly discuss the characteristics of a good tax system in the light of modern economic

philosophy.

APPLICATION OF CANNON IN THE TAX SYSTEM OF

BANGLADEH

There are so many tax system remains in Bangladesh. Among this tax system some cannons are

followed, some are not.

1. Canon of equality:

In these cannon it imposes of tax according to ability to pay. So under these circumstances this

is usually followed in the tax system of Bangladesh.

2. Canon of certainty:

This canon describe that the tax which each individual is bound to pay or to be certain and not

arbitrary. The time of payment, the manner of payment, the quantity to be paid, all ought to be


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clear and playing to the contributor and to every other person. This canon is not to be followed

in the tax system of Bangladesh. So many corruptions are seen here.

3. Canon of convenience:

It should be convenient to pay tax. A person who starts to get earning money he or she has to

give tax on that moment. This step is not followed in tax system of Bangladesh properly.

3. Canon of economy:

Every tax has a tax of collection. It is important that the cost of collection should be as small as

possible. It will be useless to imposed tax which is too widespread and difficult to administer.

4. Canon of productivity:

According to this principle, the tax system should be able to yield enough revenue for the

treasury and the Government should not be forced to resort to deficit financing.

5. Canon of elasticity:

As the need of the country increases, the revenue should also increase. To meet emergency, the

govt. should be in a position to augment its financial revenue through increasing tax rate.

6. Canon of simplicity:

The tax system should be simple and plain so that every one can easily understand it. The

assessment of tax must be simplified. To avoid corruption taxation should be simple.

8. Canon of diversity:

In line of productivity, canon of diversity also gives importance to adequate collection of tax

through diversification. Such a system breeds a lot of uncertainty for the treasury. On the other

hand, if the tax revenue comes from diversified sources, then any reduction in tax revenue on

account of any one is likely to be very small on total tax revenue. However, too much

multiplicity of taxes is also to be avoided.


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CONCLUSION

After finishing this assignment successfully, we have learnt the canon of taxation, the varioustax systems in Bangladesh and the implementation of canon in the tax system of Bangladesh.

There are many problems in tax system of Bangladesh which is created by us. So under these

circumstances we all should reach on amalgamate decision with a view to solving the problem

immediately for the sake of the welfare of the whole nation.


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RECOMMENDATION

Canon of tax implementation for the tax system in Bangladesh properly is not an easy task. It

needs several efforts, integration of all resources, proper rules and regulation and their effective

visualization.

This paper presents the following recommendations to be used by the authority or the process

of taxation for implementing the canon of tax system in Bangladesh-

The canon of equality and certainty is not implemented properly in tax system in


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Bangladesh. So, we should give concern about this canon.

In tax system of Bangladesh the canon of convenience should be implemented properly. It

should be convenience to all people of Bangladeshi and it should be that assessee. So that

gives their payment quite easily.

In Bangladeshi tax system is corrupted in many ways so we have to conscious about that

virus (corruption).

There are many political influences is available in our tax system. So we have to get it.

All in all we have to be conscious about the tax payment for the sake of the country well.

BIBLIOGRAPHY

To complete this group assignment successfully, we have to collect information from

Various sources, such as newspapers, bulletin and web sites. So, as a reference website and

reference books


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We can mention-

M. A. Akkas, M. com. MBA (AIT).. (2003),

Three taxes of Bangladesh,

(Income tax, Value Added Tax, Gift Tax),

pp, 6-9.

Dr. Kanchan Kumar Purohit, (2006),

Income Tax

(Including Gift tax & Value Added Tax),

pp, 1-3, 10-12.

http://www.AssiaTradeHub.com\Tax System of Bangladesh\BANGLADESH Tax Structure

(Tax System)\Trade in Bangladesh Trade Gallery.htm

(Stamford University Bangladesh B.B.A. 02707143 PH;

+8801914472526)

Documents

The Genesis of Tax system