Tax Evasion and Avoidance Crimes

Tax Evasion and Avoidance Crimes – A Study on SomeCorporate Firms of Bangladesh

Dr. Md. Jahirul Hoque, Mohammad Zahid Hossain Bhuiyan and AfzalAhmad

Field of Research: Tax Management

Introduction

1.1. Statement of the Problem

Tax evasion and avoidance are both phenomena that are probably as old as taxation_________________Dr. Md. Jahirul Hoque, Professor, Faculty of Business Administration, Eastern University,Bangladesh, Email: [email protected]

Mohammad Zahid Hossain Bhuiyan, Lecturer in Management, Department of BusinessAdministration, International Islamic University Chittagong, Bangladesh,Email:[email protected]

Afzal Ahmad, Lecturer in Accounting, Department of Business Administration, International IslamicUniversity Chittagong, Bangladesh, E-mail:[email protected]

Tax Evasion and Avoidance Crimes-A Study on SomeCorporate Firms of Bangladesh is based on a total number of6 (six) tax appeal cases and opinions of a total number of16(sixteen) respondents belonging to relevant tax officialsand tax practitioners. The main reason of selecting the topicis the large scale prevalence of the tax evasion andavoidance crimes in Bangladesh which adversely affect boththe volume and nature of Government finance. This studyhighlights the main reasons for tax evasion and taxavoidance, major techniques/modes adopted by thecorporate firms in evading and avoiding corporate taxes,authorities responsible for detecting tax evasion andavoidance crimes and the techniques followed thereof,authorities empowered for disposal of the crime cases andtheir main functions of responsibilities in such respects,impact of tax evasion and avoidance crimes on the revenueof the Government in particular and the economy of thecountry, as a whole and ways and means of preventing taxevasion and avoidance crimes. In order to curb widespreadtax evasion and avoidance crimes, the study suggests somepreventive measures. Of these, effective implementation oftax rules and provisions, creating awareness of the taxpayers for paying reasonable taxes, arranging more andmore publicity for paying taxes, appointing adequate trainedtax officials, ensuring access of the tax officials to the bankaccounts and relevant software of the tax payers are themajor preventive measures.

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itself. Wherever and whenever authorities decide to levy taxes, individuals and firmstry to avoid paying them. Though this problem has always been present, it becomesmore pressing in the course of globalization as this process extends the range ofopportunities to circumvent taxation while simultaneously reducing the risk of beingdetected (GIZ Sector Programme Public Finance, Administrative Reform; 2010).

Tax evasion and fiscal corruption have been universal and persistent problemsthroughout history with manifold economic consequences. Two thousand fivehundred years ago, Plato was writing about tax evasion, and the Ducal Palace ofVenice has a stone with a hole in it, through which people once informed theRepublic about tax evaders (Tanzi, 2000a).

The five year plans of the Government of the People’s Republic of Bangladesh (Asfor example The First Five Years Plan of Bangladesh, 1973) have indicated that asizeable number of persons especially the businessmen evade & avoid taxes. As aresult, the yield of income tax is very low in Bangladesh as a percentage of GrossDomestic Product. The following Table 01 presents the picture in this regards.

Table 01: Collection of Tax Revenue in Bangladesh (in core Taka)

Sources of TaxRevenue

FY 03-04 FY 04-05 FY 05-06 FY 06-07 FY-07-08 FY 08-09 FY-09-10 Average

Total TaxRevenue (inabsolute Figure)

28,300 31,950 36,175 39,247 48,012 55,526 63,956 43,309

T.T. R of % ofGDP Direct Taxes

8.50 8.62 8.70 8.40 8.86 9.02 9.2 8.75

Taxes on Income& Profit (inabsolute Figure)

5270 5850 6960 8924 11005 13538 16560 9729

Taxes on Income& Profit( as % of T.T.R)

18.62 18.30 19.24 22.47 22.92 24.38 25.89 21.69

Source: Bangladesh Economic Review 2010

The Table 01 indicates that the average total tax revenue as percentage of GDPduring FY 03 to 10 was 8.75 only which seems to be meagre as compared toSAARC countries mainly India, Pakistan and Srilanka. In India, Pakistan & Srilanka,tax GDP ratio was 16.58%, 10.01%, 14.82% respectively during FY 05. The mainreason of such a state of affairs was large scale tax evasion and avoidance practicesin Bangladesh especially by the businessman e.g. corporate firm’s individuals andpartnership firms. The businessmen are just depriving Government exchequercausing much hardship to the Government and its citizens. The escaped burden oftax is inevitably passed on to indirect tax payers’ causing price hiking in the country.Therefore, in Bangladesh, tax evasion & avoidance pose to be a serious problemwhich stimulates the researchers to undertake a mini research on tax evasion &avoidance crimes.

1.2. Objective of the study

The main objective of the study is to critically analyze tax evasion and avoidancecrimes committed by selected corporate firms operating in Bangladesh.



To achieve the main objective, the study highlights the following specific objectives:

1. To point out the main reasons for tax evasion and tax avoidance.2. To find out the techniques/modes adopted by the corporate firms in evading

and avoiding corporate taxes.3. To identify the authorities responsible for detecting tax evasion and avoidance

crimes and the techniques followed thereof.4. To identify the authorities empowered for disposal of the crime cases and

their main functions of responsibilities in such respects.5. To examine the impact of tax evasion and avoidance crimes on the revenue

of the Government in particular and the economy of the country, as a whole.6. To find out ways and means of preventing tax evasion and avoidance crimes.

1.3. Limitation of the study

The main limitation of the study is the limited coverage of the samples e.g. only 07(seven) appeal cases and only 16 respondents of two categories such as Taxpractitioners and Tax officials. This is because of time and money constraints at thedisposal of the researchers, on one hand, and the unwillingness and the busyschedule of the Tax officials, in the other, in order to provide us with more appealcases and their valued opinions. However, we had to convince the respondents bygiving gentlemen word that the names of the corporate firms would not be disclosedin our study and the materials would be used for this study purpose only. However,the analysis of the appeal cases and valued opinions of the learned respondentsdefinitely reflect the picture of tax evasion and avoidance practices in the country.

2. Literature review

The existing literature on this issue is scanty especially in Bangladesh. So far weknow, no worth mentioning study was made previously on the issue of tax evasionand tax avoidance crimes in Bangladesh. However, in this section, we may mentionthe following studies done on tax evasion and tax avoidance practices & its relatedtopics.

1. “Tax Planning of Banks Operating in Jordan”, Joummah, 1993.The study aimed to find standards to measure the extent of using tax planning by thebanks operating in Jordan, and to determine the impact of including a departmentspecialized in tax issues in these banks and also the impact of the bank’s nationality.

2. “Tax Planning of Jordan Industrial Companies” Hassen, 1996.

The main aims of the study were (i) measuring the extent of conducting tax planningand (ii) measuring the extent of following financial and accounting policies taxplanning.

3. “Factors Controlling the Pricing Way of the Spent Stock”, Shihatta, 1997.The study dealt with the factors that help the administration to choose the right wayto price the stock and the impact of tax incentives on choosing the right way ofpricing.



4. “Tax Planning In Jordan Joint Stock Companies Working in Service sector”.Noor and Ibrahem, 1999.The study aimed to recognize the process of tax planning generally and to study theextent of applying it in the companies working particularly in service sector in Jordan.

5. “Income Tax Monitoring Means in Yemen Republic”, Omer, 1999.The study dealt with tax monitoring in Yemen republic to figure out its weaknesspoints and suggest some means necessary to develop it in order to maintain therights of public treasury and, on the other, implement tax justice.

6. “Addressing tax evasion and tax avoidance in developing countries”, GIZSector Programme Public Finance, Administrative Reform; 2010.

The findings suggest that there are various reasons and facilitating factors for taxevasion and tax avoidance. In order to develop methods and instruments for fightingtax evasion and avoidance, it is important to establish a broad understanding of thedifferent reasons underlying these problems.

3. Methodology and Research Design

Two kinds of data were used in this study:

1. Primary data: They were obtained from collecting necessary data throughout thequestionnaire designed especially for this study and containing a group of questionscovering the study objectives. The questionnaire was distributed to a study sample ofsixteen (16) respondents of two groups’ namely top level tax officials and 8 personsengaged as tax practitioners especially in the area of company assessment. Of thetop level tax officials 4 (four) are of the rank and status of DCT (DeputyCommissioner of Taxes) from administrative tax authority and 4 (four) are of the rankand status of joint commissioner of tax (Appeal division). All the respondents of boththe groups were selected purposively in order to having easy access to the requisitedata and information.

2. Secondary data: Secondary data included a total number of 06 (Six) appellatecases belonging to the assessees of corporate firms operating in Bangladesh. Thesecases were collected by the researchers themselves from the relevant tax officialsassuring them that the names of the corporate firms would not be disclosed in thestudy and these would be used only for this research study. It is to be mentionedhere that originally these cases were in Bengali version in a detailed way. But thesecases were translated into English version and also summarized under someheadings for the study purpose.

The collected primary and secondary data and information were critically analyzedand interpreted by the researchers themselves in order to make the study moreinformative and useful to the readers. The findings of the study may be useful to theprospective researchers desiring to make further study on this vital national issue, inone hand, and to the tax planners, on the other, for reforming existing tax lawsprovisions with a view to alleviating tax evasion and avoidance practices to a greatextent.



4. Discussion on Findings

The whole discussion on the findings has been divided into two parts. Part onedeals with presentation of the collected appeal cases and the second part dealswith the opinions of the learned respondents.

4.1. Part 1: Presentation of Appeal Cases

Appeal Case-I

1. Assessee and Assessment Year:The assessee was a company engaged in the manufacture of vegetable oil.The appeal case was related to the assessment year 2005-2006.

2. Facts of the Case:The relevant DCT added back to the net profit of the company a sum of TK.65,690 as excessive depreciation in the name of extra shift allowance fordouble shift only for 100 days. DCT disallowed the amount as excessivedepreciation.

3. Appeal and Disposal:The company made an appeal to Appellate Joint Commissioner of Taxes(AJCT) against the decision passed by DCT. After giving necessary hearing tothe assessee; the AJCT maintained DCT’s addition of TK 65,690 to the netprofit of the company for tax purpose.

4. Conclusion: In this case, the assessee tried to evade taxes by chargingexcessive depreciation in the form of extra shift allowance.

Appeal Case-II

1. Assessee and Assessment Year:The assessee was a company engaged in the manufacture of jute goods. Theappeal case was related to the assessment year 2006-2007.

2. Facts of the Case:The said company received a sum of Tk 5,45,000 (Tk4,00,000 for replacingand repairing the machinery and the balance against the consequential loss ofprofit) from a Bima Company in the previous year as a claim for damages andloss incurred by the company owing to divesting fire in the factory. But thecompany treated the whole amount as capital income instead of revenueincome thereby showing lower taxable income. The relevant DCT added backTK 45,000 as revenue income.

3. Appeal and Disposal:The company made an appeal to the relevant AJCT against the decision of theDCT. The AJCT maintained the decision of DCT of adding back TK 1, 45,000to the net profit of the company as revenue income.

4. Conclusion: In this case, the assessee tried to evade taxes by showingrevenue income as capital income.



Appeal Case-III

1. Assessee and Assessment Year:The assessee was a company engaged in the manufacture of textiles. Theappeal case was related to the assessment year 2005-2006.

2. Facts of the Case:In the concerned previous year, the company showed excessive wastage @7% of raw materials used. But the concerned DCT allowed the wastage@3% only as being reasonable and added back the difference to the netprofit of the company.

3. Appeal and Disposal:The company made an appeal before the relevant AJCT against the decisionof DCT of adding back excessive wastage of raw material to the net profit ofthe company. But, the AJCT considering all the circumstances relating tovolume and nature of the production, however, opined that it would be fairand justice to allow wastage @5% instead of 3% as allowed by DCT.

4. Conclusion: In this case, the assessee tried to evade taxes by chargingexcessive wasted of raw materials.

Appeal Case-IV

1. Assessee and Assessment Year:The assessee was a company engaged in the Telecommunication business.The appeal case was related to the assessment year 2007-2008.

2. Facts of the Case:The said company showed lower gross profit to the extent of TK 2, 21,510 byway of charging excessive manufacturing depreciation as well asentertainment allowance which was inadmissible as per ITO 1984. Theconcerned DCT added back the said amount to the net profit of the company.

3. Appeal and Disposal:The said company made an appeal to the relevant AJCT against the decisionof DCT of adding back TK 2, 21,510 to the gross profit of the company andreassessed the tax liability of the company. The concerned AJCT after givingnecessary hearings to the company maintained the decision of DCT.

4. Conclusion: In this case, the assessee tried to evade taxes by way ofcharging manufacturing depreciation and entertainment allowance.

Appeal Case-V

1. Assessee and Assessment Year:The assessee was a company engaged in the Telecommunication business.The appeal case was related to the assessment year 2007-2008.

2. Facts of the Case:The said company showed lower amount of import purchase worth TK 6, 83,60,520. But the actual amount of import purchase was worth TK79, 72,



10,984. Thus the company evaded huge amount of tax by underinvoicingimport purchase to the extent of TK 72,88,50,464 (TK79,72,10,984-TK6,83,60,520). The relevant DCT after proper investigation of invoicing theimport purchase of the company added back the underinvoiced amount ofTK72, 88, 50,464 to the amount of total income of the company and thenreassessed the tax liability of the company.

3. Appeal and Disposal:The aggrieved company made an appeal to the relevant AJCT against thedecision of the DCT of adding back the underinvoiced amount. The AJCT afterproper scrutiny of the import purchase of the company maintained the decisionof DCT of adding back the underinvoiced amount of import purchases and thedetermination of the new tax liability of the company.

4. Conclusion: In this case, the assessee tried to evade a large amount oftaxes by underinvoicing the import purchases.

Appeal Case-VI

1. Assessee and Assessment Year:The assessee was a company engaged in the shipping agency business. Theappeal case was related to the assessment year 2008-09.

2. Facts of the Case:The said company charged against its profit some inadmissible expenses

during the previous 2007-08. The examples of such expenses are: printing &stationary expenses of which VAT was deducted at source but not supportedby copy of treasury chalan, consultant and legal fee of which tax was deductedat source but not supported by treasury chalan, audit and legal fees of whichtax was deducted at source but not supported by treasury chalan andexcessive entertainment expenses not reasonable and approved by incometax rule. The relevant DCT added back all such inadmissible expenses worthTK. 138, 20,527 with the taxable income of the assessee and reassessed itstax liability.

3. Appeal and Disposal:The aggrieved company made an appeal to the concerned AJCT against the

decision of the DCT of adding back the amount of inadmissible expensesamounting taka 138, 20,527 with taxable income. But the AJCT maintained thedecision of DCT after proper scrutiny of the vouchers and copy of Chalan ofVAT/Tax deducted at source.

4. Conclusion:In this case, the company tried to evade huge amount of taxes by showingsome inadmissible expenses as admissible under the Income Tax Ordinance.

4.2. Techniques adopted by the tax payers in evading andavoiding Taxes

The analysis of the appeal case studies as highlighted above reveals that theselected corporate firms adopted the following techniques in evading and avoidingcorporate taxes.



i. Charging deprecation at higher rates than permissible under Income TaxOrdinance, 1984 which, in turn, reduces the net profit as well as tax liabilityof the company.

ii. Showing revenue income as capital income thereby reducing net profit andhence tax liability of the firm.

iii. Charging inadmissible expenses as admissible under ITO, 1984 therebyreducing net profit and hence tax liability of the firms.

iv. Recognizing capital expenditures as revenues expenditure and charging thesame against net profit thereby reducing tax liability of the firms.

v. Charging personal expenses as business expenses thereby reducing netprofit and hence tax liability of the firms.

vi. Showing low rates of gross profit than the actual ones by charging excessmanufacturing depreciation, under valuing closing inventory etc., which, inturn, reduces taxable income of the assessee.

vii. Showing excessive wastage of raw materials in the course of production bythe manufacturing industries thereby showing low net profit than the actualone which in turn reduces taxable income of the assessee.

Part 2: Analysis of Respondents Opinions

4.3. Techniques and modes adopted by the tax payers in evadingand avoiding Taxes as opined by the respondents

The analysis of the selected respondents’ opinions reveals the following techniquesand modes by adopting which the assessees of all types whether individuals,partnership firms, sole-trader business, companies and corporations try to evadeand avoid income taxes. The responses of our respondents have been tabulated inAppendix 1.

Table 1 presented in Appendix reveals that techniques namely showing benamitransaction, showing inadmissible expenses as admissible, making wrongclassification of business expenditure, low quality of service provided in return fortaxes have been the mostly used as opined by the 100% respondents. Again, 75%respondents opined that showing excessive depreciation, claiming excessive taxdeduction, tax exemption and tax credits have also been used as the mostimportant techniques. Again, 68.75% respondents opined in favor of lack ofcompliance of tax laws and provisions in full which has been used as the mostimportant techniques. Moreover, 62.5% respondents opined the techniques namelynot recording cash transactions, showing excessive wastage of raw materials inproduction process, low ability of tax authority, both administration and appellate toenforce tax liability and low tax morale of the tax payers which have been widelyused as the techniques. Lastly, the remaining techniques, namely showing revenueincome as capital income, under invoicing by importers and exporters, showingcash credit, showing personal expenses as business expenses, showing bogus baddebts, creating reserve and provision for bad debts, bribing the low morale taxofficials, high compliance costs, weak capacity on the part of tax administration indetecting and prosecuting tax evasion and avoidance practices of the tax payershave also been used by 50% to 56.25% respondents.



4.4. Reasons for tax evasion and tax avoidance crimes

There are various reasons for tax evasion and tax avoidance. These reasons canbe filed in two categories.

The first category comprises factors that negatively affect taxpayers’ compliancewith tax legislation. These factors can be subsumed either contributing to a lowwillingness to pay taxes (low tax morale) or to high costs to comply with tax laws.

The second category contains reasons for the low ability of tax administration andfiscal courts to enforce tax liabilities. These factors can be summarized as resultingfrom insufficiencies in the administration and collection of taxes as well as weakcapacity in auditing and monitoring tax payments which limit the possibility to detectand prosecute violators.

However, the learned respondents of the study have pointed out the followingreasons for tax evasion and avoidance crimes:

i. Low tax moraleii. Low quality of the service in return for taxesiii. Tax system and perception of fairnessiv. Low transparency and accountability of public institutionsv. High level of corruptionvi. Lack of rule of law and weak fiscal jurisdictionvii. High compliance costsviii. Weak enforcement of tax lawsix. Insufficiencies in tax collectionx. Weak capacity in detecting and prosecuting inappropriate tax practicesxi. No trust in the government

xii. High tax ratesxiii. Weak tax administration

4.5. Authorities empowered for detecting tax evasion and taxavoidance cases & techniques adopted

Before identifying the specific authority empowered for detecting tax evasion andtax avoidance cases, it is essential to focus on the Tax Authorities in Bangladesh.In Appendix 1, the Tax Authority in Bangladesh has been shown under the title“Organogram of Tax Authority in Bangladesh” The Deputy Commissioners ofBangladesh have been empowered under the provisions of ITO, 1984.There mainfunctions and responsibilities are: assessing various types of assesses fordetermining taxable income and tax liabilities, asking for any type of evidences anddocuments from the assesses in support of their tax return, giving circulars andnotices etc. Therefore, the DCTs have been empowered to detect evasion and taxavoidance cases while assessing the tax liabilities of the tax payers.

Techniques followed by DCT in detecting tax evasion and avoidance crimes:

The learned respondents of the study have pointed out that the following techniqueshave been adopted by the DCT in detecting tax evasion and avoidance crimes:

i. Gathering relevant information



ii. Remaining constant vigilant of the DCT while assessing any assesses’staxable income and tax liability

iii. Making thorough bank search of the respective tax payersiv. Intelligent inspections of the books of accounts and others relevant

documents of the tax payersv. Critically examining the audit reports of the tax payersvi. Critically examining the Cash Book, Sales Register, Purchase Register, Profit

and lose account, Balance Sheet and other relevant documents theretovii. Critically examining the Import-Export invoices, Latter of Credit and other

relevant document thereto.

4.6. Authorities empowered for settlement of tax evasion and taxavoidance cases

It is the Appellate and Inspecting Division under the National Board of Revenuewhich deals with appeal cases of the assessees whether individuals, partnershipfirms and corporate firms. In the Appellate and Inspecting Division, Commissioner ofTaxes, Additional Commissioner of Taxes, Joint Commissioner of Taxes are theauthorities empowered for settlement of tax evasion and tax avoidance cases. Theaggrieved assessees make an appeal to the Appellate Joint Commissioners ofTaxes (AJCT). The AJCTs settle the appeal cases after giving necessary hearing tothe respective assessees.

4.7. Adverse impact of tax evasion and tax avoidance

Tax evasion and tax avoidance are important insofar as they affect both the volumeand nature of government finances. Today, corruption and tax evasion seem to takeplace in practically every country in the world, and should be considered a potentialproblem everywhere. Still, evasion and fraud in tax administration are phenomenawhich hit developing countries hardest (Klitgaard, 1994). Firm evidence on the extentof such illegal practices is naturally hard to come by. But anecdotal evidence fromdifferent developing countries indicate that half or more of the taxes that should becollected cannot be traced by the government treasuries due to corruption and taxevasion (Mann, 2004).

This erosion of the tax base has several detrimental fiscal effects. Theconsequences of lost revenue to the funding of public services are of specialconcern (Tanzi, 2000a). In addition, corruption and tax evasion may have harmfuleffects on economic efficiency in general (Chand and Moene, 1999; Tanzi, 2000b),and income distribution in particular because the effective tax rates faced byindividuals and firms may differ due to different opportunities for evasion (Hindriks etal, 1999). Thus, tax evasion and corruption can make the real effects of the taxsystem very different from those that the formal system would have if honestlyimplemented.

Transparency International, Bangladesh (TIB) said that an amount of Tk 210 billionin taxes were “evaded” or “defalcated” in fiscal 2009-10 which was 2.8 per cent ofthe country’s national income and one-third of tax revenues collected during theyear. The TIB, in its research findings noted, the National Board of Revenue (NBR)could have collected 34 per cent more revenues than what it did in fiscal 2009-10 ifit realized the above-noted ‘tax-evaded’ or ‘defalcated’ amount of money. In the



study report, the TIB identified tax evasion as a major reason for the country’s poortax-GDP ratio as indicated in Table 1 of the study. (The Financial Express, 2011)

4.8. Ways and means of prevention of tax evasion and taxavoidance

The learned respondents of the study pointed out that the followings are the majorways and means of prevention of tax evasion and tax avoidance:i. Creating awareness of paying taxes for the welfare of the state and its

citizensii. More and more publicity of paying taxes through media about the socio-

economic responsibility of the citizens.iii. Effective implementation of the tax rules and provisionsiv. Making stringent rules and provisions of the taxv. Appointing adequate trained and experienced tax officialsvi. Empowering tax officials to take necessary panel actionsvii. Imposing physical punishment to the tax evaders and avoiders under

sections 164 and 165 of ITO, 1984viii. Imposing high monetary penalty in the form of finesix. Ensuring access of the tax officials to the bank accounts and relevant

software of the tax payersx. Strengthening collection of the requisite data and information from the

respective tax payersxi. Measures improving tax compliance by properly educating the tax payers

and addressing tax compliance costs and administrative costs.

For solving complexities in tax appeal process, the TIB report-2010 suggested forappointment of judges, income tax lawyers and Chartered Accountants asmembers of appellate tribunals. The TIB study also strongly pleaded for fullautomation of tax collection system and facilitating e-governance. TIB said the NBRwill have to be cautious about maintaining privacy of the taxpayers so that they feelencouraged to show the actual earning. TIB recommended to the NBR to ensureefficiency, transparency and accountability in the revenue board to help boost taxcollection. (ibid)

5. Conclusion and Policy Implication

This study provides critical analyses of tax evasion and tax avoidance crimes inBangladesh. The findings of the study have been analyzed under two main parts.The first part gives an analysis of appeal cases and the second part gives ananalysis of the opinions of the respondents. The study reveals the main techniquesand modes adopted by the tax payers in tax evasions and tax avoidances; the maintechniques adopted by the relevant tax officials in detecting tax evasion and taxavoidance cases; major reasons for evading and avoiding taxes by the tax payers;adverse impact of tax evasion and tax avoidance and preventive measures of taxevasion and tax avoidance. The preventive measures suggested by the learnedrespondents as mentioned in the study should be implemented as far as practicable.However, the following policy implications are relevant for the study.

i. Reforming tax policies and strengthening tax administrations is crucial toestablish a ‘level playing field’ in tax matters. Reforming needs to be made



removing loopholes of the existing tax provisions.

ii. Training facilities of the tax personnel needs to be improved covering theprofessional as well as Islamic ethics of the tax officials. In this regards, theexisting Tax Academy has a great role to play.

iii. The successful top level administration of the Tax Authority namely Chairmanand other members of NBR need to be nationally awarded by providing bothfinancial and non-financial incentives. In this respect, one of the importantcriteria may be increase in the collection of tax revenues by curving taxevasion and tax avoidance crimes.

iv. The successful key tax officials namely Deputy Commissioner of Taxes fromthe Administrative Divisions and Appellate Joint Commissioner of Taxes fromAppellate and Inspecting Divisions also need to be awarded locally withfinancial and non-financial incentives. One of the most important criteria ofthe successful Tax Officials may be detecting the tax fraud cases as much aspossible during the fiscal year.

v. The top officials of the NBR must supervise and monitor the activities of thekey tax officials on a regular basis with a view to curving Tax evasion and Taxavoidance crimes, in one hand, and control of unnecessary tax complianceas well as administrative costs, on the other.

vi. Quality of the service to the tax payers in return for their tax payment needsto be improved so that tax payers’ feeling become positive to theGovernment.

vii. Transparency and accountability of NBR need to be improved in order toincrease public confidence in Government activities.

viii. The appointment of Judges, Income Tax Lawyers and Chartered Accountantsas members of the appellate tribunal needs to be ensured.

References:

Chand, S.K. and K.O. Moene. 1999. ‘Controlling fiscal corruption.’ WorldDevelopment 27(7), pp. 1129-1140.

GIZ Sector Programme Public Finance, Administrative Reform (2010), ‘Addressingtax evasion and tax avoidance in developing countries’, Deutsche Gesellschaft furInternationale Zusammenarbeit (GIZ) GmbH on behalf of Federal Ministry forEconomic Cooperation and Development (BMZ), Eschborn.

GIZ Sector Programme Public Finance, Administrative Reform; 2010, “Addressingtax evasion and tax avoidance in developing countries”, Op.Cit.

Hassen, 1996. “Tax Planning in Jordan Industrial Companies”, Master’s thesis.

Hindriks, J, M. Keen and A. Muthoo. 1999. ‘Corruption, extortion and evasion.’Journal of Public Economics 74, pp. 395-430.



Joummah, 1993,“Tax planning in Banks Operating in Jordan”, Master’s thesis,University of Jordan.

Klitgaard, R. 1994. ‘A framework for a country program against corruption.’Occasional Working Paper No. 4 (1994). Berlin: Transparency International.

Mann, A. 2004. Are semi-autonomous revenue authorities the answer to taxadministration problems in developing countries? A practical guide. Washington DC:USAID.

Ministry of Finance, Finance Division, Government of the People’s Republic ofBangladesh, Bangladesh Economic Review 2010,

Noor and Ibrahem; 1999, “Tax Planning In Jordan Joint Stock Companies Working inService sector”.

Omer and Abdullah Ahmad, 1996, ‘Income Tax Monitoring Means in YemenRepublic”, Master’s thesis, University of Bagdad.

Planning Commission, Government of the Peoples Republic of Bangladesh, TheFirst Five Year Plan, 1973-78, Nov. 1973, p-42.

Shihattah and Mohammad, 1997, “Factors Controlling Pricing the Spent Stock”,Magazine for Economy and Trade, Ain Shams University.

Tanzi, V. 2000a. ‘A primer on tax evasion.’ Chapter 10 in V. Tanzi Policies,institutions and the dark side of economics. Edward Elgar: Cheltenham, pp. 171-185.

Tanzi, V. 2000a. ‘A primer on tax evasion.’ Chapter 10 in V. Tanzi Policies,institutions and the dark side of economics. Edward Elgar: Cheltenham, pp. 171-185,Op.Cit

Tanzi V. 2000b. ‘Corruption, governmental activities, and markets.’ Chapter 6 in V.Tanzi Policies, institutions and the dark side of economics. Edward Elgar:Cheltenham, 88-106.

The Financial Express; 2011, “The National Board of Revenue: Challenges intransparency and accountability and its way out”, Vol. 18, No-142



APPENDIX

Table 1: Showing responses as regards techniques and modes adopted inevading and avoiding taxes

Sl.No.

Specific technique and mode No. ofrespondens

% ofrespondents

1 Not recording cash transactions 10 62.52 Under invoicing by importers and

exporters8 50.0

3 Showing benami transactions 16 100.04 Showing cash credit 8 50.05 Showing excessive depreciation 12 75.06 Showing personal expenses as

business expenses8 50.0

7 Showing excessive wastage of rawmaterials in production process

10 62.5

8 Showing bogus bad debts 8 50.09 Creating reserve and provision for bad

debts8 50.0

10 Making wrong classification of businessexpenditures as capital and revenue

16 100.0

11 Showing inadmissible expenses asallowable

16 100.0

12 Claiming excessive tax deduction, taxexemption and tax credits

12 75.0

13 Bribing the low morale tax officials 8 50.014 Claiming tax holidays which is not

genuine in nature6 37.5

15 Lack of compliance of tax laws andprovisions in full

11 68.75

16 Low ability of tax authority, bothadministration and appellate to enforcetax liability

11 62.5

17 Low tax morale of the tax payers 10 62.518 Low quality of service provided in return

for taxes16 100.0

19 High compliance costs 8 50.020 Weak capacity on the part of tax

administration in detecting andprosecuting tax evasion and avoidancepractices of the tax payers

8 50.0

21 Showing revenue income as capitalincome

9 56.25

Source: Field survey



Figure: 1Organogram of Tax Authority in Bangladesh

National Board of Revenue

DG Training

Tax Appeal and Inspecting

Commissioner ofTaxes

AdditionalCommissioner of

Joint Commissionerof Taxes

Tax RecoveryOfficer

Inspectors of Taxes

DG Inspection

Tax Administration

DG Central Intelligence CellCommissioner of

Taxes

AssistantCommissioner of

DeputyCommissioner of

Joint Commissionerof Taxes

AdditionalCommissioner of

Assistant ExtraCommissioner of

Source: Organization Manual for NBR



Tax Evasion and Avoidance Crimes

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