Complexities in The Income Tax Laws: A Quest For A Simpler Taxation System

Report Report
on on
Complexities in the Income Tax Laws: Complexities in the Income Tax Laws:
A Quest for a Simpler Taxation System A Quest for a Simpler Taxation System
By
Swapan Kumar Bala Swapan Kumar Bala FCA FCA
Associate Professor Associate Professor
Department of Accounting & Information Systems Department of Accounting & Information Systems
University of Dhaka University of Dhaka
International Business Forum of Ban!la"esh #IBFB$
%ecem&er' ())*
IBFB
Complexities in the Income Tax Laws: A Quest for a Simpler Taxation System
Ta&le of Contents Ta&le of Contents
IBFB.......................................................................................................................................................1
Acknowledgement...............................................................................................................
List of A!!re"iation............................................................................................................#
$xecuti"e Summary............................................................................................................%
&. Introduction ...................................................................................................................'
(. )!*ecti"es of the Study...................................................................................................+
. ,ethodology ...................................................................................................................+
#. Income Tax Laws in -angladesh...................................................................................+
%. Importance of Corporate Income Taxpayers.................................................................
'. /imensions and $xtent of Complexities in the Income Tax Laws.............................&&
'.& Length of Income Tax Code in -angladesh: 0ow lengthy1....................................&&
'.( Certainty 2rinciple under the Income Tax Laws: 0ow far certain1........................&(
+. The Complexities in the Tax Laws 3 4hy and how costly1........................................((
.. 0ow to $liminate the Complexities .............................................................................(#
..& Concerns....................................................................................................................(#
..( 5ecommendations for 2ossi!le 5emedies................................................................(#
6. Concluding 5emarks....................................................................................................(+
5eferences.........................................................................................................................(.
International Business Forum of Ban!la"esh
2
Ac+nowle"!ement Ac+nowle"!ement
he ta!"#DP ratio in Bang$a%esh is very $o&. It crosses ' percent on$y in 2(()"(* +'.2
percent,. In the current -u%get of 2(('"1(. it has -een e!pecte% to -e './ percent. 0ut of
the many reasons. the ta! cu$ture might -e the one reason. his cu$ture is a pro%uct of
%ifficu$ties face% -y a ta!payer for the sheer technica$ities &hi$e +s,he starts to fi$$ up the
return. If +s,he goes to the ta! office %irect$y. the treatment receive% is rare$y
praise&orthy. aking he$p of the ta! practitioners is not on$y cost$y -ut a$so might $ea% to
further hass$e %ue to the unho$y a$$iance -et&een the ta! a%ministration an% the ta!
$a&yers1practitioners.
Since its inception in Septem-er 2((2. IBFB has &orke% on some of the very important
areas in -usiness an% po$icy a%vocacy. IBFB is a p$atform of professiona$s engage% in
tra%e. commerce an% in%ustry. IBFB is a p$atform for practicing professiona$s engage% in
various tra%es. &ith an aim to %e$iver to the nation an effective voice for an ena-$ing
-usiness atmosphere. &here -usiness an% the economy can gro& an% a$so %eve$op on a
soun% -asis. 3e at IBFB -e$ieve that an ena-$ing atmosphere. free from conf$ict an%
-ase% on Socia$ 4ustice. is the key to economic integration. For this reason. &e have
un%ertaken this stu%y to $et the pu-$ic kno& &hat -usinesses fee$ a-out the current fisca$
environment in terms of its comp$e!ities. an% &e a$so hope that the re$evant authorities
&i$$ a$so take note of the inputs that &e have provi%e% an% act accor%ing$y so as to he$p
faci$itate -usiness"frien%$y ta! po$icy making -y the #overnment.
3e &ou$% $ike to offer our sincerest thanks an% gratitu%e to our partners. the Unite%
States Agency for Internationa$ Deve$opment"Promoting #overnance. Accounta-i$ity.
ransparency an% Integrity +USAID"P50#AI, for their continue% support an%
consu$tancy in he$ping us to carry out this stu%y. 3e a$so thank the 6igh 0fficia$s of the
a! Department. a$ong &ith the -usiness peop$e. for taking the time out from their -usy
sche%u$es an% provi%ing us &ith their va$ua-$e inputs. It is hope% that the fin%ings &i$$
a$so create opportunities for further research that may -enefit -usinesses an% a%%ress
many of their pro-$ems.
7ahmu%u$ Is$am 8ho&%hury
Presi%ent. IBFB
/
List of A&&re,iation List of A&&re,iation
ADB Asian Deve$opment Bank
AI A%vance Income a!
A9 Assessment 9ear
B5A Bang$a%esh 5oa% ransport Authority
8&A# 8omptro$$er & Au%itor #enera$
8PI 8orruption Performance In%e! +of the ransparency Internationa$,
D8 Deputy 8ommissioner of a!es
:P; :!port Processing ;one
FA Finance Act
F0 Finance 0r%inance
F9 Financia$ 9ear
#DP #ross %omestic pro%uct
#0B #overnment of Bang$a%esh
6D8 +he 7ah-u- u$ 6a<, 6uman Deve$opment 8entre
IBFB Internationa$ Business Forum of Bang$a%esh
I:F In%e! of :conomic Free%om
I5S Interna$ 5evenue Service +USA,
I Income a! +in Form,
I0 Income a! 0r%inance
=18 =etter of cre%it
>B5 >ationa$ Boar% of 5evenue
PA9: Pay"as"you"earn
SAA58 South Asian Association for 5egiona$ 8ooperation
S50 Statutory 5u$es an% 0r%er
DS a! De%ucte% at Source
I> a!payer?s I%entification >um-er
5 reasury 5u$es +in Form,
u1r un%er ru$e
u1s un%er section
@
-xecuti,e Summary -xecuti,e Summary
he comp$e!ity is an integra$ part of the overa$$ ta!ation system in genera$. -ut regar%ing
income ta! the %egree of comp$e!ity is of such sca$e an% scope that every-o%y &ants to
get it un%erstoo% in a simp$er &ay. his report e!amines the &ay ho& our income
ta!ation has -een affecte% -y various intricacies an% then tries to sho& some in%ications
ho& one can perceive it in a -etter &ay.
he %imensions an% e!tent of comp$e!ities are the pro%uct of a-sence of the Acertainty?
princip$e in terms of the time of payment. the manner of payment. an% the amount of ta!
to -e pai%. he other aspect of comp$e!ities is the sheer $ength of the a! 8o%e.
Fi$$ing up the 5eturn Form is comp$icate% for a ta!payer. for severa$ factors such asB so
many hea%s of incomeC %ifficu$ties in ac<uiring prior kno&$e%geC re<uirement of
kno&$e%ge of the ta! $a&s an% practica$ %emonstrative ski$$C time$y investment in
prescri-e% areas after fu$fi$$ing con%itions setC %ifficu$ties in co$$ecting re<uisite
%ocuments to -e attache% &ith returnC a-sence of fami$y return an% conse<uent emotiona$
accounting for marrie% coup$eC etc.
0ther areas of comp$ications inc$u%eB conte!tua$ $ega$ %efinitions &ithout any reference
to the conte!tC %iffering treatment of same thing for $ack of c$arificationC presence of
unusua$ provisionsC a-sence of provisionsC provisions on$y through S50C presence of
unconstitutiona$ provisionsC am-iguous provisionsC over$apping provisions for %e%uctions
from DIncome from -usiness or professionEC %e%uctions from DIncome from -usiness or
professionE -oth generous an% restrictive against norma$ accounting practiceC an%
presence of mu$tip$e types of %isperse con%itions.
he comp$e!ities in the ta! $a&s are cost"incurring. 6uge resource costs in terms of
a%ministrative costs +ta! co$$ection costs, an% comp$iance costs +ta!payers? costs, in
terms of out"of"pocket costs an% non"monetary costs.
6o&ever. many of these comp$e!ities are -eneficia$ for those &ho can e!p$oit them. he
$ive$ihoo% of the ta! $a&yers an% the ta! practitioners is %epen%ent on this comp$ication
of the ta! co%e.
he possi-$e po$icy recommen%ations to e$iminate or re%uce the comp$e!ities of the
income ta! system inc$u%e inter alia +a, avai$a-i$ity of up%ate% ta! co%e &ith ear$ier
amen%ments as reference in the >B5?s &e-site +&&&.n-r"-%.org,C +-, e!ten%ing the
scope of &ithho$%ing ta!es for rea$ ta!payers. there might -e one secon% option. &hich is
the payment -efore su-mission of returnC +c, a$$o&ing f$e!i-$e cash or -ank %eposit in
any sche%u$e% -ank a$ong &ith intro%uction of on"$ine %eposit systemC +%, a he$p %esk in
ta! office shou$% -e a-$e to fi$$ up the return <uick$y on having a $ist of prescri-e% set of
%ocuments to -e su-mitte% -y a ta!payerC +e, a simp$ifie% one"page return &ith fe& hea%s
of income shou$% -e prescri-e% for sa$arie% an% $o&er"income se$f"emp$oye% ta!payersC
+f, centra$iFation of ta! offices &ith on$ine -ooth at %ifferent convenient $ocationsC +g,
fina$ sett$ement of ta! on the -asis of &ithho$%ing ta! shou$% -e a-o$ishe% e!cept for
cases of DincomeE on$yC etc.
G
./ ./ Intro"uction Intro"uction
$-ert :instein +1*)'"1'GG, is repute% to have sai% that the har%est things in the &or$%
to un%erstan% &as the income ta!. a$though he never &rote this an% it isn?t entire$y
c$ear that he ever uttere% it. either. It is &i%e$y cite%.
1
though. an% even if it is
apocrypha$ it i$$ustrates the popu$ar vie& that the income ta! system can %efeat even the
-rightest +a$though not necessari$y the most organiFe%, among us +S$emro% an% Baki4a.
2(((B !i. 2'),.
A
A
But since ta! is so pervasive$y re$ate% to our $ife. the ta!payers shou$% not -e a victim of
comp$e!ity of the ta! $a&s. It is e!pecte% that the remova$ of comp$e!ities &i$$ resu$t in a
fairer ta! statute. in greater ease of ta! a%ministration an% in a re%uction of the costs an%
irritation of the ta!payers that often accompany the proper computation of a ta!payer?s
ta! $ia-i$ity +:ichho$F. 1'/'B 12((,. his report is an attempt to i%entify the ma4or areas
of comp$e!ities in the income ta! $a&s in Bang$a%esh an% to sho& some specific
%irections to&ar%s the simp$ification thereof.
In 2((*"('. the >ationa$ Boar% of 5evenue +>B5, rea$iFe% aka 1/*.G*(.' mi$$ion against the
revise% target of aka 1/G./*(.( mi$$ion +aroun% 2.@ percent higher,. In 2(('"1(. up to
Septem-er 2(('. the >B5 has co$$ecte% aka 2)G2).2 mi$$ion against the target of aka
2@2@(.( +1/.G2 higher than target. an% 2G.'2 percent higher than income ta! co$$ecte% up
to Septem-er 2((* in 2((*"('. &hich &as aka 21.*22.( mi$$ion, Hsee &&&.n-r"-%.orgI.
his co$$ection might -e higher if the ho$%ers of I> +a!payer?s I%entification >um-er,
proper$y su-mitte% the income ta! returns. he -usiness communities +the corporate
entities an% their %irectors, an% the sa$aries assessees +&here a$so a significant portion of
them emp$oye% -y the -usiness communities, are not usua$$y any %efau$ter in su-mitting
the income ta! returns. But others are the ma4or %efau$ter in fi$ing the return. In A9
2(('"1(. tota$ num-er of income ta! returns su-mitte% &as )G).'2@ in num-er -y
>ovem-er 12. 2(('. the e!ten%e% fina$ %ate of su-mitting the return. his num-er is
1G.G1 percent higher than $ast year +2G2.1'/ returns su-mitte% $ast year,. But out of
aroun% 22 $akh ta!payer?s i%entification num-er +I>, ho$%ers across the country +&hich
is on$y 1.G percent of tota$ popu$ation,. on$y /@.G percent have su-mitte% their return an%
ma4ority +2G.G percent, are stop"fi$ers. that is. they have %iscontinue% the fi$ing +The
Daily Star. 12.11.2((',. 0n$y vo$untary comp$iance can enhance the motivation to
su-mit the return. he remova$ of comp$e!ities in the income ta! $a&s can -e one of the
important issues to re%uce the %epen%ency of the ta!payers on other ta! professiona$s
+&ho are sometimes e!p$oiting the ta!payers %ue to their $ack of un%erstan%ing of the
$ega$ provisions, an% conse<uent$y contri-ute to improve the ta! cu$ture in se$f"fi$ing of
the ta! return in time an% vo$untary ta! payment a$so.
1
his ta! <uotation of :instein is avai$a-$e at httpB11<uotations.a-out.com1o%1moretypes1a1ta!<uotes1.htmC
accesse% 2@.11.2(('.
2
(/ (/ 0&1ecti,es of the Stu"y 0&1ecti,es of the Stu"y
he purpose of the present stu%y is to enumerate the &i%th an% -rea%th of the key areas
of comp$e!ities prevai$ing in the income ta! $a&s an% to fin% out some po$icy
recommen%ations &ith a vie& to stream$ining those comp$e!ities. he specific o-4ectives
of the stu%y are as fo$$o&sB
2.1 o i%entify the ma4or areas of comp$e!ities in the income ta! $a&s in Bang$a%eshC
2.2 o enumerate the possi-$e costs of the comp$e!ities from the ta!payer perspectiveC
2./ o provi%e po$icy recommen%ations for e$iminating the comp$e!ities i%entifie%.
2/ 2/ etho"olo!y etho"olo!y
he stu%y is primari$y -ase% on secon%ary %ata an% archiva$ resources. he initia$ fin%ing
&as presente% in a stakeho$%ers? meeting an% the fee%-ack an% recommen%ations -y the
participants from their o&n practica$ e!perience have -een incorporate%. Intervie&s have
-een un%ertaken on a $imite% num-er of persons regar%ing their e!perience an%
perceptions on comp$e!ities in income ta! $a&s. %ifferent %imensions of costs an% hass$es
arising out of these comp$e!ities. an% the &ays an% means to simp$ify the $a&s. hese
persons inc$u%e ta!men. ta!payers. an% ta! practitioners.
3/ 3/ Income Tax Laws in Ban!la"esh Income Tax Laws in Ban!la"esh
Income"ta! in the In%ian su-continent ha% its origin in the year 1*2( &hen 7r. James
3i$son. the first Finance 7em-er in In%ia. intro%uce% the Income"ta! Bi$$ entit$e% DAn
Act for imposing Duties on Profits arising from Property. Professions. ra%es an%
0fficesE. he Bi$$ sought to raise a%%itiona$ finances in or%er to rep$enish the revenue
%eficit cause% -y the Sepoy 7utiny of 1*G). 6o&ever. the ta! $evie% &as eventua$$y
%iscontinue% in 1*2G. In 1*2). the ta! &as reimpose% in an improvement form in the
name of a certificate ta!. In 1*2'. the certificate ta! &as converte% into regu$ar income"
ta! on a &i%er coverage of assessees. In 1*)/")@. &hen there &as a comforta-$e
-u%getary surp$us. income"ta! &as a$together a-o$ishe%. Five years $ater. the ta! &as
again revive% in the form of $icence ta!es an% continue% ti$$ the year 1**G"*2. In 1**2.
the #overnment of In%ia enacte% the In%ian Income"ta! Act. 1**2. In 1'12. compe$$e% -y
the necessity to rep$enish the finances %amage% -y the 3ar of 1'1@"1*. the #overnment
ma%e some enhancement in the rates of income"ta! in the gra%uate% sca$e. In 1'1*. the
Income"ta! Act 1**2 &as su-stantia$$y amen%e% to conso$i%ate the $a& re$ating to
income"ta!. In 1'22. -ase% on the recommen%ations of the A$$"In%ia Income"ta!
8ommittee appointe% in 1'21. the Income"ta! Act. 1'22 +Act KI of 1'22, &as passe%. A
Boar% of In$an% 5evenue &as create% un%er the Act. &hich &as to -e the highest
authority for income"ta!. he concept of Aprevious year? as the -asis of assessment of
income. profits an% gains. the ta!payer?s choice of the system of accounting. tota$
income. an% a%4ustment of $osses containe% in the Act. It &as the annua$ Finance Act
&hich &as to set out the rates of ta!es an% set the machinery into motion. he Act of
)
1'22 &as amen%e% in 1'2@ to su-stitute the 8entra$ Boar% of 5evenue for the Boar% of
In$an% 5evenue. It &as further amen%e% an% su-stantia$$y so in 1'/' to provi%e inter alia
for the Income"ta! Appe$$ate ri-una$ +:8. 1')'B )G")),.
In pursuance of the proc$amation of 2@th 7arch 1'*2 an% in e!ercise of a$$ po&ers
ena-$ing him in this -eha$f. the Presi%ent is p$ease% to make an% promu$gate the Income
a! 0r%inance. 1'*@ +KKKLI of 1'*@, &hich came into force on the 1st Ju$y. 1'*@. to
conso$i%ate an% amen% the $a& re$ating to income ta!. he Income"ta! Act. 1'22 &as
repea$e% an% rep$ace%. he Income"ta! Act. 1'22 he$% the fie$% of $evy. co$$ection an%
a%ministration of the income ta! up to 1'21 in In%ia &hen the Income"ta! Act. 1'21
came into force there. up to 1')' in Pakistan. &hen the Income"ta! 0r%inance. 1')' &as
promu$gate% an% up to 1'*@ in Bang$a%esh. &hen &as rep$ace% -y the Income a!
0r%inance. 1'*@ HIqbal Hasan Mahmood vs. Bangladesh 2( D=5 +2((*, **I
(
. hus. the
$ega$ frame&ork of Income a! in Bang$a%esh can -e sho&n as fo$$o&sB
22 7arch 1')1 to /( June 1'*@ B The Income-tax Act 1!!C an%
(1 Ju$y 1'*@ an% on&ar%s B The Income Tax "rdinance 1#$.
6o&ever. the income ta! $a&s %o not consist of on$y the main statute. rather these
encompass a num-er of statutory e$ements as fo$$o&sB
M Income a! 0r%inance 1'*@ N the %arent stat&teC
M Income a! 5u$es 1'*@C
M S.5.0. +Statutory 5u$es an% 0r%er,1#aFette >otificationC
M Income a! 8ircu$arC
M #enera$ or Specia$ 0r%erC
M :!p$anation10ffice 7emoran%umC
M Ler%icts of Appe$$ate ri-una$ for e<uiva$ent factC
M Ler%icts of the 6igh 8ourt Division on <uestion of $a&C an%
M Ler%icts of the Appe$$ate Division on 4u%gment of the 6igh 8ourt Division.
4/ 4/ Importance of Corporate Income Taxpayers Importance of Corporate Income Taxpayers
Bang$a%esh is not a-$e to generate enough revenue from ta!es for financing the pu-$ic
e!pen%iture. he ta!"#DP ratio is very $o& in Bang$a%esh. -ut s$o&$y improving. Both
ta! an% non"ta! revenues as a percent of #DP have -een increasing over the years. It
crosses ' percent +i.e.. '.1* percent, on$y in 2(()"(* +>B5. 2(('a,. 6o&ever. in 2((*"
('. the ratio fa$$s a $itt$e to '.(/ in the revise% target. -ut in the current year?s -u%get
target +2(('"1(,. the ta!"#DP ratio &ou$% increase to './1 percent. 3ith a s$ight increase
in non"ta!"#DP ratio. the overa$$ revenue"#DP ratio is a$so e!pecte% to gro& to 11.G)
percent in 2(('"1( from its $ast year?s position at 11.2G percent +see a-$e 1,. But the
situation is the &orst in the SAA58 region. Both the ta!"#DP ratios an% revenue"#DP
ratios are the $o&est in Bang$a%esh among the seven SAA58 countries +see a-$e 2,.
2
Iqbal Hasan Mahmood alias Iqbal Hasan Mahmood T&'& vs. (overnment o) Bangladesh and others
+Ju%gment on (G.12.2((),. The Dha'a *a+ ,e%orts +D=5,. Lo$. 2(. Fe-ruary 2((*. the 6igh 8ourt Division Part.
pp. **"1@(.
*
Ta&le .: Tax an" 5on6Tax Re,enue as a 7ercenta!e of 8%7
Financial 9ear #F9$
As a 7ercenta!e of 8%7
Tax Re,enue 5on6Tax Re,enue Total Re,enue
1')2")/ to 1')'"*( G.22 (.*' 2.G1
1'*("*1 to 1'*'"'( G./' 1.(G 2.@@
1''("'1 to 1'''"2((( ).11 1.)( *.*1
1''1"'2 to 1'''"2((( ).1' 1.)/ *.'2
2((("(1 to 2(()"(* *.@2 1.'* 1(.@@
2((*"(' +5B, '.(/ 2.22 11.2G
2(('"1( +B, './1 2.22 11.G)
5ote: A5B? means A5evise% Bu%get? +5B, an% AB? means ABu%get? +origina$,.
Sources: 8omputation -ase% on the Ann&al ,e%ort !--.-!--# of the >B5 an% Ann&al B&dget !---1-.
Ta&le (: Tax68%7 Ratios an" Re,enue68%7 Ratios in SAARC Countries
/0ercentage o) (D01
Country
Tax68%7 Ratio Re,enue68%7 Ratio
2((*
a
ADB?s Asian Develo%ment "&tloo' !--
2((' I:F 2((@ 2((G 2((2 2(() 2((*
Bang$a%esh *.G 1(.1 1(.G 1(.) 1(.2 11.2
Bhutan 1(.) /2.( /(.G /G.( /G.( /).*
In%ia 1).) 1'.) 1'.* 21.1 22.2 N
7a$%ives 2(.G /@.G @*.1 G2.G G*.2 G1./
>epa$ 1(.' 1/.@ 1@.1 12.' 1@.1 1G.2
Pakistan 1(.2 1@.1 1/.* 1@.1 1@.' 1@./
Sri =anka 1G./ 1@.' 1G.G 12./ 1G.* 1G.2
South Asia A,era!e
-
.2/4 ()/3 (./: (2/( (3/2 (3/2
a
7ain$y 2((* %ata. -ase% primari$y on Tax 0&blications -y Big @ Accounting Firms in 2((*.
-
Simp$e average
Sources: +1, Data of !-- Index o) 2conomic 3reedom +I:F, -y the 6eritage Foun%ation +&&&.heritage.org, are
avai$a-$e at httpB11en.&ikipe%ia.org1&iki1=istOofOcountriesO-yOta!OrevenueOasOpercentageOofO#DP.
accesse% 11.().2(('. +2, 5evenue"#DP ratio from 2((@ to 2((* from Asian Deve$opment Bank +ADB,
+2((',. Asian Develo%ment "&tloo' !--4 ,ebalancing Asia5s (ro+th. avai$a-$e at
httpB11&&&.a%-.org1Documents1Books1AD012(('1. accesse% 12.).2(('.
After a continuing stigma -eing the $ast ranke% country over 2((1 to 2((G in the
ransparency Internationa$?s corruption performance in%e! +8PI,. the ranking of
Bang$a%esh has -een improve% significant$y in recent years +see a-$e /,. Due to
stream$ining over the years in many sectors inc$u%ing the a! A%ministration. this
situation of %ec$ining corruption has -een achieve% an% the vo$untary ta! comp$iance has
a$so -een increase%. If &e $ook to&ar%s the structure of income ta!. the gro&ing share of
income ta! testifies that the overa$$ ta! system in Bang$a%esh is a%vancing to&ar%s
progressivity &ith $o&ering %epen%ency on in%irect ta!es. &hich are main$y -orne -y the
common peop$e. Income ta! co$$ection &as average 1(.2 percent of tota$ ta!es %uring
1')2")/ to 1')G")2. an% no& in 2(('"1(. this is targete% to aroun% 22 percent of tota$
ta!es. But the rea$ity is that income ta! is main$y pai% -y corporate ta!payers. 0ut of tota$
'
income ta!. the share of corporate income ta! &as the highest +)2.1 percent, %uring 1'*1"
*2 to 1'*G"*2. an% in 2(()"(*. it &as aroun% G'.1 percent +see a-$e @,.
Ta&le 2: C7I Ran+in! of SAARC Countries &y Transparency International
Country ()). ())( ())2 ())3 ())4 ()); ())< ())
:
())*
>o. of countries covere% '1 1(2 1// 1@2 1G' 12/ 1)' 1*( 1*(
Bang$a%esh '1 1(2 1// 1@G
a
1G*
-
1G2 122 1@) 1/'
In%ia )/ )/ */ '1 '2 )( )2 *G *@
>epa$ >I
c
>I
c
>I
c
'@ 11) 121 1/1 121 1@/
Pakistan *( )) '2 1/2 1@2 1@2 1/* 1/@ 1/'
Sri =anka >I
c
G2 2) )( *1 *@ '@ '2 ')
Bhutan >I
c
>I
c
>I
c
>I
c
>I
c
/2 @2 @G @'
7a$%ives >I
c
>I
c
>I
c
>I
c
>I
c
>I
c
*@ 11G 1/(
a
a$ong &ith 6aiti. hence $ast rank
-
a$ong &ith 8ha%. hence $ast rank
c
not inc$u%e%
Source: httpB11&&&.transparency.org
Ta&le 3: Structure of Income Tax an" Income Tax Re,enue as = of Total Tax
Financial
9ear #F9$
As a = of Total Income Tax As a = of Total Tax
Company 0thers Total Company 0thers Total
F9)/"F9)2 )(.( /(.( .))/) ).1 /.1 1(.2
F9))"F9*1 )(.( /(.( .))/) '.( /.* 12.*
F9*2"F9*2 )2.1 2).' .))/) 1(.1 /.' 1@.1
F9*)"F9'1 )(.) 2'./ .))/) 1(.) @.@ 1G.1
F9'2"F9'2 2).* /2.2 .))/) 1(./ @.' 1G.1
F9')"F9(1 G).G @2.G .))/) *.) 2.@ 1G.2
F9(2"F9(2 GG.' @@.1 .))/) 1(.1 *.( 1*.2
2((2"()
2@.*
+G2.G(@.',
/G.2
+/(.)().G,
.))/)
+*).212.@$
1@.G ).' 22./
2(()"(*
2'.@22.)
+G'.1,
@*.(2/.'
+@(.',
.))/)
+11).@@2.2,
1@.( '.) 2/.2
2((*"(' +5B, "" "" +1/G./*(.(, "" "" 2@.@
2(('"1( +B, "" "" +12G.2((.(, "" "" 2G.'
5ote: Figures in parentheses from 2((2"() +F9(), to 2(('"1( +F91(, are in mi$$ion aka of income ta! amount.
Sources: 8omputation -ase% on the Ann&al ,e%ort !--.-!--# of the >B5 an% Ann&al B&dget
!---1-.
But the num-er of corporate ta!payers is very minimum in proportion to tota$ income
ta!payers +on$y 2.* percent corporate ta!payers in A9 2(()"(*. see a-$e G,. hus
aroun% 2( percent of tota$ income ta! is -eing pai% -y a-out / percent corporate entities.
Ta&le 4: Type of Income Taxpayers in ())<6):
Assessment
9ear #A9$
Type of Income Taxpayers
Corporate Assessee Salarie" Assessee 0ther Assessee Total Assessee
2(()"(* @1.22( 2''.)G1 1121.2'G 1G(2.)(2
1(
+P of tota$, 2.* 1'.' ))./ 1((.(
Sources: he Ann&al ,e%ort !--.-!--# of the >B5.
;/ ;/ %imensions an" -xtent of Complexities in the Income Tax Laws %imensions an" -xtent of Complexities in the Income Tax Laws
A%am Smith +1)2/"1)'(,. &ho is kno&n as the father of mo%ern economics for his
famous -ook tit$e% An Inq&iry into the 6at&re and 7a&ses o) the 8ealth o) 6ations
+1))2,. has state% his secon% ma!im on ta!ation +certainty, as fo$$o&sB Dhe ta! &hich
each in%ivi%ua$ is -oun% to pay ought to -e certain. an% not ar-itrary. he time of
payment. the manner of payment. the <uantity to -e pai%. ought a$$ to -e c$ear an% p$ain
to the contri-utor. an% to every other personE +see Smith. 1'))B 11(@,.
/
3hen a ta!
system $oses the certainty princip$e. it -ecomes comp$e!. Another aspect of comp$e!ities
is the sheer $ength of the a! 8o%e. Be$o& is a -rief enumeration of the %imensions an%
e!tent of these issues that create the comp$e!ities in the income ta!ation system in
Bang$a%esh.
'.& '.& *ength o) Income Tax 7ode in Bangladesh4 Ho+ lengthy9 *ength o) Income Tax 7ode in Bangladesh4 Ho+ lengthy9
In the origina$ version of the Income a! 0r%inance 1'*@. there &ere 22 chapters. 1*)
sections an% seven sche%u$es. hen comes the regu$ar an% irregu$ar changes over the
years. he regu$ar annua$ changes in the ta! $a&s are ma%e %uring annua$ -u%get p$ace%
an% passe% in June an% the other changes ma%e -y the >B5 un%er the authority of parent
statutes. In this regar%. the comment -y im 8estnick +2((), can -e mentione%B DIn the
&or$% of ta!. change is the on$y constantE +8estnick. 2(()B !i!,. As on Ju$y 1. 2(('. the
Income a! 0r%inance 1'*@ consists of 22 chapters. 2@/ sections an% * sche%u$es. From
Ju$y 1. 1''@ to June /(. 2((2. there &as another chapter +8hapter KLIIIA on DSett$ement
of casesE. having five sections from section 1G2A to section 1G2:,. his a! Sett$ement
office might -e again set up after scrapping the a! 0m-u%sman office. for &hich the
7inistry of Finance has taken a move recent$y to annu$ the a! 0m-u%sman office from
the ne!t fisca$ year 2(1("11 +The 3inancial 2x%ress. *.12.2((',.
@
hus. in terms of
num-er of sections. the Income a! 0r%inance is a-out one"thir% more vo$uminous from
its origina$ $ength.
he Income a! 5u$es 1'*@ ha% origina$$y 22 5u$es. an% no& on Ju$y 1. 2(('. it has ''
5u$es. hus. the Income a! 5u$es 1'*@ has -een increase% -y G( percent in terms of
num-er of ru$es. 0ut of the '' ru$es. one ru$e +5u$e 2* on D7o%es of recovery of ta!esE.
/
he other ma!ims areB )irst. e<uity +the su-4ects of every state ought to contri-ute to&ar%s the support of the
government. as near$y as possi-$e. in proportion to their respective a-i$ities,C third. convenience +every ta! ought to
-e $evie% at the time. or in the manner. in &hich it is most $ike$y to -e convenient for the contri-utor to pay it,C
)o&rth. economy +every ta! ought to -e so contrive% as -oth to take out an% to keep out of the pockets of the peop$e
as $itt$e as possi-$e over an% a-ove &hat it -rings into the pu-$ic treasury of the state +Smith. 1'))B 11(/"11(G,.
@
he Par$iament passe% the a! 0m-u%sman Act 2((G on Ju$y 1(. 2((G. he Presi%entia$ assent &as given to
the Act on Ju$y 12. 2((G an% it &as pu-$ishe% in the 0fficia$ #aFette as Act >o. 1' of 2((G on the same %ay. 0n Ju$y
'. 2((2. 7r. QhairuFFaman 8ho&%hury &as appointe% the first a! 0m-u%sman for four years &ith imme%iate
effect. 0n 0cto-er 1G. 2((2. the a! 0m-u%sman Act 2((G &as ma%e effective retrospective$y from ('"()"2((2
Hvide S50 >o. 2G2"Ain"2((2. %ate% 1G.1(.2((2I.
11
inserte% on 7ay 2(. 2((), contains materia$s of a-out G1 pages +see >B5. 2(('c. pages
1'1 to 2@1,.
Another fre<uent statutory %ocument is the Income a! S.5.0. +a$though it is acronym
for AStatutory 5u$es an% 0r%er?. -ut sometimes co$$o<uia$$y kno&n as S+i)t ,o&te to
"%&lence. &hen use% -y ru$ers for granting %iscretionary ta! favours to their cronies. see
6D8. 1'''B */,. Its use is fre<uent an% at the %iscretion of the >B5 an% for that reason.
the up%ate% vo$ume is %ifficu$t to o-tain. In the $atest vo$ume of Acomp$ie% S50s?. 7r.
=a$ Baha%ur A%hikary has pu-$ishe% a /G1"page %ocument containing a tota$ of 2*)
S50s prescri-e% from 7ay /(. 1')@ up to Ju$y 1. 2(('. 0f these S50s. G* S50s have
a$rea%y -een repea$e% an% 12 S50s have -een amen%e% su-se<uent$y. hus 22' S50s
can -e ca$$e% effective. -ut since this not an officia$ pu-$ication of the >B5. it is %ifficu$t
to say. ho& many S50s are current$y effective an% &e are not sure &hether there are any
further S50s prescri-e% after Ju$y 1. 2((' +see >B5. 2(('%,.
0ther aspects of regu$atory pu-$ications inc$u%e other vo$uminous $ength of regu$ations.
main$y to he$p the ta!payers an% to ease the ta! a%ministrationB +a, Income a! 8ircu$ars
+from 1'''"2((( to 2(('"2(1(. the vo$ume &as a 2'*"page materia$s,C an% +-,
:!p$anations an% 0r%ers issue%1given -y the >B5 +from Apri$ @. 2((( to Apri$ 12. 2(('.
the vo$ume &as a 2/1"page materia$s,.
hus. the Income a! =a&s in Bang$a%esh is un%ou-te%$y of sheer $ength. If &e consi%er
the fu$$ @"vo$ume $atest pu-$ications compi$e% -y 7r. =a$ Baha%ur A%hikary +see >B5.
2(('-C 2(('cC 2(('%C 2(('e,. &e fin% a vo$uminous printe% materia$ of 12@G pages
inc$u%ing some past reference materia$s of interest an% a$so some repea$e% materia$s.
'.( '.( Certainty 2rinciple under the Income Tax Laws: 0ow far certain1 Certainty 2rinciple under the Income Tax Laws: 0ow far certain1
he certainty princip$e suggeste% -y A%am Smith +1))2, for ta!ation in terms of the time
of payment. the manner of payment. an% the <uantity to -e pai%. has -een e!amine% here
to sho& ho& uncertain these issues are.
Time of Tax 7ayment: Certain>
For income tax%ayers. there are four types of timing for ta! payment as fo$$o&s an%
hence. it might -e affecte% -y uncertaintyB
Pay"as"you"earn +PA9:, N a! De%ucte% at Source +DS, Hsec. @*"2/IC
A%vance Income a! +AI,. if tota$ income e!cee%s k. / $akh through <uarter$y
insta$$ments on the 1Gth %ay of Septem-er. Decem-er. 7arch an% June Hsec. @*.
2@")/IC
Payment of ta! on the -asis of return on or -efore the %ate of fi$ing the return Hsec.
)@IC an%
Payment &ithin the stipu$ate%1e!ten%e% time if re<uire% to pay as per notice of
%eman% u1s 1/G.
12
For entities ded&cting tax at so&rces. there are a$so three types of timing for %epositing
the ta! &ithhe$% as fo$$o&s an% hence. it is a <uestion of appropriate %e%uction an% then
the comp$iance of %eposit accor%ing to $a&B
:mp$oyer &ith prior permission through <uarter$y insta$$ments on the 1Gth %ay of
Septem-er. Decem-er. 7arch an% June Hru$e 1/IC
Dou-$e"che<ue metho% for @ cases +supp$y of goo%s or e!ecution of contract u1s
G2. fees for professiona$ or technica$ services u1s G2A. house property for house
rent a-ove k. 2(.((( pm u1s G/A & u1r 1)B or commission or fees for
%istri-ution or marketing of manufacture% goo%s u1s G/:, Hru$e 1@+2,IC an%
3ithin / &eeks from the %ate of %e%uction Hru$e 1/I.
anner of Tax 7ayment: Certain>
In case of manner of ta! payment. there are a$so mu$tip$e options as fo$$o&s an% hence. it
is a matter of %ifficu$ty on the part of the ta!payer1ta!"%e%ucting entities ho& to pay the
%ue ta!B
8ash %eposit to reasury. if the payment %oes not e!cee% k. 1(.((( Hru$e 22BIC
Pay or%er or %eman% %raft or account payee che<ue of a sche%u$e% -ank issue% in
favour of the Deputy 8ommissioner of a!es +D8, of the concerne% ta!es circ$e
Hru$e 22BIC
Payment of ta! on the -asis of return on or -efore the %ate of fi$ing the return Hsec.
)@IC
Payment on receiving the notice of %eman% Hru$e 22BIC
Payment through recovery -y ta! authorities Hsec. 1/*"1@/C ru$es 2* an% 2'IC an%
Payment through a%4ustment of surp$us income ta! or other ta!es Hsec. 1G2I.
Quantity of Tax to &e 7ai": Certain>
Pro-a-$y this is the most uncertain part of the Income a! System. Due to comp$e! an%
numerous ta! e!emptions. ta! %e%uctions an% other ta! incentives su-4ect to
con%itiona$ities. it is %ifficu$t to proper$y ascertain the amount of ta! to -e pai%.
Fo$$o&ing are the factors of uncertainty in this regar%B
Factors of uncertainties: Relate" to Return
Accor%ing to 6erman 3ouk +1'1G",. Pu$itFer PriFe"&inning American nove$ist. DIncome
ta! returns are the most imaginative fiction -eing &ritten to%ay.E
G
o a former 7em-er of
the >B5. the current Income a! 5eturn is too comp$icate% to un%erstan% an% fi$$ up.
0ne senior officia$ from the 8&A# +8omptro$$er & Au%itor #enera$, 0ffice has
commen%e% that the Income a! 5eturn is over"-ur%ene% &ith information re<uirement.
2
he factors of comp$e!ities can -e mentione% as fo$$o&sB
G
his ta! <uotation is avai$a-$e at httpB11<uotations.a-out.com1o%1moretypes1a1ta!<uotes1.htmC accesse%
2@.11.2(('.
2
hese comments are ma%e in the IBFB?s stakeho$%ers? meeting he$% on 1*.11.2(('.
1/
ota$ +ta!a-$e, income is to -e c$assifie% into 1( hea%s +' %omestic hea%s an% 1
hea% for foreign income,. a$though ) statutory hea%s for computationa$ purpose
Hfor corporate ta!payersB 2 statutory hea%s. e!cept sa$aryIC
5eporting the ta! e!empte% income an% ta! free income HItem 1* on page 2IC
a! computation HItem 1/ on page 2I might -e the most comp$icate% things in
some casesC
a! cre%it on investment a$$o&ances HItem 1@ on page 2I might -e %ifficu$t to
o-tainC
Documents to o-tain for any sort of ta! -enefitsC
Source of income +even if it is i$$ega$, may not -e raise% if you pay ta! thereon.
-ut no i$$ega$ e!pense is a$$o&a-$eC
If -oth hus-an% an% &ife are ta!payers. then fi$$ing up the I"1(B an% the I"
1(BB might -e an issue of emotiona$ fami$y accounting &ith respect to %ivi%ing
the $ive$ihoo% e!pen%itures. the num-er of %epen%ent mem-ers. the property
un%er 4oint name. an% so onC an%
0ne information is a$so %ifferent in :ng$ish version an% Bang$a version in the I"
1(B HItem 1G.+-, in I"1(BB D>um-er of %epen%ent chi$%ren1mem-er of the
fami$yI.
Factors of uncertainties: 0thers
0ther factors have -een %iscusse% at the en% of this section un%er the tit$e D0ther Areas
of 8omp$ications.E
Be$o& is an overvie& of the e!tent of comp$e!ities in our income ta! $a&s.
Say. you are a ne& ta!payer. 9ou &ant to -e an ASS:SS:: +the very termino$ogy use%
to refer to an income ta!payer,. he initia$ con%ition is to o-tain a I> +a!payer?s
I%entification >um-er, un%er section 1*@B of the Income a! 0r%inance 1'*@. 9ou may
not -e an assessee. -ut &i$$ing to open a $etter of cre%it +=18, for the purpose of import or
to app$y for a -ank $oan of more than aka G $akh or to app$y for a cre%it car% or to
purchase an% register a $an% $ocate% in city corporation. the %ee% va$ue of &hich is more
than aka 1 $akh. 9ou must have a I> un%er section 1*@A &ithout &hich you &i$$ not
-e a$$o&e% to procee% for this. 6o& can you get this I>R If you have no access to
internet. you cannot -e in a position to visit the &e-site of the >ationa$ Boar% of
5evenue. the ape! ta! authority +&&&.n-r"-%.org, to -e a&are a-out the initia$
information to $ocate a ta! office. hen you may %irect$y go to the office of the >B5.
&hich is not an accessi-$e office &ithout prior appointment. If you can c$ear$y e!p$ain
your o-4ective. you may -e a$$o&e% to visit the 6e$p Desk of the >B5 at 5oom >o. 1''
at First F$oor &orking since 12 >ovem-er 2(() to he$p the ta!payers. hen you might -e
aske% to give ans&ers to fe& <ueriesB +1, Is the assessee re$ate% to a company +the
company itse$f or any of its %irectors,R hen he &i$$ -e %irecte% to the specific ta! circ$e
un%er a ta! Fone accor%ing to the first $etter of the name of the company +e!c$u%ing 71S
or he,. +2, Is the assessee an emp$oyeeR For #overnment emp$oyees. ;one"@ might -e
the -roa%er office. For other emp$oyees. type of organiFation &i$$ %etermine the ta!
1@
circ$e. +/, For non"corporate -usiness. territoria$ c$assification is to -e emp$oye% to
i%entify the circ$e. +@, Is the assessee a professiona$R For 4uris%ictiona$ purpose. %octors.
a%vocates. ta! a%visers. fi$m actors1actresses an% ra%io1L artists are treate% as
professiona$s an% their circ$e is -ase% on this status. +G, Is the assessee a specia$iFe%
entityR For 4uris%ictiona$ purpose. non"corporate hote$s1restaurants. fast foo%1piFFa shop.
trave$ agents. manpo&er e!porters. community centers. guest1rest houses. an% 8hinese
restaurants are treate% as specia$iFe% organiFations an% their circ$e is fi!e% accor%ing$y.
hus. you may -e u$timate$y successfu$ to kno& your %esignate% ta! circ$e in a ta! Fone.
But &hat is its a%%ressR Since the ta! offices are $ocate% in rente% -ui$%ings &ith
#overnment prescri-e% ma!imum month$y rent. it might -e a -ig <uestion an% on$y the
kno&$e%gea-$e ta! officia$s can c$ear$y give you the office a%%ress. 0ffices are usua$$y
-ase% on a! ;one $ocate% &ithout any ru$e of %istri-ution. If you u$timate$y arrive at the
specific ta! office. then you can app$y su-4ect to a num-er of other con%itions +t&o
copies of fi$$e% in forms. t&o photographs. copy of treasury cha$an as a proof of %eposit
of aka 1 thousan% an% an app$ication for provi%ing a I> an% a certificate thereon,. he
up%ate% I> app$ication form is not yet printe% -y the >B5. so you might re<uire to -uy
it from private sources. his fo$$o&s the co$$ection of reasury 8ha$an +.5. Form >o. 2,
an% the fi$$ing up of its three copies a$ong &ith the re<uire% information on a! 8irc$e
an% a! ;one. 8o%e >o. H1"11@1"(((("(111I an% purpose of %eposit HAI for I>I an%
then %epositing the same in Bang$a%esh Bank or any %esignate% reasury Branch of
Sona$i Bank stan%ing in a $ong cro&%e% <ueue &ith a risk of facing a pickpocket. hen
you might face the time"consuming -ehaviour of the staff in the ta! office to get your
I> an% I> certificate. &ho might e!pect the spee% money to e!pe%ite your task. For a$$
these efforts. you may resort to a ta! $a&yer1practitioner. &hich is cost$y an% a$so risky
for possi-$e frau%u$ent treatment. Accor%ing to a press re$ease of the >B5 +%ate%
(G.(/.2(('. avai$a-$e at &&&.n-r"-%.org. accesse% 1G.('.2((',. the >B5 has foun% 2G2
fake I> 8ertificates out of 1G@* re$ate% to January an% Fe-ruary of 2((' an% G)@ fake
I> 8ertificates out of /@@* in 2((* +partia$, &ith respect to I> certificates su-mitte%
for car registration at B5A +Bang$a%esh 5oa% ransport Authority, an% 1)' mem-ers?
I> certificates are fake out of 2@* mem-ers of the Dhaka Je&e$ry Association. So take
the hass$e to o-tain a true I> for $ifetime.
hen pro-a-$y the rea$ comp$e!ities arise &hen you have to fi$$ up the Income a!
5eturn form. For non"corporate ta!payers. the 5eturn Form is one &ith num-er DI"
11#AE. Income ta! return form has -een revise% from assessment year +A9, 2((*"('.
he ne& return for non"corporate ta!payers +in%ivi%ua$s an% ta!payers other than
company, is a composite form containing / FormsB I"11#A +the 5eturn Form having /
Parts an% / Sche%u$es,. I"1(B +Statement of assets an% $ia-i$ities,. an% I"1(BB
+Statement regar%ing particu$ars of $ife sty$e,I. he sa$ient items are as fo$$o&sB
Page"1 B HPart"II
I%entification. particu$ars. name$y. photograph. name an% a%%resses.
father?s1hus-an%?s name. mother?s name. status. %ate of -irth. I>.
8irc$e1;one. assessment year etc.
Page"2 B =ist of %ocuments enc$ose%
Page"/ B HPart"III
1G
Summary of income from %ifferent sources. tota$ income. ta! paya-$e. ta!
pai%. e!empte% income. ta! pai% $ast year. etc.
Page"@ B HPart"IIII
Sche%u$e"1B Detai$s of Sa$ary Income inc$u%ing e!empte% items
Sche%u$e"2B Detai$s of 6ouse Property Income
Page"G B Sche%u$e"/B Detai$s of investment ta! cre%it
6ouse Property Income
Ackno&$e%gement S$ip
Page"2 B Lerification +Dec$aration of correctness, an% signature
Page")"* B Statement of assets an% $ia-i$ities HI"1(BI
Page"' B Statement regar%ing particu$ars of $ife sty$e HI"1(BBI
Page"1( B Instruction.
Fi$$ing up the 5eturn Form is comp$icate% for an in%ivi%ua$ ta!payer. for severa$ factors
as fo$$o&sB
So many heads o) income4 ota$ +ta!a-$e, income is to -e c$assifie% into 1( hea%s
+' hea%s for %omestic income an% 1 hea% for foreign income,. a$though the
income ta! $a& has c$assifie% the income into ) statutory hea%s for computationa$
purpose. Some of this income might -e ri%icu$ous$y sho&n even un%er a $oss
-ase% on fina$ %ischarge of ta! $ia-i$ity un%er section *28. Some of the
components of income un%er a hea% might -e sho&n as D%eeme% incomeE or
D%eeme% to -e receive% incomeE &ithout getting it in cash.
Di))ic&lties in acq&iring %rior 'no+ledge4 5eporting the ta! e!empte% income an%
ta! free income HItem 1* on page 2I is possi-$e if you are a&are a-out the Part A.
Si!th Sche%u$e an% numerous S50s on e!emption. some of &hich are prescri-e%
un%er section 2(+1, of the repea$e% Income a! Act 1'22. -ut sti$$ are va$i%.
,eq&irement o) 'no+ledge o) the tax la+s and %ractical demonstrative s'ill4 a!
computation HItem 1/ on page 2I might -e the most comp$icate% things in some
cases. -ecause that is not a straight for&ar% function. here are specia$ ta! rates
su-4ect to %etermination through a mathematica$ app$ication in Secon% Sche%u$e
Hfor 8apita$ #ains un%er section /1 an% for &in%fa$$ income un%er section
1'+1/,I. here might -e income su-4ect to &ithho$%ing ta! to -e treate% as a fina$
%ischarge of ta! $ia-i$ity un%er section *28 Hor eventua$ $oss. -ut you are not
a$$o&e% to report a $oss. since #overnment &i$$ not refun%1a%4ust this ta!I. &hich
is to -e %ocumente% &ith proof. hen the resi%ua$ income is su-4ect to app$ication
of the ta! rates prescri-e% -y the Finance Act +usua$$y propose% in the secon%
&eek of June an% passe% on the $ast %ay of the concerne% income year,. hen the
ta! re-ates on ta!"free income Hre-ate at average ta! rate on share of pre"ta!
income from a partnership firm or association of persons. &here the
firm1association has a$rea%y pai% ta! thereonI an% the re-ates for enhance%
income for very high ta!payers H1(P ta! re-ates on the a%%itiona$ ta! pai% -y
those in%ivi%ua$ ta!payers paying ta! at the highest rate of 2GP prece%ing A9
an% %isc$osing more than 1(P higher income than that prece%ing A9I.
12
Timely investment in %rescribed areas a)ter )&l)illing conditions4 a! cre%it on
investment a$$o&ances HItem 1@ on page 2I might -e %ifficu$t to o-tain if you %o
not invest in %esignate% savings1investment schemes %uring the income year.
Di))ic&lties in collecting req&isite doc&ments4 9ou have to co$$ect a$$ the
%ocuments to o-tain for any sort of ta! -enefits or to c$aim any %e%uctions or
e!emption inc$u%ing the &ithho$%ing ta!es.
Di))ering treatment regarding illegal income and illegal ex%enses4 Source of
income +even if it is i$$ega$, may not -e raise% if you pay ta! thereon. -ut no
i$$ega$ e!pense is a$$o&a-$e.
Absence o) )amily ret&rn and conseq&ent emotional acco&nting4 If -oth hus-an%
an% &ife are ta!payers. then fi$$ing up the I"1(B an% the I"1(BB might -e an
issue of emotiona$ fami$y accounting &ith respect to %ivi%ing the $ive$ihoo%
e!pen%itures. the num-er of %epen%ent mem-ers. the property un%er 4oint name.
an% so on.
Di))erent in)ormation on )orms in di))erent lang&age4 0ne information is a$so
%ifferent in :ng$ish version an% Bang$a version in the I"1(B HItem 1G.+-, in I"
1(BB D>um-er of %epen%ent chi$%ren of the fami$yB A%u$t an% 8hi$%E in :ng$ishC
D>um-er of %epen%ent mem-er of the fami$yB A%u$t an% 8hi$%E in Bang$aI.
he 8orporate a! 5eturn HI"11#6AI is app$ica-$e for companies &ith huge
information covering a$most the &ho$e Annua$ 5eport. Fo$$o&ing are some %etai$s of this
returnB
Part"IB Particu$ars of Assessee
Part"IIB A. Statement of Income of the 8ompany
B. Income ta! payments of the 8ompany
8. Particu$ars of Income1:!penses
Part"IIIB Particu$ars of -a$ance Sheet
Part"ILB A. Statement of 3ithho$%ing ta!es +see 7ha%ter :II o) Income tax "rdinance; 1#$,
B. Particu$ars of Shareho$%er Directors of the 8ompany
8. Particu$ars of Bank Accounts
D. Particu$ars of 5e$ate% Parties1Su-si%iary an% Associate% 8ompanies1Directors1
7anagers
Lerification +Dec$aration of correctness, an% signature
If a 8ompany has a goo% accountant &ith sufficient ta! kno&$e%ge. then pro-a-$y the
company an% its %irectors may resort to that e!ecutive for ta!"re$ate% matters an% the $ife
may not -e a comp$icate% one for ta!.
he usua$ comp$ications re$ating to income ta! are norma$$y for e!istence of
in%iscriminate e!emptions. mu$tip$e ta! rates +often gra%uate%,. an% issuance of S50s
outsi%e the visi-$e statutory -oun%ary. 7ost of these things are c$aime% to -e 4ustifie% in
the name of e<uity. &hich is essentia$ -ut causing comp$iance cost.
1)
)ther Areas of Complications: 0ther areas of comp$ications might -e for fo$$o&ing
thingsB
1. %ifferent perspecti,es' "ifferent meanin!s:
5ecipient vs. Payer H:mp$oyer vs. :mp$oyee. such as Dper<uisiteE %efine% u1s
2+@G, for emp$oyer an% Dper<uisiteE as mentione% in section 2+G*,+c, for
emp$oyeeC Depositor vs. Bank. such as DinterestE %efine% u1s 2+/*, for -ank an%
DinterestE as mentione% in section //+a, for %epositorsIC
De%uction -y a ta! paying entity vs. that -y an e!empte% entity. -ecause in
a%%ition to the interaction -et&een the t&o parties +the payer -eing the %e%ucting
entity an% the recipient,. a ta! paying entity is monitore% for secon% time -y the
ta! authority at the time of assessment.
2. Same thin! clarifie" "ifferently:
Income from sa$e of shares of $iste% companies may -e treate% as Dcapita$ gainE
in genera$. since the shares are treate% as Acapita$ asset? Hu1s 2+1G,I. -ut the income
may -e treate% as Dspecu$ation -usiness incomeE Hu1s 2+21, an% :!p$anation to
section 2*+1,I for the mem-ers1-rokers of a stock e!changeC
5ente% -ui$%ing space may or may not -e su-4ect to %e%uction -y the tenant
-usinessman Ha$$o&e% u1s 2'+1,+i,. -ut not a$$o&e% u1s 2@+1,I.
/. 7resence of unusual pro,isions:
In case of Da private $imite% company or a pu-$ic $imite% company not $iste% &ith
a stock e!change.E if the company %isc$oses any amount of investments in its
e<uity receive% any shareho$%er or %irector. &hich is not receive% through crosse%
che<ue or -ank transfer. the amount is ta!a-$e as DIncome from other sourcesE.
a$though the amount is sho&n in the %irector?s return as a transfer to the
company?s return an% the company has sho&n it proper$y in its return Hu1s 1'+2@,.
effective from A9 2((2"()IC
3ithho$%ing ta! treate% as fina$ %ischarge of ta! $ia-i$ity Hu1s *28IC
)
Prescri-e% rate of %epreciation Hhir% Sche%u$eIC
)
As on Ju$y 1. 2(('. amount of ta! %e%ucte% on the fo$$o&ing 1* situations sha$$ -e consi%ere% fina$ %ischarge
of ta! $ia-i$ity for the concerne% source on$yB +1, supp$y of goo%s or e!ecution of contract on &hich ta! %e%ucte% at
source u1s G2 Hru$e 12. ru$e 1)IC +2, payment on account of roya$ty or technica$ kno&"ho& fee on &hich ta! %e%ucte%
at source un%er section G2A+2,C +/, commission from c$earing an% for&ar%ing on &hich ta! %e%ucte% at source u1s
G2AAAC +@, manufacture of cigarettes on &hich ta! %e%ucte% at source on &hich ta! %e%ucte% at source un%er
section G2BC +G, interest on savings instruments un%er section G2D Hsavings instruments purchase% after 1("(2"1'''
an% -efore (1"(1"2((@IC +2, sa$aries of a foreign technician serving in a %iamon% cutting in%ustry. for &hich ta! is
%e%ucti-$e un%er section G20C +), import of goo%s on &hich ta! %e%ucte% at source un%er section G/C +*, freight
earning from shipping -usiness of a resi%ent on &hich ta! %e%ucte% at source u1s G/AAC +', e!port of manpo&er on
&hich ta! %e%ucte% at source un%er section G/B Hru$e 1)8IC +1(, e!port of certain items Hknit&ear an% &oven
garments. terry to&e$. carton an% accessories of garments in%ustry. 4ute goo%s. froFen foo%. vegeta-$es. $eather
goo%s. packe% foo%I on &hich ta! %e%ucte% at source un%er section G/BBC +11, transaction -y a mem-er of any stock
e!change on &hich ta! %e%ucte% at source u1s G/BBBC +12, auction purchase on &hich ta! %e%ucte% at source un%er
section G/8 Hru$e 1)DIC +1/, service charge from courier -usiness of a non"resi%ent on &hich ta! %e%ucte% at source
un%er section G/88C +1@, transfer of rea$ estate or $an% %eve$oper on &hich ta! %e%ucte% at source un%er section
G/FFC +1G, remuneration or re&ar% on &hich ta! %e%ucte% at source on &hich ta! %e%ucte% at source un%er section
G/#C +12, payment on account of survey un%er section G/##C +1), va$ue of property for the purpose of co$$ection of
ta! un%er section G/6 Hru$e 1) IIC an% +1*, &innings from $ottery or cross"&or% puFF$e. etc. referre% to sec. 1'+1/,
an% ta! %e%ucte% at source un%er section GG.
1*
>o %epreciation on $ease% assets Hpara 2+1, an% para /+@, of hir% Sche%u$eIC
7a!imum cost prescri-e% for %epreciation purpose Hpara 11+2,+a, of hir%
Sche%u$eIC
Depreciation not -ase% on e!tent of useB Fu$$ %epreciation in year of ac<uisition
an% no %epreciation in year of %isposa$ Hpara 11+G, of hir% Sche%u$eIC
Distinction of revenue $oss +%e%ucti-$e, an% capita$ $oss +not %e%ucti-$e, at the
time of %isposa$ of -usiness1agricu$tura$ assets su-4ect to %epreciationC revenue
$oss as Ao-so$escence a$$o&ance? for -usiness assets is %e%ucti-$e un%er c$ause
+!i, of su-"section +1, of section 2'IC revenue $oss for agricu$tura$ assets is
%e%ucti-$e un%er c$auses +i, an% +4, of su-"section +1, of section 2)I an% capita$
$oss +not %e%ucti-$e, at the time of %isposa$ of -usiness1agricu$tura$ assets su-4ect
to %epreciation Hfirst proviso to section /)IC
&o capita$ e!pen%itures a$$o&e% as fu$$y %e%ucti-$e at the time of incurrence
Hc$auses +!!, an% +!!iii, of su-"section +1, of section 2'IC
Fees for any Dtechnica$ or consu$tancyE services H%efine% u1s 2+/1,I treate% as
DIncome from other sourcesE u1s // an% fees for any Dtechnica$ consu$tancyE
services H%efine% as Dprofessiona$ servicesE un%er :!p$anation +a, to section G2AI
treate% as DIncome from -usiness or professionE u1s 2*C an%
=imit for %e%ucti-i$ity on certain -usiness e!penses Hsection /(I.
@. A&sence of pro,isions:
>o fu$$ proof %istinction -et&een investment an% specu$ation is avai$a-$e in the
$a&C
>o %efinition of Acapita$ $oss? is givenC an%
>o provision for amortiFation on intangi-$e assets. a$though there are provisions
for %epreciation in hir% Sche%u$e an% for %ep$etion in Fifth Sche%u$e.
G. 7ro,isions only throu!h SR0:
Income ta! %ue to o&nership of a car HS50 >o. 1*)"Ain12(('. %ate% (1.().2(('IC
an%
Presumptive assessment for vehic$es HS50 >o. 1)1"Ain12(('. %ate% /(.(2.2(('
an% S50 >o. 1)/"Ain12(('. %ate% /(.(2.2(('I.
2. 7resence of unconstitutional pro,isions:
Un%er section 1'+1/,. any amount is receive% D-y &ay of &innings from $otteries.
cross&or% puFF$es. car% games an% other games of any sort or from gam-$ing or
-etting in any form or of any nature &hatsoeverE sha$$ -e %eeme% to -e his
income. Un%er su-"artic$e +2, of Artic$e 1* +Pu-$ic hea$th an% mora$ity, of our
8onstitution. the State sha$$ a%opt effective measures to prevent prostitution an%
gam-$ing.
). Am&i!uous pro,isions:
it$e of Part B. Si!th Sche%u$e is D:!emptions an% A$$o&ances for Assessees
-eing 5esi%ent an% >on"5esi%ent Bang$a%eshi Hsee section @@+2,I. Is it app$ica-$e
for D5esi%ent ForeignerER
Is there any $oss un%er the hea% DIncome from house propertyE u1s 2@R
1'
Is the %e%uction app$ica-$e for DIncome from house propertyE u1s 2G for the &ho$e
house or on$y to the $et"out portionR
*. 0,erlappin! pro,isions for "e"uctions from ?Income from &usiness or
profession@:
:!pen%iture incurre% in connection &ith visits a-roa% Hu1s 2'+1, +!!v,. foreign
trave$ Hu1s /(+f,+ii, an% u1r 2GAI. an% overseas trave$ Hu1s /(+k,IC
Per<uisite for one emp$oyee Hu1s /(+e,I. the %efinition of &hich excl&des
Dincentive -onus not e!cee%ing ten per cent of %isc$ose% profit of re$evant income
yearE a$so for one emp$oyee Hu1s 2+@G,I. Dany e!pen%iture -y &ay of incentive
-onus e!cee%ing ten per cent of %isc$ose% net profitE as e!pen%iture for a$$
emp$oyees Hu1s /(+4,I.
Per<uisite for one emp$oyee Hu1s /(+e,I. the %efinition of &hich incl&des the
-enefit of Dforeign trave$s of one emp$oyee an% their %epen%ents for ho$i%aying
an% recreationE Hu1s /(+f,+ii, an% u1r 2GAI. an% -oth have separate prescri-e%
$imit.
Profit"-ase% computation. -ut %ifferent &or%ing for DprofitEB
" any e!pen%iture e!cee%ing ten per cent of the profit un%er the hea% of 6ea%
0ffice e!penses -y a company. not incorporate% in Bang$a%esh un%er the
8ompanies Act 1''@ Hu1s /(+g,IC
" any payment -y &ay of roya$ty. technica$ services fee. technica$ kno& ho&
fee or technica$ assistance fee e!cee%ing eight per cent of the profit Hu1s
/(+h,IC
" any e!pen%iture -y &ay of incentive -onus e!cee%ing ten per cent of the
"isclose" net profit Hu1s /(+4,IC
" any e!pen%iture in respect of DentertainmentE to -e %etermine% -y app$ying
the prescri-e% rate +@P on first aka 1( $akh an% 2P on the -a$ance, on
Dincome. profits an% gains of the -usiness or profession +compute% -efore
making a$$o&ance in respect of e!pen%iture on entertainment,E Hu1s /(+f,+i,
an% u1r 2GI.
'. %e"uctions from ?Income from &usiness or profession@ &oth !enerous an"
restricti,e a!ainst normal accountin! practice:
Initia$ %epreciation. acce$erate% %epreciation. carrie% for&ar%e% $oss. fu$$
a$$o&ances on capita$ e!pen%iture on scientific research an% any e%ucationa$
institution or hospita$ esta-$ishe% for the -enefit of emp$oyees an% their fami$ies
an% %epen%ents or on the training of in%ustria$ &orkersC
5estricte% e!penses on a num-er of items u1s /( an% no a$$o&a-$e %e%uction for
certain profit"-ase% e!penses for $osing entity. 0f the 12 prescri-e% ina%missi-$e
e!penses u1s /(. there are / c$auses Hc$auses +a, an% +%, for DS on DSa$ariesE an%
c$ause +aa, for &ithho$%ing income ta! or va$ue a%%e% ta! +LA, in genera$I. if
the ta!1LA not &ithhe$% proper$y. the payment is not a$$o&e% as e!pense an% the
%isa$$o&e% e!penses are treate% as Aa%%itiona$ ta!a-$e income? su-4ect to income
ta! %irect$y. But proper %e%uction of income ta! or LA at source is %ifficu$t %ue
to tracking pro-$em for numerous items an% rates. Un%er the Income a!
0r%inance there are as many as @/ items un%er @( sections are su-4ect to DS +ta!
2(
%e%ucte% at sources, at more than 1G relati,e rates Hsuch as (.2GP. (.(/P. 1P.
2P. 2.GP. /P. /.GP. @P. GP. 2P. )P. ).GP. 1(P. 2(P. an% 2GPC an% in some
cases unspecifie%I an% fe& a&solute rates Hsuch as k. G((. or k. 1(.(((. or k.
12.(((. or k. 1*.(((I. Un%er the LA Act 1''1. there are no& +2(('"1(,. 2)
services are su-4ect to LA %e%ucte% at sources at G %ifferent rates. such as 1.GP.
2.2GP. @.GP. 'P an% 1GP. Up%ate% rates of &ithho$%ing ta!es &ith
correspon%ing payment are not ma%e avai$a-$e officia$$y -y the Income a!
authorities or the LA 0fficia$s. In many cases. these %e%uctions at sources are
a$so not app$ica-$e for particu$ar ta!payers.
21
1(. Con"itions' con"itions' con"itionsA//:
A$ternatives &ith &or%ing of D&hichever is $o&erE He.g.. G(P of -asic sa$ary or
aka 1G.((( per month. &hichever is $o&er. for cash house rent a$$o&ance to an
emp$oyee u1r //AI
A$ternatives &ith &or%ing of D&hichever is higherE He.g.. Dsa$e procee%sE for the
purpose of hir% Sche%u$e +8omputation of Depreciation A$$o&ance, means.
&here the asset is actua$$y so$%. the sa$e prices thereof or the fair market va$ue.
&hichever is higher un%er paragraph 11+/,+a, of hir% Sche%u$eIC
A$ternatives &ithout &or%ing of D&hichever is higher or $o&erE He.g.. any sum
representing interest cre%ite% on the accumu$ate% -a$ance of an emp$oyee in a
recogniFe% provi%ent fun%. in so far as it %oes not e!cee% one"thir% of the sa$ary
of the emp$oyee for the year concerne% an% in so far as it is a$$o&e% at a rate not
e!cee%ing such rate as the Boar% may. -y notification in the officia$ #aFette. fi!
in this -eha$fC %aragra%h !< o) 0art A; Sixth Sched&le4 D:!c$usions from ota$
IncomeEC see section @@+1,IC
Diversifie% &or%ing to $imit on an amount. e.g.. Das e!cee%s taka t&o $akhE Hu1s
/(+e,I. De!cee%ing eight percent of the profitE Hu1s /(+h,I. Dnot e!cee%ing ten per
cent of %isc$ose% profit of re$evant income yearE Hu1s 2+@G,I. Dup to taka t&enty
five thousan%E Hpara 22A. Part A. Si!th Sche%u$eI. Dnot e!cee%ing t&enty five
thousan% takaE Hpara /1B. Part A. Si!th Sche%u$eI. Dsha$$ not e!cee% t&enty
thousan% takaE He.g.. proviso to para 1/. Part A. Si!th Sche%u$eI. D%oes not
e!cee% one"thir% of the sa$aryE Hpara 2G. Part A. Si!th Sche%u$eI. etc.
</ </ The Complexities in the Tax Laws B Chy an" how costly> The Complexities in the Tax Laws B Chy an" how costly>
he argument in favour of the %ifficu$ty containe% in the ta! regu$ations might -e
un%erstoo% from the fo$$o&ing <uoteB
Peop$e think ta!ation is a terri-$y mun%ane su-4ect. But &hat makes it fascinating
is that ta!ation. in rea$ity. is $ife. If you kno& the position a person takes on ta!es.
you can te$$ their &ho$e phi$osophy. he ta! co%e. once you get to kno& it.
em-o%ies a$$ the essence of $ifeB gree%. po$itics. po&er. goo%ness. charity.
:verything?s in there. hat?s &hy it?s so har% to get a simp$ifie% ta! co%e. =ife
4ust isn?t simp$e. SFormer I5S 8ommissioner She$%on 8ohen. <uote% in Jeffrey
6. Birn-aum an% A$an S. 7urray +1'*),. Sho+do+n at (&cci (&l) +vide
7c8affery. 2((2. p. 112,.
S$emro% an% Baki4a +2(((, have mentione%. from the US perspective. the reasons
responsi-$e for making the ta! system comp$e! as fo$$o&sB Dhe %esire to achieve e<uity
an% fairness provi%es one set of reasons. Attempts to encourage certain activities %eeme%
socia$$y or economica$$y %esira-$e provi%e another. Sometimes. pure$y po$itica$ factors
appear to -e responsi-$eE +S$emro% an% Baki4a. 2(((B 1/',.
22
In our income ta!ation system. the gra%uate% ta! rates for non"corporate ta!payers are for
ensuring e<uity. e!emptions an% ta! %e%uctions are often provi%e% for encouraging
socia$$y %esira-$e activities. But many issues. particu$ar$y the imposition of restriction on
amount an% con%itiona$ities for -usiness ta! %e%uctions. might -e pure$y for intro%ucing
Ae!pe%iency? an% another un%isc$ose% o-4ective of raising the revenue &ith a pressure for
achieving the ta! target -y ta! circ$es1Fones that is given through -u%get.
Dow the complexities are costly>
Collection costs #Tax A"ministratorEs Costs$: he comp$e!ities in the ta! $a&s are a$so
cost"incurring. 6uge resource costs in terms of a%ministrative costs +ta! co$$ection costs,
are invo$ve% for these. he >B5?s a%ministrative costs &ere k. G.)(G.2 mi$$ion in 2(()"
(* to co$$ect k. @)@./G2.2 of ta!. hus. average annua$ ta! co$$ection costs +per aka
1(( of ta!, in 2(()"(* &as k. (.G1 for in%irect ta! an% k. (.2( for %irect ta! an% hence
a tota$ of k. 1.2( for overa$$ ta! +inc$u%ing the >B5?s 6ea% 0ffice costs,. A$though.
over 2((/"(@ to 2(()"(*. the annua$ average ta! co$$ection costs +per aka 1(( of ta!,
&as k. (.G2 for in%irect ta! an% k. (.)G for %irect ta! an% hence a tota$ of k. 1./1 for
overa$$ ta! +see a-$e 2,. A$though the ta! co$$ection cost for %irect ta! is to some e!tent
higher. -ut the fact that is that more that ha$f of the income ta! is -eing co$$ecte% at
sources +in 2(()"(*. G2.G* percent of tota$ income ta! &as co$$ecte% at sourcesC vi%e
>B5. 2(('aB )2,.
Ta&le ;: Collection -fficiency of Tax A"ministration
+Figures in mi$$ion aka e!cept for A8ost per k. 1(( a!es,
7articulars ())26)3 ())36)4 ())46); ());6)< ())<6):
F9)3 to F9):
A,era!e
-xpen"iture:
Direct a!es @)1.G @'1.2 G*1.( 2'2.1 )/1.( G'/.@
In%irect a!es 1.22(.' 1.2@(.G 1.2*2.2 1.2G).2 1.*(G.( 1.G21./
>B5 6ea% 0ffice 2.122.' 2.1)G.2 2.1*G./ 2.22*.' /.12'.2 2.@)2.@
Total 2':44/2 2'*)</2 3'33:/* 4').:/; 4'<)4/( 3'4:</.
Tax Collection:
Direct a!es G(.(11.G G*.2)@.) )@.@@'.@ '(.G((.G 121.**2.2 )'.(2/.)
In%irect a!es 211.'22.2 2@(.)2'.' 22G.)').1 2*1.2'2.) /G2.@)@.@ 2)(.G/2.1
>B5 6ea% 0ffice n1a n1a n1a n1a n1a n1a
Total (;.'*2</< (**')33/; 23)'(3;/4 2<('.*2/( 3<3'24;/; 23*'444/<
Cost per T+/ .)) Taxes:
Direct a!es (.'@ (.*@ (.)* (.)2 (.2( )/<4
In%irect a!es (.G* (.G2 (.2/ (.G' (.G1 )/4;
>B5 6ea% 0ffice n1a n1a n1a n1a n1a nFa
Total ./3< ./2. ./2. ./24 ./() ./2.
Sources: Ann&al ,e%orts !--=--$ to !--.--# of the >ationa$ Boar% of 5evenue +>B5,.
Compliance costs #TaxpayersE Costs$: From the perspective of ta!payers. the costs of
comp$e!ities are main$y re$ate% to comp$iance. &hich inc$u%e the fo$$o&ingB
0ut"of"pocket costsB
M Direct monetary out$ays for professiona$ gui%ance
M :!penses for recor%keeping an% Asupp$ies? +stationeries. fi$es. etc.,
M :!penses for -uying $atest ta! pu-$ications
2/
M 8ost of au%its. appea$s an% $a&suits
ime spent -y the ta!payers on their ta! affairs
M 0&n time for preparing return
M For activities such as researching the ta! $a&. meeting &ith an a%visor. or
arranging financia$ affairs to minimiFe ta!es
ime spent an% costs incurre% -y -usiness entities +usua$$y $arge corporate -o%ies,
M 7ore time for corporate return an% returns for %irectors
M 8omp$e! %epreciation ru$es
M A$ternative ta! rates +say. for e!porters,
M Juris%ictiona$ %ifferences for ta! treatments +:P;. 8hittagong 6i$$ Districts. etc.,
>on"monetary costsB
M An!iety suffere% -y ta!payers concerne% a-out getting their ta!es %one on time
an% %one rightC an%
M 3orrying a-out a ta! au%it.
hese huge costs re$ate% to comp$e!ities can -e consi%ere% as imp$icit ta!es an% on$y
simp$ification can re%uce or e$iminate these costs a$so.
:/ :/ Dow to -liminate the Complexities Dow to -liminate the Complexities
..& ..& Concerns Concerns
7any of these comp$e!ities are -eneficia$ for those &ho can e!p$oit them.
he $ive$ihoo% of the ta! $a&yers an% the ta! practitioners is %epen%ent on this
comp$ication of the ta! co%e. -ecause
most of the ta!payers are not &i$$ing to un%erstan% his o&n ta! issues +&hich
are not at a$$ comp$icate%, an%
they have an un&i$$ingness to face the perceive% hass$e an% harassment in the
ta! offices.
..( ..( 5ecommendations for 2ossi!le 5emedies 5ecommendations for 2ossi!le 5emedies
Be$o& is an enumeration of the possi-$e po$icy recommen%ations to e$iminate or re%uce
the comp$e!ities of the income ta! system an% to make the system simp$er than -efore.
Initia$$y. the top fi,e priority recommen"ations have -een provi%e% an% then other
recommen%ations fo$$o&.
A/ Two recommen"ations important to any corporations:
8ithdra+al o) %rovision o) >ca%ital loss54 he provision of Acapita$ $oss? Has
mentione% first proviso to section /) an% section @(I shou$% -e imme%iate$y
&ith%ra&n. -ecause there is no %efinition of Acapita$ $oss? an% there is no metho%
2@
of computation prescri-e% for Acapita$ $oss? Ha$though there is a separate provision
for D8omputation of capita$ gainsE un%er section /2I an% accor%ing to provision
of paragraph 1( of hir% Sche%u$e. any $oss +capita$ $oss or revenue $oss, on
%isposa$ of -usiness asset Dshall &e %eeme% to -e an e!pen%iture. %e%ucti-$e from
the profits an% gains of -usiness or professionE Hc$ause +c, of paragraph 1( of
hir% Sche%u$eI. In Accounting. there is on$y D$oss on %isposa$ of assetsE &ithout
any %istinction -et&een Acapita$ $oss? or Arevenue $oss?. -ecause. there might -e
Acapita$ gainE +e!cess of sa$e procee%s a-ove cost, or Arevenue gain? +recovery of
%epreciation charge%,. -ut there cannot -e Acapita$ $oss?.
8ithdra+al o) restrictive %rovision on b&siness ex%endit&res4 5estrictive
provision on -usiness e!pen%iture other than Ae!pe%iency princip$e? un%er c$ause
+!!vii, of su-"section +1, of section 2'
*
shou$% -e &ith%ra&n. An% there shou$% -e
a provision in the Income a! 0r%inance 1'*@ Hmay -e -y inserting a ne& su-"
section in section @'I an% a$so in the LA Act 1''1 Hmay -e -y inserting a
proviso to su-"section +@AA, of section 2I that the >B5 at the outset of a
financia$ year sha$$ supp$y a $ist of items &ith the prescri-e% rate of %e%uction for
each item. other&ise the fai$ure of the corporate entities in &ithho$%ing ta! shou$%
-e e!empte%. -ecause u$timate responsi-i$ity of ta! payment $ies &ith the
recipient of money. Because of the fre<uent changing nature of the $ist of
numerous items an% rates of %e%uction H@/ items &ith more than 1G rates in
percentage an% fe& a-so$ute rates of %e%uction in the Income a! 0r%inanceC an%
2) vata-$e services &ith five rates of %e%uction un%er the LA ActI. this
provision is a necessity. -ecause enforcement shou$% not -e un%ertaken &ithout
any prior notice &ith up%ate% $ega$ provisions.
B/ Two recommen"ations important to the em&ers of the IBFB: A$though these
recommen%ations are given main$y -y the mem-ers of the IBFB. -ut they are e<ua$$y
app$ica-$e for private sector corporate entities a$so.
2x%licit %rovision )or distinction bet+een >investment5 and >s%ec&lation54 :!p$icit
provision to i%entify Ainvestment? %istinguishe% from Aspecu$ation? regar%ing
investment in shares of $iste% company an% for this purpose su-"section +), of
section /2 shou$% -e amen%e% to incorporate the perio% of investment. &hich
might -e minimum si! months.
Allo+ing cash trans)er )rom director5s ret&rn to ne+ com%any5s ret&rn4 From A9
2((2"(). cash transfer out of Ata! pai% income? sho&n in the %irector?s return to
form a ne& -usiness again ta!a-$e in company?s return. his cash transfer shou$%
-e a$$o&e% su-4ect to e!p$icit %ocumente% transfer from one return to another
Hamen%ment to -e ma%e in section 1'+2@,I.
C/ 0ne !eneral recommen"ation: he IBFB -e$ieves that unconstitutiona$ e$ement
shou$% not -e in a nationa$ statute an% hence the provision of income from
unconstitutiona$ sources. such as income from Agam-$ing? u1s 1'+1/, shou$% -e
&ith%ra&n.
*
Un%er the Ae!pe%iency princip$e.? any e!pen%iture. not -eing capita$ or persona$. ma%e e!c$usive$y for
-usiness or professiona$ purposes is fu$$y a$$o&e% u1s 2'+1,+!!vii,.
2G
0ther Recommen"ations: Fo$$o&ing recommen%ations are a$so foun% from the
fee%-ack of the participant stakeho$%ers.
Sl/ -lement !i,in! rise
to Complexities
Implication of the
Complexities
7ossi&le ways to o,ercome
1. *engthy and
vol&mino&s nat&re o)
Tax 7ode and no
o))icial %&blication
available
a!payer &i$$ing to consu$t
the ta! co%e faces %ifficu$ty
in fin%ing an up%ate%
version of the ta! co%e
Up%ate% ta! co%e &ith ear$ier
amen%ments as reference shou$% -e
avai$a-$e in the >B5?s &e-site
+&&&.n-r"-%.org,.
2 Timing o) tax
%ayments
7u$tip$e options cause
e!tra -ur%en in terms of
comp$iance costs.
:!ten%ing the scope of &ithho$%ing
ta!es for rea$ ta!payers.
'
there might
-e one secon% option. &hich is the
payment -efore su-mission of
return.
/ Manner o) tax
%ayments
7u$tip$e options &ith
physica$ -arrier to $ocate
the p$ace of %eposit. &ith
$imite% num-er of p$aces.
A$$o&ing f$e!i-$e cash or -ank
%eposit in any sche%u$e% -ank a$ong
&ith intro%uction of on"$ine %eposit
system.
1(
@ ?ncertain amo&nt o)
tax
6ass$e &ith ta! authorities.
uncertain higher ta! after
assessment. possi-$e appea$
an% $itigation an% inci%enta$
costs
A he$p %esk in ta! office shou$% -e
a-$e to fi$$ up the return <uick$y on
having a $ist of prescri-e% set of
%ocuments to -e su-mitte% -y a
ta!payer.
G 3orm o) the income
tax ret&rn
=engthy. over"-ur%ene%
&ith information
re<uirement. %ifficu$ty in
reconci$iation %ue to
ignoring the hypothetica$
%eeme% incomes arisen for
ta! purposes
A simp$ifie% one"page return &ith
fe& hea%s of income shou$% -e
prescri-e% for sa$arie% an% $o&er"
income se$f"emp$oye% ta!payers
2 *ocation o) tax o))ice Fin%ing out the appropriate
ta! circ$e office is a$most
impossi-$e for a ne&
ta!payer
It shou$% -e fu$$y centra$iFe% &ith
on$ine -ooth at %ifferent convenient
$ocationsC up to that centra$iFation.
the government shou$% provi%e
%irection of ta! offices or map.
) 8ithholding tax
treated as )inal
discharge o) tax
liability &@s #!7
In many cases. ta! is -eing
%e%ucte% not on income or
u$timate resu$t might -e a
$oss
It shou$% -e a-o$ishe% e!cept for
cases of DincomeE on$y.
11
'
In many cases. ta! is -eing &ithhe$% from persons &ho are not at a$$ ta!payers +e.g.. ta! %e%ucte% -y -anks
u1s G/F on interest payment to a$$ the %epositors. most of &hom have no other income -eing stu%ents or non"earning
fami$y mem-ers,.
1(
Bang$a%esh Bank has a$rea%y issue% a notification on >ovem-er 2. 2((' to a$$o& the sche%u$e% -anks on$ine
transactions. &hich is e!pecte% to -e the -eginning of the e$ectronic commerce +e"commerce, in Bang$a%esh +he
0rothom Alo. (/.11.2(('. pp. 1"2,.
11
A$though. this is against the norm of income ta!ation. yet this is high$y $ucrative to ta!payers. since this
re%uces hass$e &ith ta! authorities an% the ta!payers can fee$ the comp$acency that they are not ta!"%efau$ter at $east
in these specific cases.
22
Sl/ -lement !i,in! rise to
Complexities
Implication of the
Complexities
7ossi&le ways to o,ercome
* 7om%lexities related to
de%reciation
Separate computation of
ta! %epreciation &ith
prescri-e% rate.
%isregar%ing the usefu$
$ife an% e!tent of use
hir% Sche%u$e +for %epreciation,
shou$% enumerate on$y the
provisions of initia$ %epreciation an%
acce$erate% %epreciationC for finance
$ease the %epreciation shou$% -e
a$$o&e% for the $essee.
' *oss o) sale o) assets Distinction -et&een
capita$ $oss an% revenue
$oss &ithout any
prescri-e% gui%e$ine
affecting the -usiness
communities
=oss shou$% -e treate% as A$oss?
&ithout any %istinction -et&een
revenue or capita$ $ossC an% shou$%
-e a$$o&e% as ta! %e%ucti-$e.
1( AmortiAation on
intangible assets
3ithout any provision. if
any -usiness entity
capita$iFes Aintangi-$e
asset?. it &i$$ face
pro-$em.
Provision of amortiFation shou$% -e
intro%uce% for the sake of ta!
revenue.
Fe& other recommen%ations in genera$ can -e as fo$$o&sB
Discretionary po&er of the ta! authority shou$% -e e$iminate% an% if it is
necessary un%er any provision. the action shou$% -e in &riting an% su-4ect to
scrutiny &hether the %iscretion is -eyon% the authority as per $a&.
In case of an a-sence of any provision. it cannot -e impose% as a $ogic. -ecause
on$y ta! $a& can give the ta! authority to impose an action.
he -enefit of any am-iguity in interpreting any provision must -e given to the
ta!payers.
5efun% system shou$% -e ma%e automatic an% <uick.
Bur%en of proof must $ie on the person raising the comp$aint.
6e$p %esk shou$% -e responsive <uick$y an% the ans&er to any ta!payer?s <uery
shou$% -e in &riting an% the &ritten rep$y -y a ta! e!ecutive shou$% not create a
further hass$e to the ta!payer %ue to any interpretation &hich might -e contrary to
the accepte% meaning of the provision.
*/ */ Conclu"in! Remar+s Conclu"in! Remar+s
f the recommen%ations %e$ineate% a-ove can -e imp$emente%. the comp$e!ities can -e
re%uce% significant$y. hen hopefu$$y every ta!payer &i$$ han%$e his o&n ta! affairs
&ithout any fear an% taking any cost$y favour from others.
I
I
2)
References References
Birn-aum. Jeffrey 6.. an% A$an S. 7urray +1'*),. Sho+do+n at (&cci (&l)4 *a+ma'ers;
*obbyists; and the ?nli'ely Tri&m%h o) Tax ,e)orm +>e& 9orkB Lintage Books,.
Bittker. Boris I. +1')@,. Da! 5eform an% a! Simp$ification.E ?niversity o) Miami *a+
,evie+. 2'+1,. +Fa$$,B 1"2(.
B$um. 3a$ter J. +1'G@,. Simp$ification of the Fe%era$ Income a! =a&.E Tax *a+
,evie+. Lo$. 1(B 2/'"2G/.
B$umentha$. 7arsha an% Joe$ S$emro% +1''2,. Dhe 8omp$iance 8ost of the U.S.
In%ivi%ua$ Income a! SystemB A Secon% =ook After a! 5eform.E 6ational Tax
Bo&rnal. @G+2,. +June,B 1*G"2(2.
8estnick. im +2((),. 1-1 Tax Secrets )or 7anadians4 Smart Strategies that can Save
Co& Tho&sands +8ana%aB John 3i$ey & Sons 8ana%a. =t%.,.
8ommittee on a! Po$icy +1')2,. A ,e%ort on 7om%lexity and the Income Tax +>e&
9orkB >e& 9ork a! State Bar Association. a! SectionC 7ay,.
:ichho$F. 5o-ert B. +1'/',. DShou$% the Fe%era$ Income a! -e Simp$ifie%RE The Cale
*a+ Bo&rnal. @*+),. +7ay,B 12(("122(.
:ustice. James S. +1'*',. Da! 8omp$e!ity an% the ta! Practitioner.E Tax *a+ ,evie+.
Lo$. @GB )"2@.
#i$$. Jit B. S. +2(((,. A Diagnostic 3rame+or' )or ,even&e Administration +3ashington.
D.8.B he 3or$% BankC 3or$% Bank echnica$ Paper >o. @)2,.
#raetF. 7ichae$ J. an% Bar-ara 7cDo&e$$ +1'*@,. Da! 5eform 1'*GB he Tuest for a
Fairer. 7ore :fficient an% Simp$er Income a!.E Cale *a+ D 0olicy ,evie+.
/+G,B G"@(.
6D8 +7ah-u- u$ 6a< 6uman Deve$opment 8entre, +1''',. 6uman Deve$opment in
South Asia 1''' +QarachiB 0!for% University Pres,.
Qap$o&. =ouis +1''2,. D6o& a! 8omp$e!ity an% :nforcement Affect the :<uity an%
:fficiency of the Income a!.E 6ational Tax Bo&rnal. @'+1,. +7arch,B 1/G"1G(.
Qha$i$Fa%eh"ShiraFi. Java% an% An&ar Shah +e%s., +1''1,. Tax 0olicy in Develo%ing
7o&ntries +3ashington. D.8.B he 3or$% Bank,.
7c8affery. :%&ar% J. +1''(,. Dhe 6o$y #rai$ of a! Simp$ification.E 8isconsin *a+
,evie+. Lo$. 1''(. 122)"1/22.
7c8affery. :%&ar% J. +2((2,. 3air 6ot 3lat4 Ho+ to Ma'e The Tax System Better and
Sim%ler +8hicagoB he University of 8hicago Press,.
>B5 +>ationa$ Boar% of 5evenue, +2(('a,. Ann&al ,e%ort !--.-!--# +DhakaB 5esearch
an% Statistics 3ing. >B5. Apri$ 2,.
>B5 +2(('-,. The Income Tax "rdinance 1#$ EAs amended &% to B&ly; !--F +DhakaB
Supreme PrakashaniC compi$e% -y =a$ Baha%ur A%hikary,.
>B5 +2(('c,. The Income Tax ,&les 1#$ EAs amended &% to B&ly; !--F +DhakaB
>B5 +2(('%,. Income Tax 6oti)ications /S.,."1 E7om%iled )rom 1.$ to A&g&st; !--F
+DhakaB Supreme PrakashaniC compi$e% -y =a$ Baha%ur A%hikary,.
2*
>B5 +2(('e,. Income Tax 7irc&lars; Im%ortant 2x%lanations and S&mmary o) Income
Tax Ded&cted at So&rces E7om%iled )rom 1 to A&g&st; !--F +DhakaB
S$emro%. Joe$ +1'*G,. Dhe :ffect of a! Simp$ification on In%ivi%ua$s.E 8onference
SeriesC HProcee%ingsI. Fe%era$ 5eserve Bank of Boston. pages 2@"1(2C avai$a-$e at
httpB11&&&.-os.fr-.org1economic1conf1conf2'1conf2'c.p%fC accesse% 1'.11.2(('.
S$emro%. Joe$ an% >ikki Sorum +1'*@,. Dhe 8omp$iance 8ost of the U.S. In%ivi%ua$
Income a! System.E 6ational Tax Bo&rnal. /)+@,. +7arch,B @21"@)@.
S$emro%. Joe$ an% 7arsha B$umentha$ +1''/,. Dhe Income a! 8omp$iance 8ost of Big
Business.E +3ashington. D8B a! Foun%ationC >ovem-erC avai$a-$e at
&&&.ta!foun%ation.orgC accesse% 1*.11.2((',.
S$emro%. Joe$ an% Jon Baki4a +2(((,. Taxing "&rselves4 A 7itiAen5s (&ide to the (reat
Debate over Tax ,e)orm +8am-ri%ge. 7assachusettsB he 7I Press,.
Smith' A"am #.*<<$' An Inq&iry into the 6at&re and 7a&ses o) the 8ealth o) 6ations
+8hicagoB University of 8hicago PressC 2 Lo$umes in 1C :%ite% an% &ith an
Intro%uction. >otes. 7argina$ Summary. an% In%e! -y :%&in 8annanC an% &ith
a ne& Preface -y #. J. Stig$erC origina$$y pu-$ishe% in 1))2 in t&o vo$umes,.
:8 +he a!ation :n<uiry 8ommission, +1')',. 3inal ,e%ort o) the Taxation 2nq&iry
7ommission +DhakaB 7inistry of Finance. Interna$ 5esources Division. #0BC
Apri$,.
hirsk. 3ayne +e%., +1''),. Tax ,e)orm in Develo%ing 7o&ntries +3ashington. D.8.B
he 3or$% Bank,.
ran">am. Binh +2(((,. Da! 5eform an% a! Simp$icityB A >e& an% ASimp$er? a!
SystemRE ?niversity o) 6e+ So&th 8ales *a+ Bo&rnal. 2/+2,B 2@1"2G1.
2'

Complexities in The Income Tax Laws: A Quest For A Simpler Taxation System

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