Tax Structure and Tax System of Bangladesh

8/10/2019 Tax Structure and Tax System of Bangladesh

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Contents

EXECUTIVE SUMMARY ................................................................................................................................. 2

Introduction .................................................................................................................................................. 2

Hstory of tax in Bangladesh ......................................................................................................................... 3

Tax structure in Bangladesh .......................................................................................................................... 3

Features of Bangladesh Tax Structure ...................................................................................................... 4

Tax system in Bangladesh ............................................................................................................................ 7

Income Tax at a Glance: ............................................................................................................................ 7

Sources of Income: ................................................................................................................................ 7

Application Of Cannon In The Tax System Of Bangladesh .......................................................................... 11

Tax Evasion And Tax Avoidance .................................................................................................................. 13

What is tax evasion & tax avoidance? ........................................................................................................ 13

Effects of Tax Evasion and Avoidance in Economic Development:.......................................................... 13

Reasons for tax evasion and tax avoidance ................................................................................................ 14

Scopes of tax evasion and avoidance ......................................................................................................... 16

Recommendation to reduce tax evasion and tax avoidance ...................................................................... 17

Public Accounting Practices in Bangladesh: Standards from ICMAB & ICAB .............................................. 19Accounting in Bangladesh: .......................................................................................................................... 19

ICMAB: .................................................................................................................................................... 20

Roles and Standards of ICMAB............................................................................................................ 21

References and Bibliography ..................................................................................................................... 23


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EXECUTIVE SUMMARY

The term paper is a requirement of BBA Program. This term paper focuses on TAX STRUCTURE IN

BANGLADESH, TAX EVASION AND TAX AVOIDANCE & PUBLIC ACCOUNTING PRACTICES IN

BANGLADESH: STANDARDS FROM ICMAB & ICAB.The total term paper is divided into three broad

parts. The first part includes the Tax Structure in Bangladesh. The second part includes the Tax Evasion

and Tax Avoidance &the final part includes the Public Accounting Practices in Bangladesh: Standards

from ICMAB & ICAB. In the first part we discuss about the overview, types, function, characteristic,

sources and pay system of tax in Bangladesh. In the second part we discuss about reasons, modes of tax

evasion and avoidance and strategies against them. Then we discuss about the public accountingpractices standards from ICMAB & ICAB in Bangladesh.And finally we have tried to draw a conclusion on

the above analysis.

Introduction

One of the major sources of public revenue to meet a countrys revenue and development expenditures

with a view to accomplishing some economic and social objectives, such as redistribution of income,


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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 wordtaxeand etymologically, the Latin

word taxareis related to the term tax, which means to charge. Tax is a contribution exacted by the

state. It is a no penal but compulsory and unrequited transfer of resources from the private to the

public sector, levied on the basis of predetermined criteria.

Taxes are compulsory payment to the government without expectation of direct return in benefit to

the taxpayer.

According to section 2(62) of the ITO 1984 Tax means the income tax payable under the ordinance and

includes any additional tax, excess of profit, penalty, interest, fees or other charges leviable or payable

under this ordinance.

History of tax in Bangladesh

Bangladesh inherited a system of taxation from its past British and Pakistani rulers. The system,

however, developed on the basis of 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. To develop manpower for efficient tax administration,

the government runs two training academies BCS (Tax) Academy atdhaka for direct tax training and

Customs, Excise and Value Added Tax Training Academy atchittagong for indirect tax training.

Thenational board of revenue (NBR) is the apex tax authority of Bangladesh and it collects around 93%

of total taxes or 83% of total public revenues. The NBR portion of total taxes includescustoms

duty,value added tax(VAT), supplementary duty (SD),excise duty, income tax, foreign travel tax,

electricity duty, wealth tax (collected as a surcharge of income tax since fiscal year 1999-2000), turnover

tax (TT), air ticket tax, advertisement tax, gift tax and miscellaneous insignificant taxes. Other taxes

(amounting to around 7% of total taxes or 5% of total revenues) are often referred to as non -NBR

portion of tax revenue. These 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 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).

Tax structure in Bangladesh

The tax structure in Bangladesh consists both of direct tax(income tax, gift tax, land development tax,

non-judicial stamp, registration, immovable property tax etc.) and indirect taxes (custom duty, excise
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duty, motor vehicle tax, narcotics and liquor duty, VAT, SD, foreign travel tax, TT, electricity duty,

advertisement duty etc.).

Analysis of revenue collection activities in Bangladesh for the fiscal year 2012-13 reveals that tax

revenue accounts for 83.64% of government revenue and direct taxes represent only about 33.12% of

total taxes. As per the national budget of FY 2013-14, the tax revenue has been targeted to1412.19billion which was tk.1122.59 billion in the fiscal year 2012-13 as per the revised budget. From

the analysis of the national budget 2013-14, it can be said that in the FY 2013-14 revenue collections

from value added taxes (VAT) have been estimated at around tk.499.56 billion(35.37% of total taxes),

from import duty at tk.146.29 billion(10.36%), income tax at tk.482.97 billion(34.20%), supplementary

duty at tk.208.53 billion(14.77%) and others 5.30% of this aggregate target.

Features of Bangladesh Tax Structure

The salient features of Bangladesh tax system are as follows:

Multiple tax system:

The tax system of Bangladesh consists of various types of taxes which are as follows:

A. Taxes on Income and Profit:

1. Income tax-Company

2 .Income tax-other than company

B. Taxes on Capital and Property Transfer

1. Estate Duty 2.Gift tax

3 .Narcotics Duty 4.land revenue

5. Stamp Duty-non judicial 6.Registration

C. Taxes on Goods and Services

1. Customs Duty

2. Excise Duty

3. Value Added tax(VAT)

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

5. Taxes on Vehicles

6. Electricity duty

7. Other taxes and duties (travel tax, turnover tax etc.)


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Sources of Non-tax Revenue

Interest, Dividend and Profit

General Administration and Services

Social and Community Service

Economic Services Agriculture and Allied Services

Transport and Communication

Other non-tax revenue

Capital Revenue

Inadequate and stagnant yield relative to GDP

The ratio of the tax revenue to GDP is very low comparing to other developing countries. In FY 1973-74

tax GDP ratio was around 5% and even after 35 years the progress is not satisfactory. We can see the

status of the ratio of tax revenue to GDP of Bangladesh in the following table for the last seven

years.(Bangladesh Economic Review-2013):

Revenue as

% of GDP

2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14

Total

Revenue

11.1 11.3 11.4 11.9 12.5 13.5

Tax Revenue 8.8 9.0 9.2 9.9 10.5 11.3

Non-tax

Revenue

2.3 2.2 2.2 2.0 2.0 2.2

High ratio of indirect and direct tax revenue

Despite the progress 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 indirect taxes on international trade, goods and services towards direct taxes on

income and profit, whose share in total revenue in Bangladesh is appallingly low, even compared to

other developing countries in Asia.

An analysis of the revenue from the existing taxes shows that the indirect taxes pre-dominate the

revenue yield of the country. Nearly 67% of the tax revenue is from indirect taxes which are clear from

the following table (Bangladesh Economic Review-2013):

Revenue

(Tk.in Crore)

2007-08 2008-09 2009-10 2010-11 2011-12 2012-13

Total

Revenue

60539 69180 79484 95187 114885 139670


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Tax

Revenue

48012 55526 63956 79052 96285 116824

Non-tax

Revenue

12527 13654 15528 16135 18600 22846

% of tax

to Revenue

79.31% 80.26% 80.46% 83.30% 83.81% 83.64%

Direct Tax

(DT)

12502 15462 19516 24592 31011 38693

% of DT to

Total Tax

26.04% 27.85% 30.51% 31.11% 32.21% 33.12%

Indirect Tax

(IT)

35510 40064 44440 54460 65274 78131

% of IT to

Total Tax

73.965 72.15% 69.49% 68.89% 67.79% 66.88%

Dominance of VAT and Import Duty

It has been notified that dominance of VAT and import duty in tax revenue sector is increasing day by

day. Moreover, in order to increase revenue collection from domestic sources, VAT network has been

widened in recent years (See the following table:BER-2013):

Item Wise

Collection

2008-09 2009-10 2010-11 2011-12 2012-13

VAT 36.2% 35.6% 35.8% 35.65 34.6%

Import duty 17.25 16.35 13.8% 13.1% 12.4%

Income Tax 24.4% 25.9% 28.0% 29.1% 30.2%

Supplementary

Duty

16.4% 16.4% 17.1% 16.8% 17.1%

Other taxes

and duties

.8% .7% .6% .7% .9%

Excise Duty .4% .4% .34% .5% .9%

Negligible Direct Contribution Of The Agricultural Sector To Tax Revenue


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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 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.

Tax system in Bangladesh

To explain ins and outs of tax structure in Bangladesh we should explain above three major parts oftax revenue. For this reason in this perspective we will decorate our topic in the three headlines and

subhead lines.

Income Tax at a Glance:

Among direct taxes, income tax is one of the main sources of revenue. It is a progressive tax system.

Income tax is imposed on the basis of ability to pay. The more a taxpayer earns the more he should

pay''- is the basic principle of charging income tax. It aims at ensuring equity and social justice.

Sources of Income:

For the purpose of computation of total income and charging tax thereon, sources of income can be

classified into 7 categories, which are as follows:

1.

Salaries


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2.

Interest on securities

3.

Income from house property

4.

Income from agriculture

5.

Income from business or profession

6.

Capital gains

7.

Income from other sources

The tax structure for individual tax payers:

If an individual has been in Bangladesh for a period/period totaling 182 days or more in the income year,

he/she is considered a resident. In case an individual has been in the country for 90 days in the income

year and 365 days in four years proceeding this year, he/she will also be considered a resident.

Tax Rate (Assessment Year- 2013-2014): Other than Company: For individuals (other than femaletaxpayers, senior taxpayers of 65 years and above and retarded taxpayers), tax payable for the-

First 2,20,000 Nil

Next 3,00,000/- 10%

Next 4,00,000/- 15%

Next 3,00,000/- 20%

Rest Amount 25%

For female taxpayers, senior taxpayers of age 65 years and above, tax payable for the:

First 2,50,000 Nil

Next 3,00,000/- 10%

Next 4,00,000/- 15%

Next 3,00,000/- 20%


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Rest Amount 25%

For retarded taxpayers, tax payable for the:

First 3,00,000 Nil

Next 3,00,000/- 10%

Next 4,00,000/- 15%

Next 3,00,000/- 20%

Rest Amount 25%

For Companies:

Publicly Traded Company 27.5%

Non-publicly Traded Company 37.5%

Bank, Insurance & Financial Company (Except merchant bank) 42.5%

Merchant bank 37.5%

Cigarette manufacturing company 45%

Publicly traded cigarette company 40%

Mobile Phone Operator Company 45%

Publicly traded mobile company 40%


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If any publicly traded company declares more than 20% dividend, tax rate would be 24.75% and

if declares less than 10%

dividend tax rate would be 37.5%.

If any non publicly traded company transfers minimum of 20% shares of its paid-up capital

through

IPO(Initial Public Offering) it would get 10% rebate on total tax in the year of transfer.

Who is entitled to a Tax Holiday:

Tax holiday is allowed to industries subject to the relevant rules and procedures set by the National

Board of Revenue (NBR) for the following period according to the location of the establishment. In

Dhaka and chittagong Divisions (excluding 3 hill districts): 5 years. In other divisions (including 3 hill

districts of chittagong Division): 7 years.

The period of such tax holiday will be calculated from the month of commencement of commercial

production. The eligibility of tax holiday to be determined by the NBR and the time of the

commencement of commercial production is certified by the respective sponsoring agencies. The

industrial establishment should be registered under the companies Act. 1994.

Tax holiday facility can be availed by industries coming into commercial production within 30 June 2000

A.D

Value Added Tax (Vat):A type ofconsumption taxthat is placed on a product whenever value is added at a stage of production

and at final sale. Value-added tax (VAT) is most often used in theEuropean Union.The amount of value-

added tax that the user pays is the cost of the product, less any of the costs of materials used in the

product that have already been taxed.

Characteristics of VAT:

VAT is imposed on goods and services at import stage, manufacturing, wholesale

and retails levels;

A uniform VAT rate of 15 percent is applicable for both goods and services.

15 percent VAT is applicable for all business or industrial units with an annual

turnover of Taka 2 million and above;
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Turnover tax at the rate of 4 percent is leviable where annual turnover is less than

Taka 2 million.

VAT is applicable to all domestic products and services with some exempted

VAT is payable at the time of supply of goods and services;

Tax paid on inputs is creditable/adjustable against output tax ;

Export is exempt;

Cottage industries (defined as a unit with an annual turnover of less than Taka 2

million and with a capital machinery valued up to Taka 3,00,000) are exempted

Customs Duty/Import Tax:

Of the three wings of the NBR, Customs Wing is responsible for the collection of customs duties on all

imported goods. At present International trade (Export-Import trade) is conducted through Dhaka,Chittagong, Benapole, and Mongla Custom Houses and a few Land Customs Stations. At the import level

Customs Duty, VAT, IDSC, SD, Advance Income Tax, and Advance Trade VAT are imposed. Although law

provides for Regulatory Duty, Safeguard Duty and Anti-dumping Duty, these are rarely applied in

Bangladesh. Over the past two decades consistent efforts have been made to rationalize the tariff

structure with a view to achieving greater trade facilitation. As a result we have now only 4 slabs of

customs duty (0%, 6%, 13%, 25%) as against a couple of dozens of them prevalent in the recent past.

Customs department is also entrusted with the task of combating smuggling with the support and

assistance of all law enforcing agencies of the country including Bangladesh Navy, Bangladesh Coast

Guards, Bangladesh Police, Bangladesh Rifles, Bangladesh Ansar and the Narcotics Control Department.

There is a special agency in the Customs Department called Customs Intelligence and InvestigationDirectorate, which plays an important role in anti-smuggling activities. In order to make customs

procedures more transparent and achieve more trade facilitation, a number of measures have been

taken over the past few years. With the introduction of ASYCUDA++ and DTI (Direct Traders Input)

automation in customs clearance has begun. As a result clearance of goods has been accelerated,

procedures simplified, lead-time reduced and collection of revenue augmented. The changes that have

been undertaken over the past few years have significantly increased revenue collection thereby

enhancing NBRs contribution to the national economy.

Application Of Cannon In The Tax System Of Bangladesh

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

followed, some are not.


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Tax Evasion And Tax Avoidance

Tax evasion and avoidance are both phenomena that are probably as old as taxation itself. Wherever

and whenever authorities decide to levy taxes, individuals and firms try to

avoid paying them. Developing and emerging countries like Bangladesh are particularly vulnerable to taxevasion and avoidance activities of individual taxpayers and corporations. While tax revenues in OECD-

countries are almost 35 per cent of GDP ,in case of Bangladesh it is only around 10%.This can be

considered one of the primary reasons for large differences in the ability to mobilize own resources

between developed and developing countries. Tax evasion and tax avoidance is a great problem in our

country. In Bangladesh there are many individual taxpayers and corporations who are evading or

avoiding tax.

What is tax evasion & tax avoidance?

Definition of Tax Evasion:

Tax evasion may be defined either as the understatement or concealment of taxable object or as the

failure to pay tax in time either by the assessee or his agent. So it is illegal. In case of tax evasion, tax

liability is reduced or tax is not paid at all. Tax evasion means illegally hiding income or concealing the

particulars of income or concealing particular source of income or manipulating account so as to inflate

expenditure and other outgoings with a view to illegally reduce the burden of taxation. Hence, tax

evasion is illegal.

Definition of Tax Avoidance:

Tax avoidance is the minimization of tax liability by the tax-payer or his agent by efficient tax planning.

It is possible by fully complying with the tax laws and meeting tax liabilities. Thus tax avoidance takes the

advantages of the loopholes in the existing fiscal laws. The avoider is just smart taxpayer who exploits

loopholes in the tax laws (and related laws) to reduce tax liability.

Effects of Tax Evasion and Avoidance in Economic Development:

Tax Evasion and Avoidance has a great impact in economic development. The effects of tax evasion and

tax avoidance in economic development are as follows:

Tax revenue is used to build the infrastructure, to invest in social security programs, in

various poverty elevation programs. But due to tax evasion and tax avoidance above the development

activities are hampered.

Tax evasion and tax avoidance hamper the social welfare. It obliges the government to borrow

loan that affects the economic development.


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Economic growth is co-related with budget. It is natural that higher government`s income support to

do large budget and large budget helps to accelerate economic development of a country. But due to

tax evasion and tax avoidance a lot amount of revenue is not collected. As a result the government has

to shortcut the budget.

In capitalist and mixed economy private sector is supposed to play vital role in investment anddevelopment. But sometimes direct investment by the governments is necessary. Due to tax evasion

and tax avoidance the government cannot supply the expected fund for investment.

The government has to take various plans for economic development. But lack of fund the plan cannot

be implemented. If the people would not evade tax, the government could implement the plans.

Due to tax evasion and tax avoidance the government cannot ensure the employment opportunity.

Tax evaded incomes are used for conspicuous consumption in the form of buying luxurious goods. As a

result honest tax payers find various methods of tax evasion and tax avoidance. So the stability of the

society will be endangered. Such illegal money is also transferred abroad weakening the economy of thecountry.

Reasons for tax evasion and tax avoidance

There are various reasons for tax evasion and tax avoidance. In order to develop methods and

instruments for fighting tax evasion and avoidance, it is very much important to establish a broad

understanding of the different reasons underlying these problems. These reasons can be divided in two

categories. The first category comprises factors that negatively affect taxpayers compliance with tax

legislation. These factors can be subsumed either contributing to a low willingness 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 and fiscal courts to enforce tax liabilities. These factors can be summarized

as resulting from insufficiencies in the administration and collection of taxes as well as weak capacity in

auditing and monitoring tax payments which limit the possibility to detect and prosecute violators.


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1. Low level of (voluntary) tax compliance

1.1.Low tax morale

Taxpayers willingness to pay taxes differs widely across the world. It cannot be viewed as simply

depending on the tax burden. Rather, empirical research indicates that taxpayers throughout the world

pay more taxes than can be explained by even the highest feasible levels of auditing, penalties and risk-

aversion. These high levels of tax compliance result from the tax morale of society that fosters self-

enforcement of tax compliance. Tax morale is, however, not easy to establish. Especially countries

without a deep-rooted culture and habit of paying taxes find it difficult to establish tax morale. This

willingness topay of the taxpayer is influenced by the following factors:

Low quality of the service in return for taxes

In general, citizens expect some kind of service or benefit in return for the taxes paid. If the government

fails to provide basic public goods and services or provides them insufficiently, citizens may not be

willing to pay taxes and tax evasion and avoidance will be the consequence

Tax system and perception of fairness

Some studies suggest that high tax rates foster evasion. The intuition is that high tax rates increase the

tax burden and, hence, lower the disposable income of the taxpayer. However, the level of the tax rate

may not be the only factor influencing peoples decision about paying taxes. In fact, the structure of the

overall tax system has an impact as well. For example, if the tax rate on corporate profits is relatively

low, but individuals are facing a high tax rate on their personal income, they may perceive their personal

tax burden as unfair and choose to declare only a part of their income.

Low transparency and accountability of public institutions

Lack of transparency and accountability in the use of public funds contributes to public

distrust both with respect to the tax system as well as the government. This, in turn, increases the

willingness to evade taxes.

High level of corruption

Due to high levels of corruption in the government sector, taxpayers may feel that their paid taxes are

highly abused by the corrupted officers .Thats why they evade tax. A tax-payer might consider evading

taxes if the cost of bribing a tax auditor is lower than the potential benefit from tax evasion.

Lack of rule of law and weak fiscal jurisdiction


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Strong fiscal courts are essential to protect taxpayers rights and safeguard them from arbitrariness. The

lack of rule of law reduces transparency of public action and fosters distrust among citizens. As a result,

citizens may not be willing to finance the state through taxes, and decide to evade these liabilities.

1.2High compliance costs

High compliance costs, that are the costs the taxpayer has to bear to gather the necessary information,

fill out tax forms etc, can be an additional reason for tax evasion and avoidance.

2.Weak enforcement of tax laws

While the preceding section discussed the sources for low voluntary compliance and high regulatory

costs of tax compliance, the current section turns to challenges in the enforcement of tax laws. There

exist several circumstances that restrain tax administrations from performing their functions properly

thereby increasing the possibility of tax evasion.

2.1Insufficiencies in tax collection

Regarding tax collection, like many developing countries, Bangladesh also faces difficulties with respect

to developing a well functioning tax administration, especially with respect to identifying and

administering those citizens and firms that are liable to tax payments. Problems of insufficient capacity

may also occur due to the organizational set up of the tax administration and its relationship to the

ministry of finance. Additionally, unclear responsibilities regarding the collection and administration of

specific types of taxes by different institutions can lead to inefficiencies and tax losses and require a

reorganization of the tax administration. Qualified, well trained and motivated tax officials are crucial for

the collection of taxes and the performance of tax administration bodies as a whole. But in Bangladesh

most of the tax officials are corrupted to have their personal gain.

Scopes of tax evasion and avoidance

1. Tax shelter and tax haven:

The tricky transactions involve shifting of income between taxpayers and tax-indifferent entities through

composite chains of interrelated entities are of this type. The use of offshore bank accounts in tax havencountries to hide unreported income, which can later be accessed through credit cards to finance

personal consumption at home. For transactions that are clearly outside the tax law, the only question

for tax gap measurement is the ability of NBR to find and identify them.

2. Legal vagueness:


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Often these consist of a series of separate transactions, all of them within the letter of the tax law, that

reduce tax liability, but produce no expectation of pretax economic gain. Tax result depends on

definitions of legal terms which are usually vague. For example, vagueness of the distinction between

business expenses and personal expenses is of much concern for taxpayers and tax authorities. More

generally, any term of tax law, has a vague subsection, can be a potential source of tax avoidance

.

3.PSI agencies and dodging of customs duty:

Customs duties are the important sources of tax revenue in the developing countries like Bangladesh. It

is often alleged that tax lawyers and chartered accountants help tax payers including firms and

companies in evading taxes. In the same vein, the C & F agents help in evasion of customs duties. The

importers contend to evade customs duty by under invoicing and misstatement of quantity and product

price.

4.Underground trafficking:

An import and export of illegal products through unauthorized way is a source of tax evasion. This act is

resorted to for total evasion of taxable revenues as well as for importation of contraband (smuggled

goods) items. A purported trafficker does not have to pay any customs duty since the products are not

routed through an authorized or notified customs port and therefore, not subjected to declaration and

payment of duties and taxes.

5. Elusive VAT and Turnover taxes:

VAT is the most talking and latest issue of the time of modern taxation age. An ultimate consumer who

bears the real burden of this taxation has little scope to evade, but producers or distributors who collectVAT from the consumers may evade tax by under-reporting the amount of sales.

6. Dishonesty of tax officials and hissing of paying taxes to respective order:

Sleaze tax officials cooperate the tax payers who intend to evade taxes is an open-secrete matter in the

most developing country like Bangladesh. When they detect an instance of evasion, they refrain from

reporting in return for illegal gratification or bribe. Corruption by tax officials is a serious problem for the

tax administration in a huge number of underdeveloped countries like Bangladesh.

Recommendation to reduce tax evasion and tax avoidance

1. Social awareness program:

Create awareness among the people and motivate the wealthy section of the society to pay taxes. Apart

from the NBR, it must be ensured that the tax payers should be free from various complications and

harassments in tax offices while coming to pay taxes. The NBR in alignment with the government

concerned department can initiate motivational campaign in raising consciousness explaining how


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regular payment of taxes serves the country and ensures justice in the society. This can be done not only

by appropriate NBR personnel, educational campaigns and by seeking support and co-

operation from professionals like chartered accountants, tax lawyers, etc.

2. Broad band tax net:

A wide base and a low rate structure would maximize the tax revenue. Presumptive tax on professionals

such as accountants, lawyers, doctors, engineering and management consultants, university teachers

may be brought to the tax net. Assessments on coaching center, private university, English medium

schools, and private educational institutions for professional development are still at large from tax net.

Special turnover tax (not VAT) may be imposed on coaching centers and private educational institutions

including university and English medium schools.

3.Special watch-dog for excise and turnover taxes:

It presumes that the business houses and industrial firms are engaged in tax evasion in a significant

scale. The success of government machinery for revenue collection is largely relied on administering the

system involves in collection process, NBR policies and the honesty of the taxpayers. The national

budget 2013-14 precludes cigarette, bidi, chanachur, juice, energy drink and M.S products from cottage

industries facilities is an appreciable step but policy formulation is not enough to plug the loopholes of

the perpetrators movements.

4. Reengineering custom duty net:

For halting evasion of tax by means of under invoicing, proper valuation of imported and exported

goods should be placed at most important custom centers of the country. The present custom net is too

poor to fish many cross borders trade. Tax evasion by multinational companies through transfer pricing

is a global phenomenon. Revenue people in many countries including USA, India have been given special

power and training to examine extensively the

transfer pricing mechanism of those companies. In this country too, there is possibility of tax under

reporting through this mechanism.

5. Simplified Income Tax system:

The present income tax system is too complicated to understand. Chartered accountants, tax lawyers

and related professionals often allegedly are abusing this complexity. Their dubious roles as middle man

help under reporting many income tax cases. People are likely to go for self assessments are

discouraged by the difficult system. The problem is more acute in a poor economy like ours with high


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illiteracy and poor record keeping and accounting habits. So, there is a ongoing demand to make the tax

system simple and easily convincible to the taxpayers.

6. Penalty and Reward:

Appropriate design of a penalty rate structure also appears to be anti-evasive and anti-avoidance. The

rate of penalty should be progressively higher with the amount of tax evaded and must also reflect the

current market conditions. At present, the provision of penalty in the statute books is one

sided. The tax payers only to be penalized for an act of omission or default but there is no corresponding

provision to penalize dishonest, inefficient or unjust tax officials. Moreover, there must be reward for

them who pays taxes regularly and on time.

7. Standardization of public utility price:

The policy of taxation and user charges for

services provided by nationalized state enterprises, i.e., PDB, WASA, DESA, etc., should be well

formulated. The latter when based on standard marginal pricing would collect more revenue and wouldgenerate less resistance by the tax payers. The result may be low income tax rate and lesser tax evasion

8. Updating Anti-evasion Provisions in the ITO, 1984:

Income Tax Ordinance 1984 was equipped supposedly adequate legible provisions to tackle concurrent

tax under reporting-evasion and avoidance, and penal provision for purported taxpayers. Section 19

deals with unexplained investment, Section 115 for detecting concealment, Section 123-124 deal with

imposing penalty for tax evasion and chapter XXI for offences and prosecution. Special provisions are

incorporated in Section 93, 104 and 106 for escaped income assessment or non-filing tax return; and

Sections 117-119empower NBR officials to raid, search, seize and retain the concealments of bullion or

valuables required to be disclosed under the ITO, 1984.

Public Accounting Practices in Bangladesh: Standards from ICMAB & ICAB

Accounting in Bangladesh:

In Bangladesh, the profession of accountancy developed during the British colonial period. Today it is

represented by two professional bodies, the Institute of Cost & Management Accountants of Bangladesh

(ICMAB) and the Institute of Chartered Accountants of Bangladesh (ICAB).

Chartered Accountants complete their training in practising firms and specialise in financial accounting,

financial audit and tax. CMAs receive particular training in cost audit, management audit and

management accounting, as well as general accounting and taxation. Both the ICMAB and ICAB are

under the administrative control of the Ministry of Commerce. The Government of Bangladesh


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considers both type of professional accountants equal in respect of employment in government

services.

The Generally Accepted Accounting Principles (GAAP) in Bangladesh are based upon standards set by

the ICAB, which has stated its intention to adopt International Financial Reporting Standards. As of 2001,

23 such standards had already been adopted, and listed companies are required to use IFRS.

ICMAB:

The Institute of Cost and Management Accountants of Bangladesh (ICMAB) at Nilkhet, Dhaka,

Bangladesh is the only institution in the country dedicated to Cost and Management Accounting

education and research. It is managed as an autonomous professional body under the Ministry of

Commerce.

As well as education, it is also engaged in regulating and promoting the profession of cost and

management accounting in Bangladesh. The Institute is managed by a National Council of 16 members.

It is a member of the International Federation of Accountants (IFAC), Confederation of Asian and Pacific

Accountants (CAPA), and South Asian Federation of Accountants (SAFA).

ICMAB more..

Members are known as CMAs with their designatory title ACMA and FCMA. They play leading roles in

the accountancy and finance profession in Bangladesh. 30% of members live and work in UK, USA,

Canada, Australia and Gulf Countries. ICMAB UK Chapter is a lively forum for members working in the

UK.

Vision: Institutes vision is to help Bangladesh become an industrialized nation by promoting and

regulating Cost and Management Accounting profession towards market economy to enhance economic

competitiveness and quality of life

Mission: The Institute mission is to enable them to provide better services to the society.The Institute is

entrusted with the formulation and implementation of National Accounting as well as Cost Accounting

Standards and take other necessary steps with a view to regulating the Cost and Management

Accounting profession commensurate with global standard with the ultimate objective of developing

Bangladesh's human and natural resources to ensure common welfare and to enrich our shared future.


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Roles and Standards of ICMAB

Regulate and develop the Cost and Management Accounting (CMA) profession in Bangladesh

Provide and confer the highest professional degree in Cost and Management Accounting

Impart education and training to the members, corporate managers and intending students of CMA for

enhancing their capability in the fields of Cost and Management Accounting

Develop knowledge, skills and competence of the CMAs needed to support economic development of

the country and, thus, to prepare capable manpower needed for various national and international

development activities according to the requirements of the millennium

Help development, adoption and implementation of International Financial Reporting Standards (IFRS)

in Bangladesh

Formulate, adopt and implement Cost Accounting and Auditing Standards (CAAS) in Bangladesh and

international arena.

Implement statutory Cost Audit as provided in the Companies Act, 1994

Conduct research in the field of Cost and Management Accounting in order to promote and develop

the profession to meet the requirement of the time. International organization....

ICAB

The Institute of Chartered Accountants of Bangladesh(ICAB) is the nationalprofessional accountancybodyinBangladesh. It is the sole organisation in Bangladesh with the right to award the Chartered

Accountantdesignation. It has around 1,400 members.[1]

It was established under the Bangladesh Chartered Accountants Order 1973 (Presidential Order No. (2 of

1973). The Ministry of Commerce, Government of the People's Republic of Bangladesh is the

administrative Ministry of the ICAB. The mission of the ICAB is to provide leadership in the development,

enhancement and coordination of theaccountancyprofession in Bangladesh in order to enable the

profession to provide services of consistently high quality in the public interes

THE ROLES OF ICAB AND ITS STANDARDS:

The Institute of Chartered Accountants of Bangladesh(ICAB), the National Professional Accounting

Body of Bangladesh established under the Bangladesh Chartered Accountants Order 1973(President's

Order No. 2 of 1973).The Institute have the following objectives:

1. Regulatesthe accounting Profession and matters concerned there with in the country
http://en.wikipedia.org/wiki/Professional_accountancy_bodyhttp://en.wikipedia.org/wiki/Professional_accountancy_bodyhttp://en.wikipedia.org/wiki/Professional_accountancy_bodyhttp://en.wikipedia.org/wiki/Professional_accountancy_bodyhttp://en.wikipedia.org/wiki/Bangladeshhttp://en.wikipedia.org/wiki/Bangladeshhttp://en.wikipedia.org/wiki/Bangladeshhttp://en.wikipedia.org/wiki/Chartered_Accountanthttp://en.wikipedia.org/wiki/Chartered_Accountanthttp://en.wikipedia.org/wiki/Chartered_Accountanthttp://en.wikipedia.org/wiki/Chartered_Accountanthttp://en.wikipedia.org/wiki/Institute_of_Chartered_Accountants_of_Bangladesh#cite_note-1http://en.wikipedia.org/wiki/Institute_of_Chartered_Accountants_of_Bangladesh#cite_note-1http://en.wikipedia.org/wiki/Institute_of_Chartered_Accountants_of_Bangladesh#cite_note-1http://en.wikipedia.org/wiki/Accountancyhttp://en.wikipedia.org/wiki/Accountancyhttp://en.wikipedia.org/wiki/Accountancyhttp://en.wikipedia.org/wiki/Accountancyhttp://en.wikipedia.org/wiki/Institute_of_Chartered_Accountants_of_Bangladesh#cite_note-1http://en.wikipedia.org/wiki/Chartered_Accountanthttp://en.wikipedia.org/wiki/Chartered_Accountanthttp://en.wikipedia.org/wiki/Bangladeshhttp://en.wikipedia.org/wiki/Professional_accountancy_bodyhttp://en.wikipedia.org/wiki/Professional_accountancy_body


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2. Administers its members and students

3. Ensures sound professional ethics and code of conduct by its members

4. Provides specialized training and professional expertise in Accounting, Auditing, Taxation, Corporate

Laws, Management Consultancy, Information Technology and related subjects

5. Imparts Mandatory continuing Professional Education (CPE) to its members

6. Fosters acceptance and observance of International Accounting Standards(IAS)and

International Standards on Auditing (ISA)and adopt IAS & ISA in Bangladesh as Bangladesh Accounting

Standards(BAS)and Bangladesh Standards on Auditing (BSA) respectively

6. Keeps abreast of latest developments in Accounting techniques, Audit methodology,

Information technology , Management consultancy and related fields

7. Liaises with regional and international organizations to influence the development of efficient capital

markets and international trade in services.


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References and Bibliography

Asiatradehub.com, (2014). Bangladesh Tax Structure > Income Tax at a Glance. [online]

Available at: http://www.asiatradehub.com/bangladesh/tax.asp

Anon, (2014). [online] Available at: http://Tax Structure in Bangladesh - Research Papers -

Himubuet

Joseph E. Stiglitz(1980). Lectures in Public Economics, McGraw-Hill Economics Handbook Series

Alan S. Blinder, Robert M. Solow, et al. (1974). The Economics of Public Finance, Brookings

Institution.Table of Contents.

Joseph E. Stiglitz(2000). Economics of the Public Sector, 3rd ed. Norton.Description.

Dyreng SD, Hanlon M, Maydew EL. (2008). Long-run corporate tax avoidance.The Accounting

Review.

Prebble R, Prebble J. (2010). Does the Use of General Anti-Avoidance Rules to Combat Tax

Avoidance Breach Principles of the Rule of Law?.Saint Louis University Law Journal.

Moran Harari, Markus Meinzer and Richard Murphy (October 2012) "Financial Secrecy, Banks

and the Big 4 Firms of Accountants"Tax Justice Network

"Transfer Pricing".Tax Justice Network. Taxjustice Network. Retrieved 2012-08-09.

Sharife, Khadija (2011-06-18)."Transparency hides Zambias lost billions".Al-Jazeera.Retrieved

2011-07-26.

Kristina Froberg and Attiya Waris (2011)."Introduction".Bringing the billions back: How Africa

and Europe can end illicit capital flight. Stockholm: Forum Syd Forlag.
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