Types of Taxes

Taxes represent the amount of money we pay to the government at predefined rates and
periodicity. Taxes are the basic source of revenue to the Government using which it provides
various kinds of services to the tax payers. There are mainly two types of Taxes, direct tax and
indirect tax which are governed by two different boards, Central Board of direct Taxes (CBDT)
and Central Board of Excise and Customs (CBEC).

Let’s discuss the two types of taxes in details.

Direct Taxes

Direct taxes are the personal liability of tax payers. These are collected directly from the tax
payers and they have to be paid by the persons on whom it is imposed. Important direct taxes are
listed below:

Income Tax

This is most important types of direct tax and almost everyone familiar with it .TDS is its famous
synonymous and whosoever is earning g above a minimum amount (tax exemption limit) has to
pay income tax.

Wealth Tax

Despite having a structured mechanism of corporate and personal income taxation, the country
still lacks a systematic tax mechanism. There is no systematic effort of assessing property and
financial assists and of collecting taxes accordingly yet there are provisions of imposing a 10%
surcharge on net wealth, the threshold is tk 2 corer and 25 lakh of the price of net in 2015-2016.

Property Tax/ Capital Gains Tax

This is levied on the capital gains arrived by selling property and stokes .Tax rates are different
for long term and short term capital gains.

Gift Tax/Inheritance Tax

Amount exceeding 50000 taka received without consideration by an individual from any person
is subjected to gift tax as income under” other sources”. There are exemptions like money
received from relatives is not taxable. Marriage gifts and money received through inheritance are
also exempt from gift tax. Inheritance tax was earlier in practice but has been repealed by the
government.
Corporate Tax

Companies operating in Bangladesh are taxed as per the corporate tax rate on their income. This
tax is one of the major sources of revenue for government.

Indirect Tax

Impact and incidence of indirect taxes fall on different persons as opposed to direct taxes where
impact and incidence is on the same person. These taxes are recovered from different groups of
people but the liability remains with the person who collects it. A tax payer recovers the indirect
taxes paid from their consumers and clients and finally pays it to government.

For example, when we purchase any product we pay VAT, when we eat in restaurants we pay
services tax which are ultimately deposited in government’s kitty by the service providers. Brief
about various types of indirect taxes is given below

Service Tax

Service providers in Bangladesh are subject to service tax, when is charged on the aggregate
amount received by the service provider. Service like leasing, internet/voice, transport, etc are
subject to service tax.

Custom Duty

Custom duties are indirect taxes which are levied on goods imported to export from Bangladesh.
There are different rules for different types of goods and sectors. Government keeps on charging
these rates sp as to promote import/export of specific goods.

Excise Duty

Excise duties are indirect taxes which are levied on goods manufactured in Bangladesh for
domestic consumption. like custom duty, there are a number of rules which keep on changing as
per government discretion.

Sales Tax and VAT

Sales tax is levied by the government on sale and purchase of products in Bangladeshi market.
As customers, whatever you buy from the market, you pay sales tax on it. Now, sales tax is
supplemented with new Value Added Tax so as to make it uniform across the country.