Tax of Bangladesh
Incidence of income taxation in Bangladesh
Tapan K Sarker1 ABSTRACT: This article reviews the incidence of income taxation in Bangladesh tax system. The main purpose of the study is to determine how the burden of personal and corporation income taxes is allocated among taxpayers of different income groups. In case of personal income taxes it shows that only 13 percent taxpayers paying around 73 percent of tax revenue collected through personal income taxes and interestingly about 53 percent taxpayers pay only 0.08 percent taxes. In case of corporation income taxes the study shows similar results. For privately owned unlisted companies only 25 percent of them bears about 84 percent taxes earned through this sector and about 13 percent corporations pay nothing to the exchequer in the form of income taxes. Among the listed companies only 1.15 percent of them pay about 53.28 percent taxes and top 40 percent of them pay the entire taxes collected from this sector. The reasons identified behind such eccentric burden of taxes are, unlimited tax exemptions and tax holidays, poor tax base, inequality of taxing urban and rural sectors, special privileges to the public sectors, repeated tax amnesty etc. This study gives some recommendations, which could act as remedies for a better income tax system in Bangladesh and would relevant to other developing countries as well. Key Words: Tax Incidence, tax progressivity, tax base, tax exemptions, tax holiday, tax amnesty etc. 1. INTRODUCTION 1.1 Aim and Scope of the Study The heavy reliance on indirect taxation has been treated as one of the main obstacles in attaining economic progress in developing countries. The problem arises mainly due to the fact that only a few taxpayers share the burden of taxes. Bangladesh is no exception which is also trying to reform its tax structure for long time through structural adjustment and growing demands have been placed on it to suggest towards a desirable tax system. A huge segment of the
Tapan K Sarker1 ABSTRACT: This article reviews the incidence of income taxation in Bangladesh tax system. The main purpose of the study is to determine how the burden of personal and corporation income taxes is allocated among taxpayers of different income groups. In case of personal income taxes it shows that only 13 percent taxpayers paying around 73 percent of tax revenue collected through personal income taxes and interestingly about 53 percent taxpayers pay only 0.08 percent taxes. In case of corporation income taxes the study shows similar results. For privately owned unlisted companies only 25 percent of them bears about 84 percent taxes earned through this sector and about 13 percent corporations pay nothing to the exchequer in the form of income taxes. Among the listed companies only 1.15 percent of them pay about 53.28 percent taxes and top 40 percent of them pay the entire taxes collected from this sector. The reasons identified behind such eccentric burden of taxes are, unlimited tax exemptions and tax holidays, poor tax base, inequality of taxing urban and rural sectors, special privileges to the public sectors, repeated tax amnesty etc. This study gives some recommendations, which could act as remedies for a better income tax system in Bangladesh and would relevant to other developing countries as well. Key Words: Tax Incidence, tax progressivity, tax base, tax exemptions, tax holiday, tax amnesty etc. 1. INTRODUCTION 1.1 Aim and Scope of the Study The heavy reliance on indirect taxation has been treated as one of the main obstacles in attaining economic progress in developing countries. The problem arises mainly due to the fact that only a few taxpayers share the burden of taxes. Bangladesh is no exception which is also trying to reform its tax structure for long time through structural adjustment and growing demands have been placed on it to suggest towards a desirable tax system. A huge segment of the
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