Direct Taxes in Bangladesh

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<p>Direct Taxes In Bangladesh</p> <p>Direct Taxes In Bangladesh</p> <p>Md Syedur Rahman Id:053-218-530 Parvez Akhter Linkon 053-225-530</p> <p>Id:</p> <p>Act-322 {MBR}</p> <p>Direct Taxes In Bangladesh</p> <p>A tax is a financial charge or other levy imposed on an individual or a legal entity by a state or a functional equivalent of a state. Taxes consist of direct taxes and indirect taxes. Pecuniary burden laid upon individuals or property to support the government a payment exacted by legislative authority. 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 VAT, Custom, Excise or other name.</p> <p>Taxation means imposition of a non-penal yet compulsory levy for transfer of resources from private to public sector, imposed by the public representative based onpre-determined criteria and without reference to any specific commitment, in order to accomplish some nations economic and social objective. These are dues that we pay for the privileges of membership in an organized civil society. Tax is imposed in the assessment year based on income year. Assessment year: The assessment is a period of 12 months just following the income year means computation of total income and tax payable there on. Income year: Income year is the year when the income is earned.</p> <p>The income tax is administrated Income Tax Ordinance, 1984 and the Income tax Rules, 1984 as well as notification made under the Ordinance. The charge of tax of a person depends on its residential status. Total world Income of a resident is charged to tax in Bangladesh. Whereas, a non-resident's Bangladesh income is only charged to tax in Bangladesh. There are seven heads of income. They are salary, interest on security, house property, agriculture, business and profession, capital gain and other sources. Submission of income tax returns is generally due by 30th September in case of non-companies and by 31st December in case of companies. Assessment is made in several procedures. They are self-assessment, presumptive assessment, spot assessment, pre-audit based assessment. Certain percent of self-assessment cases are selected for audit.Act-322 {MBR}</p> <p>Direct Taxes In BangladeshThe assessee can prefer appeal if aggrieved by his assessment. There are three primary forums for appeal. They are to the Appellate Commissioner/Additional Commissioner/Joint Commissioner or to the Commission for reviews. The decisions of Appellate Commissioner/Additional Commissioner/Joint Commissioner can be challenged to the next Appellate Court named as Appellate Tribunal. Withholding tax is levy able on a number of items including contractors, imports, transfer of urban land/building, bank deposits etc. Bangladesh has Agreement on Avoidance of Double Taxation with 20 countries. Negotiations with some other countries are on way.</p> <p>Taxation one of the major sources of public revenue to meet a country's revenue and development expenditures with a view to accomplishing some economic and social objectives, such as redistribution 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 and services and borrowings. The term 'tax' has been derived from the French word taxe and etymologically, the Latin word taxare 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. According to Article 152(1) of the Constitution 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 83 of the Constitution, "no tax shall be levied or collected except by or under the authority of an Act of Parliament". Bangladesh inherited a system of 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 tax administration for optimizing revenue collection, reducing tax evasion and preventing revenue leakage through system loss.</p> <p>Act-322 {MBR}</p> <p>Direct Taxes In BangladeshTaxes 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 Tahsil 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 tax, etc) 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 of absolute rate, or from 0.07% to 1.5% of the value of consideration in case of ad valorem rate. The judicial stamp tax is 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 of 1948. 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 deficit caused by the sepoy revolt, 1857. After independence of Bangladesh, income tax was made effective under the Income Tax Act 1922 passed on the basis of the recommendations of the All-India Income Tax Committee appointed in 1921. Currently, income tax has been imposed under the Income Tax Ordinance 1984 (ITO) promulgated on the basis ofAct-322 {MBR}</p> <p>Direct Taxes In Bangladeshrecommendations of the Final Report of the Taxation Enquiry Commission submitted in April 1979. Income taxpayers (assessees) are classified as individuals, partnership firms, Hindu undivided families (HUF), associations of persons (AOP), companies (publicly traded and private), local authorities, and other artificial juridical persons. Tax rates and scope of taxable income differ based on residential status of an assessee (resident or non-resident). From fiscal or assessment year, (AY) 2000-01, there is a filing threshold of annual total income of Tk. 100,000 applicable for individuals (including non-resident Bangladeshis), partnership firms, HUF, AOP and assessees 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.</p> <p> There are 3-divisions under the Ministry of Finance (MOF) and Secretary leads each</p> <p>division.</p> <p> The Chairman of NBR (National Board of Revenue) is working under Internal Resource Division (IRD).</p> <p> NBR is the apex body of the Tax Administration. It consists of two parts: (1) Customs &amp; VAT (2) Income Tax Both are under the same authority. There are 4-members under NBR.</p> <p>Act-322 {MBR}</p> <p>Direct Taxes In Bangladesh Under the NBR, a Commissioner of Taxes is the head of the department and he is in</p> <p>charge of a taxes Zone. There are 8-Zones in Bangladesh.</p> <p>Act-322 {MBR}</p> <p>Direct Taxes In Bangladesh</p> <p>Income: Income means anything received in cash or in kind unless exempted by laws.1) Assessable Income: Assessable Incomes are those incomes, which are included in the</p> <p>determination of total income of a taxpayer.a) Taxable Income: Taxable Incomes are those incomes that the tax is to be paid on</p> <p>those incomes.b) Non- Taxable Income: Non taxable income is taken into total income for</p> <p>taxation rate purpose but no tax is to be paid on this part of income.2) Non- Assessable Income: Non- assessable incomes are those incomes which are not</p> <p>included in the determination of total income of a taxpayer.</p> <p>1. S</p> <p>i n g l e</p> <p>Tax: Only one tax for everybody. Single tax is the poll tax or the head tax or adolescent tax, which is imposed on a person simply because he is there in the society.2. Multiple Taxes: A system under which different types of taxes shall be levied by the</p> <p>govt. according to suitability. Ex. Income Tax, VAT.Act-322 {MBR}</p> <p>Direct Taxes In Bangladesh</p> <p>a)</p> <p>Direct Tax: Direct tax is a sort of tax the impact of effect incidents and which fall back on the person on whom it is imposed. EX: Income Tax, Marriage Tax etc. b) Indirect Tax: Indirect taxes are those burden of which can be passed on others through price vehicles. c) Progressive Tax: The tax rate increases as the taxable income/amount increases. d) Regressive tax: The opposite of a progressive tax is a regressive tax where the decreases as the taxable income/amount increases. e) Proportional Tax: In between is a proportional tax, where tax is fixed as the amount to which the rate is applied increases. tax rate</p> <p>a) Resident taxpayer: Anyone who lives in the taxable territory for 182 days in the income year or 365 days in the last four years preceding the income year and 90 days in the income year than he is a resident. b) Non- resident: A nonresident is a person who is not a resident.</p> <p>Act-322 {MBR}</p> <p>Direct Taxes In BangladeshAssesses and Tax payers are not apart from each other rather alike.</p> <p>Firm: The head office of the firm should be registered in Bangladesh. Then it will be permitted as a resident.Otherwise, the higher rate of taxes will be imposed on the firm as a non-resident. Companies: Given below are under companies of Non-Corporate Assesses.</p> <p>Tax avoidance is the legal utilization of the tax regime to one's own advantage, in order to reduce the amount of tax that is payable by means that are within the law. By contrast tax evasion is the general term for efforts to not pay taxes by illegal means. The term tax mitigation is a synonym for tax avoidance. Its original use was by tax advisors as an alternative to the pejorative term of tax avoidance. Latterly the term has also been used in the tax regulations of some jurisdictions to distinguish tax avoidance foreseen by the lawmakers from tax avoidance which exploits loopholes in the law. Based on these concepts arises the pillars of Tax Protesters as well as Tax Resistance: Some of those attempting not to pay tax believe that they have uncovered interpretations of the law that show that they are not subject to being taxed: these individuals and groups are sometimes called tax protesters. An unsuccessful tax protestor has been attempting openly to evade tax, while a successful one avoids tax. Tax resistance is the declared refusal to pay a tax for conscientious reasons (because the resister does not want to support the government or some of its activities). Tax resistors typically do not take the position that the tax laws are themselves illegal or do not apply to them (as tax protesters do) and they are more concerned with not paying for particular government policies that they oppose. Responses to tax avoidance:Act-322 {MBR}</p> <p>Direct Taxes In BangladeshAvoidance also reduces government revenue and brings the tax system into disrepute, so governments need to prevent tax avoidance or keep it within limits. The obvious way to do this is to frame tax rules so that there is no scope for avoidance. In practice, this has not proved achievable and has led to an ongoing battle between governments amending legislation and tax advisors' finding new scope for tax avoidance in the amended rules.</p> <p>Tax evasion: By contrast, tax evasion is the general term for efforts by individuals, firms, trusts and other entities to evade taxes by illegal means. Tax evasion usually entails taxpayers deliberately misrepresenting or concealing the true state of their affairs to the tax authorities to reduce their tax liability, and includes, in particular, dishonest tax reporting (such as declaring less income, profits or gains than actually earned; or overstating deductions). Illegal income and tax evasion: Who earn income by illegal means (gambling, theft, drug trafficking etc.) is required to report unlawful gains as income when filing annual tax returns. Suspected lawbreakers have therefore been charged with tax evasion when there is insufficient evidence to try them for their non-tax related crimes. Other times tax evasion can be used as a "one more nail in the coffin" by prosecutors by stating that if a person earns illegal income, s/he may also be guilty of tax evasion. Those who attempt to report illegal income as coming from a legitimate source could be charged with money laundering. Evasion of Value Added Tax (VAT): During the latter half of the twentieth century, Value Added Tax (VAT) has emerged as a modern form of consumption tax through the world. Producers who collect VAT from the consumers may evade tax by under-reporting the amount of sales. Control of evasion: Level of evasion depends on a number of factors one of them being fiscal equation. People's tendency to evade income tax declines when the return for due payment of taxes is not obvious. Evasion also depends on the efficiency of the tax administration. Corruption by the tax officialsAct-322 {MBR}</p> <p>Direct Taxes In Bangladeshoften render control of evasion difficult. Tax administrations resort to various means for plugging in scope of evasion and increasing the level of enforcement.</p> <p>Public opinion on tax avoidance: Tax avoidance may be considered...</p>

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