Over the past years, the continuous growth of gross domestic product led to the increment in the percentage of Total Revenue and tax receipts in Bangladesh. While Income taxes, Customs Duties, Supplementary Duty & VAT make the building structure of Taxation in Bangladesh, the recent optimistic disposition in financial revenue led to a higher tax-to-GDP ratio, in terms of the ratio of GDP of domestic-based taxes compared to international trade-based taxes. This augmentation is also ascribable to the fact that various reforms were taken on the domestic tax front. Despite this upward curve, the system continues to suffer due to its low level of Revenue Mobilization, high tax incidence, and the excessive rate of tax evasion. In Bangladesh, income tax is being administered under the tax legislation named “THE INCOME TAX ORDINANCE, 1984 (XXXVI OF 1984) and INCOME TAX RULES, 1984.” This article intends to reflect the current shape of the Taxation laws of Bangladesh and its surrounding procedures.

Since the inception of income tax law in 1860 various reforms have taken place over the years to improve and modernize the existing Income Tax schemes of Bangladesh. In terms of direct taxes, income tax is widely regarded as the principal source of revenue. Although The National Board of Revenue (NBR) is the central authority for tax administration in Bangladesh, Section 3 of the Ordinance broadly demonstrates other relevant authorities as well. Section 20 of the Ordinance categorizes the heads of income into 7 sections, which include Salaries, Interest on securities, income from house property, agricultural income, etc. The tax rate is determined in ordinance to the recent enactment of Finance rules and regulations of the Finance act 2015 and following annual enactments. For individuals other than female taxpayers, senior taxpayers of 65 years and above, retarded taxpayers, and war-wounded freedom fighters the tax payment ranges around 10-30% based on the annual income from TK 2,50,000. While, for companies, the scheme varies from 25% to 45%. Section 124 of the ordinance describes in detail the Consequences of Non-Submission of Return and Return of withholding tax, where the primary imposition of penalty makes 10% of tax on last evaluated income,  which is subject to a minimum amount of BDT 1000.

Income from house property is also a substantial head of income amongst the seven mentioned heads in Section 20 of the ITO, 1984. As per sections 24 & 25 of the ITO, the yearly value of the property, whether that’s any land or building pertinent thereto, of which the assessee is the owner, is to be charged under this head of income after claiming deduction under section 25. A broad-based capital gains and property tax is needed because in the absence of appropriate rates of land/property tax and capital gains from these, investment incentives can easily be distorted in favor of land holdings and real estate and away from taxed assets and activities. If the execution of Tax law wasn’t implemented in Land law, there would be an excess demand for land and real estate that would escalate the existing excessive market price in this densely populated country. Tax in Bangladesh

In regards to corporate tax, the law imposes income tax at 25 percent on listed entities and 35 percent for non-listed entities. A recent update in corporate tax law saw a reduction of the corporate income tax rate for companies in the readymade garments sector to 15 percent, a 5% drop from the previously enacted 20%. On the other hand, the tobacco sector saw an additional 2.5% surcharge on the income of companies. In Bangladesh corporate tax rates are mainly generalized into three general sectors, Financial Institutions are one of them, which includes Bank and Insurance companies. Based on their types of incomes, whether that’s Capital gain rising or Dividend income, the tax rates vary from 10% to 42.5%. In relation to exemption, Accelerated depreciation on the cost of machinery is admissible for new industrial undertakings in the first three years of commercial production at 50 percent, 30 percent, and 20 percent respectively. Also, Incomes derived from any Small, and Medium Enterprise (SME) engaged in the production of any goods, and having an annual turnover of not more than Tk. 2.4 million is exempted.

TAX in Bangladesh:

1. Income Tax: The taxation on individuals and businesses based on their income.
2. Value Added Tax (VAT): A consumption tax levied on the value added to goods and services at each stage of production or distribution.
3. Corporate Tax: The tax levied on the profits of companies and corporations operating in Bangladesh.
4. Customs Duties: Taxes imposed on goods imported or exported from Bangladesh.
5. Capital Gains Tax: The tax on the profit made from selling assets such as stocks or real estate.
6. Property Tax: A tax levied on property owners, including land and real estate.
7. Tax Deduction at Source (TDS): The withholding tax collected by the payer on behalf of the payee.
8. Tax Filing: The process of submitting tax returns to the tax authorities.
9. Tax Exemptions: Special conditions or categories that may be exempt from certain taxes.
10. Tax Evasion: Illegally avoiding paying taxes.
11. Tax Rebates: A partial refund of taxes already paid.
12. Double Taxation: The situation where the same income is taxed in more than one country.
13. NBR (National Board of Revenue): The central authority for tax administration in Bangladesh.
14. Tax Compliance: Adhering to the tax laws and regulations of Bangladesh.
15. Tax Planning: Strategically organizing financial affairs to minimize tax liability.

Key points on TAX in Bangladesh:

1. Progressive Tax System: Bangladesh employs a progressive tax system, which means that the tax rate increases as income rises.
2. VAT on Goods and Services: The Value Added Tax (VAT) is a significant source of revenue in Bangladesh and is levied on most goods and services.
3. Corporate Tax Rates: Corporate tax rates vary based on the type of business, but they are generally competitive in the region to attract foreign investment.
4. Tax Filing Deadline: Individuals and businesses have specific deadlines for filing their tax returns.
5. Penalties for Non-Compliance: Failure to comply with tax laws can result in penalties, fines, or legal action.
6. Customs Duties: The Bangladesh Customs Department oversees the collection of customs duties on imported and exported goods.
7. Double Taxation Agreements: Bangladesh has double taxation agreements with various countries to prevent double taxation for individuals and businesses operating internationally.
8. Tax Incentives: The government offers certain tax incentives to encourage investment in specific sectors, such as export-oriented industries.
9. Tax Identification Number (TIN): Individuals and businesses are required to obtain a Tax Identification Number (TIN) for tax purposes.
10. Taxpayer Services: The NBR provides various services and resources to assist taxpayers in understanding and complying with tax regulations.

While the first comprehensive version of the value-added tax was promulgated on 31 May 1991, it was in vogue in Bangladesh for 21 years. During this period, distortions like cascading effect, tariff value, and truncated value base Advance Trade VAT (ATV) at the import stage, eventually led the NBR to adopt a modernization plan in 2011. As per Finance Minister AHM Mustafa Kamal The new Value Added Tax (VAT) and Supplementary Duty (SD) Act 2012 as originally proposed by the International Monetary Fund (IMF) and World Bank is likely to be implemented in July 2019. The new VAT law provides with uniform VAT rate of 15% with the slogan 1 country 1 rate. This stipulation will cause the existing package VAT and truncated system of VAT (short VAT) to cease operation. The act also imposes VAT on second-hand sales, the sale of real estate flat businesses, and land as well at the rate of 7.5%. Presently capital assets are out of boundary in practice. VAT exemption has been lifted from some other trades such as travel agents, immigration advisory services, and meditation services; fabrics woven by power loom; and classified advertisements except condolence messages.

In concern to customs duties of Bangladesh, the entire law and machinery for the collection was consolidated in 1878, when the Sea Customs Act was enacted on the pattern of the British customs law. The Customs Act 1969 was enacted to consolidate and amend the law relating to the levy and collection of customs duties and provide for allied matters. After the country gained independence NBR was created in place of the abolished CBR, and with President Order no 48 of 1972 the Customs Act was made effective in Bangladesh. The country has abolished excise duties on all locally produced goods and services, with certain exceptions.  For example, services rendered by banks or financial institutions are subject to a tax on each savings, current, loan, or other account with balances above defined levels, and certain taxes apply to airline tickets.