Executive Summary

Bangladesh has been experiencing different kinds of taxation processes over the years and all of
them are focused and designed to accelerate economic progress through increasing GDP growth
rate. To replace the Sales Tax, the government of Bangladesh first introduced VAT in 1991. The
main agenda was to increase the fund of government revenue and utilize it for development
activities of the country. In the last two decades, Bangladesh has been experiencing increasing
Gross Domestic Production (GDP). In this paper, a detailed discussion and analysis have been
made to identify the Corporate Tax System and its problems with remedial measures which may
positively accelerate such development. This theoretical analysis has been conducted based on
collected data from FY 2010 to 2022. A major portion of the study has revealed that Corporate
Tax has an enormously positive role in economic progress and acceleration of GDP growth.
Although there is a trend of reduction of corporate tax in Bangladesh every year, according to the
budget for fiscal year 2023-24, it has not decreased or increased compared to the previous year.
In 2023 also, the tax rate of listed companies has been fixed at 20% and the tax rate of listed
companies has been fixed at 27.5%. Besides, this year's Tax-to-GDP Ratio has decreased
compared to the previous year which has now come down to 7.4 percent. Government of
Bangladesh earned 4.631 USD bn in 2023 as tax revenue where corporate tax has an effective
role. Moreover, in Bangladesh there are still many small, and medium organizations which are
yet to be brought under the taxation system. It is expected that if such a system is reformed and
designed properly then the GDP growth might accelerate at a very high rate and assist
Bangladesh in achieving the title of a developed country soon. Currently, online-based e-
commerce activities have risen dramatically and this sector mustn't increase tax evasion.
Technology-based and user-friendly Tax collection and utilization may reduce the negative
impact arising out of it. Presently, problems with the Corporate Taxation System in Bangladesh
are Complex Tax Laws and Regulations, Multiple Tax Authorities, Diverse Tax Rates and
Incentives, Inefficient Tax Administration, Lack of Clarity and Transparency etc. To eradicate
the problems, the regulatory body needs to Simplify Tax Laws, Enhance Tax Compliance,
Capacity Building and Improve Transparency in the sector. In a developing country like
Bangladesh with the presence of a large formal sector, Corporate Tax and reform in its system
and payment process can bring immense positive contributions to raising economic welfare and
GDP growth.
Table of Contents

1. Introduction.......................................................................................................................2

1.1 Background of the Study.............................................................................4

1.2 Aim of the Study.........................................................................................7

1.3 Objectives of the Study...............................................................................8

1.4 Origin of the Study......................................................................................8

1.5 Limitation of the Study................................................................................8

1.6 Structure of the Report................................................................................8

2. Methodology.......................................................................................................................10

2.1 Research Design........................................................................................10

2.2 Research Approach....................................................................................10

2.3 Research Question.....................................................................................10

2.4 Research Method.......................................................................................11

2.5 Sources of Data..........................................................................................11

2.6 Primary Sources of Data.............................................................................................11

2.7 Secondary Source of Data...........................................................................................11

2.8 Ethical Issues.............................................................................................11

3. Literature Review...............................................................................................................13

4. Corporate Taxation System in Bangladesh.....................................................................18

4.1 Corporate taxation system.........................................................................18

4.1.1 Contribution of Corporate Tax in the economic development in Bangladesh........18

4.1.2 Corporate Tax Rates................................................................................................20

4.1.3 Capital Gains............................................................................................................22

4.1.4 VAT and Other Taxes..............................................................................................22

 4.1.5 Double Taxation Treaties.........................................................................................23

4.2 Contribution of Corporate Tax in GDP.....................................................24

4.3 Problems with the Corporate Taxation System in Bangladesh.................26

4.3.1 Complexity...............................................................................................................26

4.3.2 High Tax Rates........................................................................................................27

4.3.3 Tax Evasion.............................................................................................................28

4.3.4 Lack of Transparency..............................................................................................29

4.3.5 Inefficient Tax Collection........................................................................................30

4.4 Remedial Measures...................................................................................30

4.4.1 Simplify Tax Laws...................................................................................................30

4.4.2 Lower Tax Rates......................................................................................................31

4.4.3 Enhance Tax Compliance........................................................................................31

4.4.4 Improve Transparency.............................................................................................32

4.4.5 SME-Focused Policies.............................................................................................32

4.4.6 Invest in Tax Infrastructure......................................................................................32

4.4.7 Capacity Building....................................................................................................33

4.4.8 International Collaboration......................................................................................33

5. Conclusion...........................................................................................................................35

5.1 Findings.....................................................................................................35

5.2 Recommendation.......................................................................................36

5.3 Conclusion.................................................................................................37

5.4. Reference..................................................................................................38
Introduction
 1. Introduction
The word “tax” is derived from the Latin word “taxare” and the French word “taxes” which
are closely related to each other and refer to simply charge. The National Board of Revenue
(NBR) in Bangladesh is primarily responsible for levying taxes on different financial issues
and has the power of exercising taxation. The central government of Bangladesh generally
imposes a tax on different financial organizations, business organizations, and wealthier
individuals. According to the constitution of Bangladesh, Article 152(1) articulates that “the
taxation policy of Bangladesh can include the tax rates, general interest, imposition of local
or central tax, and taxes imposed on specific individuals”. According to the Income-Tax
Ordinance 1984, section 2(62) states that “income tax, additional tax, interest rates, excess
profit tax, liveable charges, payable fees, different penalties, and other charges are considered
as tax under the ordinance”. In Bangladesh, different charges on different issues are
considered as the tax that is imposed by the National Board of Revenue (NBR) which is a
supportive organisation of the government of Bangladesh. The government levies the tax on
specific individuals and different business profitable organizations to assuring security for the
citizens and provide different significant facilities in the society. Some people think that tax
is not a donation & voluntary payment but it is a helping payment to the country that is
collected by the central government of a country. In addition, tax is considered a primary
source of the country’s revenue from which the government of the country provides different
facilities to the citizens of the country. The main purposes of imposing taxes are including
developing a strong economic infrastructure, ensuring the security of the citizens, protecting
domestic industries of a country, offering different crucial public services for the general
people of the country, and investing in the defence of the country. Moreover, there are some
significant objectives of taxation that can include diminishing discrimination between rich
people & poor people of a society, consolidating total revenue for the government of the
country, reducing the consumption of unhealthy products or luxurious products, boosting the
economic growth of a country, and protecting domestic industries.

In Bangladesh, the National Board of Revenue categorizes tax into two major types that are
direct taxes and indirect taxes. The contribution of direct tax to the total revenue of the
government of Bangladesh is comparatively higher than indirect taxes. Direct tax means a tax
that is imposed by the government and collected from individuals & business organizations
that are more astonished to estimate their income than the government. In addition, income
taxes, gift taxes, property taxes, and other organizational taxes are considered direct tax that
is levied by the central government of the country. On the contrary, the indirect tax refers to a
common tax that is imposed by an intermediary which can be a retail shop on the customers
and collected tax from these customers who purchase different household products from the
retail shops. The indirect tax can include value-added tax (VAT), sales tax, service tax, and
per unit tax that is levied by the intermediary parties.

Indirect Tax includes different categories among which VAT, excise and customs duties,
stamp duty, and insurance premium taxes are the major ones. The national board is the core
authority for administrating activities and regulations related to tax in Bangladesh. VAT in
the broader sense is a transactional-based tax that is imposed upon the supplies of different
products and services. Indirect taxes have a great impact on accelerating the economic
progress of a country. It reduces the financial gap between the poor and the wealthy as it
allows the poor to collect and utilize their part. VAT is incorporated in the selling price of
goods and services and so the people do not feel they are being taxed as these are in very
small values. VAT and other indirect taxes are comparatively easier to collect because they
are collected as soon as a customer pays for the goods they are buying. These are collected by
the buyers and paid to the government which uses for the development of the economy and
progress of the society for infrastructural and financial development through equitable
distribution of the fund collected through taxes.
1.1 Background of the Study

Every government collects taxes in the form of direct and indirect taxes to mobilize resources
for that country. Generally, taxes are imposed to increase revenue and to provide public
goods and welfare services or to deal with externalities. In the direct tax family personal and
corporate income tax are key constituents. In this research, the term taxation is a synonym of
Corporate Income Tax (CIT), which is the most important tax instrument and is the focus of
our research. The foremost challenge of corporate taxation is to find an appropriate way to
raise the needed tax revenue. Corporate tax is a key constituent of the taxation system in
Bangladesh. A large portion of the income tax revenue of the Government of Bangladesh
(GoB) comes from the corporate sector. In the fiscal year 2016-17, the total collection of
income tax from the corporate sector was taka 318 billion, which was 60 percent of the total
income tax revenue of the GoB. The complexity of collecting taxes is an essential part of the
overall tax system in general, but regarding income tax, the extent of intricacy is of such scale
and scope that everyone wishes to understand it more easily. Even a slight misunderstanding
and error in implementing the provisions of income tax laws may lead to a higher tax burden
on corporate entities. Direct tax law of Bangladesh is now under review and the government
is considering a new and relatively unproblematic law to cope with the recent economic and
technological progress of the country.

This study reviews the tax laws and accounting aspects of corporate taxation as well as to
make an appraisal of corporate tax reforms in Bangladesh. Industrial policies are one of the
guiding policies to frame incentive structures for the corporate sector as the government has
some stated goals to achieve through those instruments. In this study, national industrial
policies (NIP) 2005, 2010 and 2016 and incentives provided under the direct tax code of that
period have been reviewed to determine the congruence among them. To get a complete
picture of corporate taxation in the South Asian region, this study has reviewed some
corporate tax-related issues of the selected countries to know the relative position of those
countries. Finally, this study has measured the corporate effective tax rate (ETR) of selected
companies to know the real tax load of those companies. Moreover, it also analysed some
determinants of variability of corporate ETR of the selected non-financial listed companies
on Dhaka Stock Exchange Ltd (DSE). The following sections of this chapter deal with
problem statement, objectives, literature review, development of hypotheses, and a detailed
methodology to accomplish this study. Finally, brief discussions about the thesis structure
and some concluding remarks have been presented.

Corporate Tax

Corporate tax is a kind of direct tax which is leviable on the net income of a company.
Earnings before tax are calculated by subtracting expenditures including the cost of goods
sold (COGS) and depreciation from revenues and other allowable deductions and additions
under the provision of tax laws, statutory tax rates are applied to produce a legal compulsion
the business owes the government.

Double Taxation

It is a condition where a jurisdiction imposes a tax on an income that has previously been
taxed in the same or another country. For example, corporate profits are taxed on the
corporate level at the corporate tax rate when they are earned, and then taxed again on a
personal level at a personal tax rate when the profits are distributed to the shareholders as a
dividend.

Effective Tax Rates (ETR)

For financial reporting purposes, it is the sum of taxes currently payable and deferred tax
expense divided by net income before tax. For tax reformer purposes, the effective tax rate is
defined as taxes paid currently divided by net income before tax. The second view is used in
this research.

Company

According to section 2 (20) of Income Tax Ordinance 1984 (later on has been mentioned as
ITO) company means a company as defined in the Companies Act, 1913 and Companies Act,
1994 and includes-

(a) A body corporate formed or created by or under any law that was in force for that time;

(b) Any state-owned banking or other financial organizations, Assurance Company and
manufacturing or commercial initiatives;

(bb) any organization or collection of person called by whatever name, if it is a company

according to the definition of companies act 1913 or 1994;

(bbb) any company formed under the act of a country beyond Bangladesh;
(c) Any overseas organization not formed under any law may be treated as company if the
board declare those enterprises as company for tax purpose.

Publicly Traded Company

From the assessment year 2002-2003, according to the explanation provided in the rate
schedule part of the finance acts, “publicly traded companies’’ are those companies which
have fulfilled the following two conditions:

a) Companies which are registered in Bangladesh according to the provision of the

companies 1913 or 1994;

b) Companies should be listed with stock exchanges before the year of assessment.

Tax Incentives

It may be defined as some activities by or at the direction of the government to achieve

economic objectives. The forms of tax incentives are full or partial exemption, exclusion or
deduction from income and reduced rate. Incentives are given to correct market failures and
to attract investments.

Tax Holiday

It is a stipulated time period, during which time the government eliminates corporate taxes on
certain sectors, or industries located in a specific area to encourage the sectors to grow and
flourish.

Tax Base

Tax base is the amount of income or asset on which tax liability are calculated. Tax liability
are calculated by using statutory tax rate on those amount of income or assets.

Hidden Tax

A hidden tax is a tax burden that is not directly understandable by the taxpayers. These types
of taxes can increase the prices of commodities and lower salaries for workers. Thus hidden
taxes can decrease the purchasing power of individuals significantly. Many types of tax
behave like hidden taxes one of them is CIT, because of this tax, shareholders, and employees
get less dividends and salary.
Externality

Externality may be defined as the result of an economic action experienced by an unrelated

third party. There is two type of externalities—positive and negative. Example of negative
externalities may be the tannery industry and example of positive externalities are educated
labor force.

1.3 Statement of the Problem

The business entity assumption is the original basis for imposing a separate corporate tax. It
partly describes the public view of the companies. This assumption can explain why two
levels of tax would be imposed. Another common interpretation is that corporate tax is
merely another type of tax on capital. General people support an income tax on corporate
profits because they believe that this tax is charged on owners of capital, the general people
do not have substantial amount of capital, as such, they assume that those who have enough
capital should be taxed. A common difference on this issue is the ‘‘hidden tax’’ argument.
This argument makes corporate tax an administratively suitable means of collecting revenue
because the general people does not comprehend that they eventually endure the load of this
tax. Some opponents of corporate tax have opined that the corporate tax continues because it
helps achieve the government’s revenue objectives more easily. There is a visible impact of
socio-economic, political, and ideological factors to shape the CIT laws. These laws help
determine the amount of revenues to be transmitted from the corporate sector to the treasury
to fund public goods, which economic activities to encourage or discourage through the
initiation of particular incentives and disincentives in the corporate tax laws. Besides, these
laws stimulate the overall economic activity explicitly through the reduction of tax load on
the corporate sector and its transference to other sectors of society to maintain the economic
stability of the society.

The President of Institute of Chartered Accountants of Bangladesh (ICAB) and taxation

subcommittee member of Metropolitan Chamber of Commerce and Industry (MCCI), Adeeb
H Khan said ‘‘cost of doing business in Bangladesh is already to some extent high because of
infrastructural inefficiencies. Besides, if businesses have to pay one third of their profits as
corporate tax, it can be discouraging for them. Also, investors have to pay a twenty percent
tax on their dividend that they take from the business. Potentially, an investor is thus paying
around half of his/her profit as taxes.’’
1.2 Aim of the Study

This study aims to assess the elements related to the Corporate tax system in Bangladesh and
its problems with remedial measures.

1.3 Objectives of the Study

The main objective of this study is to understand the corporate tax system of Bangladesh, its
structural problems and remedial measures. The specific objectives are:

1. To identify the Corporate Tax system and its contribution in the GDP of Bangladesh.
2. To identify the contribution of Corporate Tax in the economic development of
Bangladesh.
3. To identify the problems lies within the Corporate Tax system of Bangladesh.
4. To identify remedial steps to reduce the negative impacts of the Corporate Taxation
process to accelerate economic development.

1.4 Origin of the Study

The topic of this report is “Corporate Taxation System in Bangladesh: Problems and
Remedial Measures”. This has been prepared as a partial requirement of Master of Tax
Management courses under Department of Banking and insurance.

1.5 Limitation of the Study

The study will use relevant information with the government tax structure and collection in
Bangladesh. Therefore it will require extensive data from different government bodies like
National Board of Revenue (NBR), banks and non-bank financial institutions. The major
limitation of this study is due to time limitation it was not possible to make field research,
therefore, I had to focus on the secondary sources of data which are limited.

1.6 Structure of the Report

The report will start with an introductory review of the whole topic. Here the background of
the study, aims and objectives, scopes, and the limitation will be discussed. In the next
chapter there will be an extensive review of previous literature on the same topic for better
understanding and to compare the outcome of the analysis. In the third chapter, the
methodology used in this paper will be discussed in detail. A theoretical review of important
topics like Tax, Indirect Tax, tax collection and trends, and the effect on GDP will be
discussed in the next chapter. This chapter will also cover data analysis and I will interpret,
assess and evaluate the theoretical analysis for understanding the corporate tax system in
Bangladesh. Finally, the last chapter will include the findings, possible suggestions and
conclusion to the analysis.

Methodology
2. Methodology
In this part of the report, the methodologies used for making this report will be discussed. The
research structure, purpose, type of data used, data collection, research question and how the
overall analysis has been made will be discussed here.

2.1 Research Design

Research design means the mechanism used for analysing and evaluating the outputs of the
analysis. Most of the topics discussed in this paper will be covered from the theoretical
perspective of the elements of corporate tax structure and the overall economic condition in
Bangladesh. Therefore, the “Descriptive Research method” will be used in this paper.
Though statistical data collected from different sources will also be used to conduct the data
analysis portion.

2.2 Research Approach

In this report, the exploratory research method is applied to conducting this thesis report. The
crucial data are collected from different essential secondary data sources as secondary data
that can help the researchers conduct the research and make crucial decisions based on the
findings. To implement this study the researchers will analyse the feedback of the experts,
different recommendations, and research methodologies that are applied in this report. A
small number of people were interrogated regarding their knowledge, revenue structure,
experience, and opinions regarding the nation’s tax code, and tax administration.

2.3 Research Question

Research questions specify the factors that will be included in the paper to identify the impact
of related factors on the topic. It specifies the research questions so that important areas
regarding the topic can be assessed sequentially. The research questions include-

1. What is Corporate Tax?

2. How Corporate Tax is imposed in Bangladesh?
3. How the Corporate Tax and GDP relationship affect the overall economic growth in
Bangladesh?
4. What are the major negativities in collection process of corporate taxes?
5. How can the negativities of Corporate Tax system can be eradicated to increase GDP
growth rate?
2.4 Research Method

In this paper, both quantitative and qualitative method for analysing data has been used.
Qualitative data will consider the elements that affect the indirect tax collection and its
advantages and disadvantages. Quantitative or numerical sources of data will include
statistical graphs or charts showing trends in GDP rate and external or internal sources of
Corporate tax.

2.5 Sources of Data

The research procedure that will be used here is a combined method where both qualitative
and quantitative data will be assessed to make the evaluation and identification of the impact
of Corporate tax on the economic growth of the country.

Hence the data sources include-

2.6 Primary Sources of Data

Due to the time limitation and lack of resources no primary sources of data will be taken here
to make the analysis.

2.7 Secondary Source of Data

Most of the data in this paper will be accumulated from secondary sources. These will
consider- NBR reports, scholarly papers, textbooks, the website of Bangladesh Bank and
Bangladesh Bureau of Statistics, E-Books, journals etc. The thesis research paper will include
the presentation of the trend in corporate tax, trend in GDP, the growth rate of GDP and
amounts of tax collected for financing over the last few years. The representation of the data
will be done using Microsoft word and calculation will be done in excel.

2.8 Ethical Issues

Maintaining authenticity and the ethical standard is important to get the effective output from
the research and to make the best use of the results. Accordingly, the ethical standards that I
tried to follow in my research paper can be summarized as follows-

1. Authentic sources of data have been chosen and used for analysis.
2. Information that provides partial and controversial statements has been avoided
strictly.
3. Only relevant data that are directly connected to the topic will be used.
Literature Review
3. Literature Review
Literature review refers to the portion where scholarly articles and research on a particular
topic are discussed. Any research paper trying to establish a theory must discuss a literature
review. The portion generally discusses the past findings of research on the topic. A literature
review is one of the most important portions of any research because the review backs the
current research topic. When the previous findings backed research the stakeholders get more
comprehensiveness. On the other hand conflicts with the current results provides more
comparison opportunity and changes. A literature review also illustrates the literature gap on
the topic.

The literature review provides deep knowledge and comprehensiveness of the topic selected.
Indirect tax has been very significant for the development of the economy of Bangladesh.
According to many scholars, it has tremendously affected the transaction process, export-
import business, large constructions and development in the rural areas of Bangladesh. The
research also compares the contribution of Indirect tax and direct tax in the economy.

Taxation (VAT) and Economic Development

Taxation is a branch of accounting and taxes are a very old phenomenon; taxes are as old as
human civilization itself. The taxation history goes back to ancient days when we found a
certain reference about taxes in many old books like Arthshastra written by Kautilya
popularly known as Chanakya. This book includes valuable information regarding taxation
concepts, rules and regulations. According to Arthshastra, in ancient times, taxes were
levied and collected in both cash and kind. Gradually taxes have been classified in various
ways and direct tax and indirect tax are two of them. In most countries especially developing
countries like Bangladesh, tax policies are used as a tool for correcting fiscal imbalances
where indirect taxation plays a vital role.

Khondaker (2014) conducted a study based on the secondary sources of data provided by
KPMG to investigate the relationship between corporate tax rate and private investment in
the context of developing countries. He observed that experiential studies on industrialized
nations had found an opposite association between corporate tax and private investment.
Conversely, the effect of the reduction of the marginal effective tax rate on local private
investment in developing countries was neutral, and the effect of the average effective tax
rate on private investment was found unhelpful. It is also found that there was less investment
in foreign countries due to the high corporate tax rate in Bangladesh.
Alam and Masud (2007) studied on the key issues that have directed the recent tax reform
initiative in Bangladesh. They have identified that tax reforms in Bangladesh are done on a
fragmentary basis at different times. In addition to this, some comprehensive approach of tax
reforms also started from the 1990s mainly as a conditionality of donor agencies. The main
objective of these reforms was to improve the tax-GDP ratio by extending the tax base. They
pointed out the major reforms were done in Bangladesh in the field of income taxation like-
the initiation of TIN, simplification of self-assessment procedure, expansion the scope of
withholding tax, the formation of LTU and CIC, highlighting audit processes, deal with tax
evasion, specific steps for modernization of taxation system, etc. About achievements, they
stated that the achievements of tax reforms in Bangladesh are mixed. Though some
improvements have made in revenues, but, implementation, audit and collection efforts stay
weak which reflect the capacity constraints and resistance from some quarters. Widespread
court rulings on tax cases have damaged the revenue collection. About challenges they have
identified that: (1) Low level of compliance (2) Long processing cycles (3) Failure to gather
appropriate tax from the high-income segments of the society—businessmen, doctors,
lawyers, actors, professionals, and other self-employed professionals are the vital challenges.
They suggested that reforms in tax administrations should be well planned and extensive,
addressing inclusive strategy organization and job design, performance management, and
implementation of information technology. The study presents overall aspects of tax reforms
in Bangladesh. However, no survey was conducted in the study, rather only a few revenue
figures were used from secondary sources. However, the findings of the study provide some
indications for the present study.

Chowdhury (2003) in his study stated that through the reform process the tax system has
been subjected to a continuous process of changes and shuffles. A rate was increased one
year on one ground and further decreased in the following year on another ground. He
commented that tax reforms in Bangladesh seems to be mostly the output of administrative
policy who pursues to defend their position by lessening the political cost of tax issues while
thwarting a budget deficit.

Begum (2007) conducted a study on the tax effort and tax resilience in Bangladesh. She
found that Bangladesh tax effort index is very poor it is about one half among the developing
countries. The meaning of this index is, the country is not utilizing its optimum ability to
gather tax revenue. It also implies that there is huge potential of Bangladesh in the field of tax
revenue collection. Another finding of this study relating to tax buoyancy ratio, she found
that it is 1.25 in Bangladesh. It indicates that tax revenue is well respondent to GDP. This
study also shows that the tax revenue was augmented over the period mostly through several
reform initiatives. The study points out the scope of tax reforms and output of the reforms
which inspires for thorough studies using Bangladesh situation.

Badrul Ahsan (2010) in his short article published in an online journal mentioned those
income tax laws in Bangladesh are complex and it creates confusion in many things. In
Bangladesh, tax rates are high, company income is taxed double, and traders, manufacturers,
and service providers need to maintain a lot of papers only to fulfill taxation requirements
and a legal battle is usual between the tax department and taxpayers. It also increases the cost
of tax collection. He concludes that simple and transparent tax law and low tax rate ensures
compliance while ambiguity, discretion, and high tax rate promote evasion and corruption.

Akter (2010) in his study discussed about the unfriendly environment of the tax offices. He
stated that due to contradictory provisions in tax laws and misinterpretation of the tax
officials, taxpayers are harassed and they are taxed more. Due to harassment and anxieties for
taxes, more taxpayers hesitate to meet the tax officials. Detrimental attitudes towards assesses
by unfriendly tax officials resulted in a poor collection of revenue.

Khaled (2010) in his study presented some negative insights of the taxpayers and
inadequacies of the tax offices based on the newspapers column. He recommended executing
a business-like strategic management method to increase revenue. Though some significant
drawbacks are mentioned in these studies, however, these are presented from experience and
information from the media, not through the methodological study.

Rahman and Rahman (2010) conducted a study on the causes of revenue loss under direct
taxation in Bangladesh. They have identified six factors of non-compliance in the case of
income tax. These are - dodging, lack of consciousness, official harassment, and complication
of tax laws, lack of social benefits, and other reasons. By multiple regression analysis, they
found that each of these factors is significant for revenue loss in Bangladesh. In consideration
of the categories of taxpayers, this factors contribute significantly to the amount of revenue
losses in case of both private limited and public limited companies and contribute partially in
case of individuals, professionals, and companies having rental income; and no relation has
been found in case of the financial institutions.

Mondol and Roy (2010) on a study mentioned that no attempt has yet been made to estimate
the amount of tax revenue dodged every year. They conducted an initial study to simply
screen out the tax evasion situation and the tax gap ratio in Bangladesh. They stated that
gross tax evasion and avoidance have three components—non-filing, under-reporting of tax
owed and underpayment. They estimated that only the non-filing and under-reporting tax gap
is about 45 percent (non-filing 64% and under-reporting 33%). They have identified some
issues in measuring the tax gap in Bangladesh. These are tax evasion and avoidance, possible
exaggeration of tax liabilities, the suitability of data, and tricky transactions.

Literature Gap

By reviewing the related literature, I have found some Bangladesh related tax studies mostly
on tax reform and urgency for reform. But, we did not find any research covering the whole
spectrum of corporate tax related issues in Bangladesh, as I have set in my study objectives.
However, there is a lot of researches have been done on corporate tax law reforms, different
policies and tax incentives relationship and on analysis of ETR from different viewpoints in
abroad, mainly in some developed and developing countries. As we know that, different
economic conditions provide different results in the same area of research by changing the
viewpoints of research. There is a dearth of researches in the field of taxation in Bangladesh,
though there are some study on individual direct tax, but there is hardly any study particularly
in the field of corporate taxation in Bangladesh. So there is an ample scope to do research in
this field with my stated study objectives.
Analysis
4. Corporate Taxation System in Bangladesh

4.1 Corporate taxation system and its objectives

The National Board of Revenue (NBR) is in charge of ensuring that Bangladesh's business
tax system is fair and equitable. The corporation tax rate for openly listed firms and
institutions was reduced to 20% as of my most recent version in June 2023; however, the rate
for non-publicly listed corporations remained unchanged at 27.5%. In addition, listed
companies that provide cell phone services are subject to a tax rate of 40% (Uddin, 2021).
Meanwhile, unlisted mobile phone operators have a current corporate tax rate of 45%. For the
first three years after the year in which a company is initially registered on a stock market,
that company is eligible for a lower tax rate of 22.5%. This rate will remain in effect. In
addition, companies that are involved in the discovery, manufacturing, and transportation of
electricity or fuel can be eligible for certain tax benefits. Businesses located in special
economic zones (SEZs) or high-tech parks are eligible for a lower tax rate of 10% for the
very first period of time, followed by a rate of 15% for the following five years (Asen, 2020).
Another significant component of the tax system in Bangladesh is the Value-Added Tax
(VAT), which is imposed at a fixed rate of fifteen percent on the majority of taxable products
and services. Because tax rules and rates might have evolved during the last revision, it is
essential to keep in mind that it is best to keep track of the most recent tax legislation and
seek the advice of a tax expert in order to get the most up-to-date and correct knowledge
possible.

The objectives are:

Full Employment: Corporate taxes encourage companies to grow and retain more workers,
promoting prosperity and lowering unemployment rates in an effort to promote employment
while preserving an adequate workforce.

Economic Control: Governments use corporation taxes to control economic expansion,

reduce inflation, and affect general economic activity in an effort to maintain a stable and
balanced financial growth pathway for the country.

Collection of Revenue: Corporate taxes are an important source of income for the
government. It helps to pay for infrastructure improvements, governmental services, and
other vital social programmes, enabling the government to fulfil its fiscal obligations and
make investments in the welfare of its people.
Protection of Industry: Corporate taxation laws may be crafted to protect home businesses
from unfair competition, creating an atmosphere that is favourable to development,
innovation, and sustainability—all of which are essential for a country's financial security.

Economic Development: A country's economy and competence in the international

marketplace may be boosted by appropriate tax breaks and concessions that encourage
business investment in important industries, hence promoting employment, technical
improvements, and general economic expansion.

Redistribution of Income: By placing greater financial strain on prosperous firms,

proportional corporate tax rates aid in wealth redistribution and reduce income inequality,
promoting social prosperity and an increased fair allocation of resources.

National Income Increase: Good corporation taxation policies are essential for raising
national revenues, promoting economic progress, and ensuring the general comfort of the
populace since they provide funds for infrastructure and public programmes.

Figure 01: Objectives of Corporate Taxation System

4.1.1 Contribution of Corporate Tax in the economic development in Bangladesh
In the first seven months of the current fiscal year (FY), 2022-23, the government's tax
revenue collection continued to climb at a rate that was slower than the period's average, as
compared to the collection of tax revenues during the same time period in the previous fiscal
year. This is in comparison to the collection of tax revenues during the same time period in
the previous fiscal year. This was the case when compared to the amount that was collected
during the same time period in the fiscal year prior to the current one (Roshaiza, 2011). This
is a comparison of the outcomes that were acquired during the same time period in the fiscal
year before to the one that is now being used. The government's attempts to tighten its belt
are an indication of the sluggish economy, which is also causing individuals and business
organisations to suffer a fall in their earnings as a direct consequence of the slowdown in the
economy. As a result of the downturn, the government is tightening its belt. As a direct and
immediate response to the downturn, the government is now attempting to tighten its fiscal
controls (Shakhawat, 2021). The National Board of Revenue's (NBR) ability to mobilise
resources increased by more than 10% between July and January of Fiscal Year 23, which is
a time period that falls under Fiscal Year 23. In contrast to this, the average rise in tax
revenue collection during the preceding five years was 12%. This shows a significant
difference.

Contribution of Corporate Tax in the

economic development in Bangladesh

Corporate Tax
Revenue Corporate Tax Revenue
33% Others Tax Revenue

Others Tax Revenue

67%

Figure 02: Contribution of Corporate Tax in the economic development in Bangladesh

Revenue Generation: One of the main sources of income for the government is corporate
tax. Corporate tax money serves to support public services and initiatives that are essential to
economic development.

Investment and Economic Growth: Both local and international investment may be
stimulated by a fair corporation tax rate (Rahman, 2019). Tax rates that are lower may
encourage companies to develop, spend on new technology, and add more employees, all of
which will contribute to economic development.

Competitive Advantage: Retaining a corporation tax rate that is competitive with that of
nearby nations helps attract foreign direct investment (FDI). Businesses are more inclined to
set up businesses and make investments in Bangladesh when they perceive the tax climate to
be favourable, which promotes economic growth.

Infrastructure Development: The money collected from corporations' taxes may be used to
make improvements to transportation, borders, and power systems. Improved infrastructure
may spur economic growth by drawing in more capital and facilitating easier corporate
operations.

Fiscal Stability: Businesses benefit from the assurance that an ongoing corporation tax
system brings, which helps with future planning and making investments (Keen, 2010).
Companies are encouraged to undertake long-term investments by a tax climate that is
foreseeable, and this promotes economic development and predictability.

4.1.2 Corporate Tax Rates

Bangladesh keeps an ascending corporation tax rate structure that changes depending on the
kind of business and the industry it works in the most recent analysis. The regulatory agency
in charge of managing taxes in the entire country is the National Board of Revenue (NBR).

Particulars Tax rate

Listed companies with 10% or less paid-up
20%
capital raised through initial public offers
Listed companies with 10% or less paid-up
capital raised through initial public offers,
One person companies 22.5%
 Non-listed companies (insurance
companies, merchant banks and other 27.5%
financial institutions etc.)
Banks, insurance and other financial
institutions (except merchant banks) if not 40%
publicly listed
Banks, insurance and other financial
institutions (except merchant banks) if 37.5%
publicly listed
Tobacco product manufacturing companies
(companies, firms, and individuals) 45%
irrespective of listing status
Non-listed mobile phone operator
45%
companies
Listed mobile phone operator companies 40%
Association of persons, any artificial
judicial person created by law and other 27.5%
taxable entities
Ready-made garment manufacturers and
12%
exporters, Export-oriented companies
Textile Industries 15%

Table 01: Corporate Tax Chart (2023) in Bangladesh

Standard Corporate Tax Rate: In Bangladesh, banks and listed enterprises are subject to a
normal corporation tax rate of 20%. Revenue from routine company activities is subject to
this rate (Bray, 2023). However, the tax rate on taxable earnings for non-publicly listed
corporations is more, at 27.5%.

Tax Rate for Mobile Phone Operators: In Bangladesh, non-listed cell phone providers are
liable to a 45% special tax rate. Besides, the tax rate of listed mobile operator companies is
40% which is fixed after the announcement of budget 2023-24. The purpose of this increased
tax rate is to collect money from the nation's quickly expanding telecommunications industry.
Tax Rate for Newly Listed Companies: To incentivize advertisement newly listed firms on
the stock market are granted a tax benefit. Within the first three years after the year of listing,
companies are liable to a lower tax rate of 22.5% (Abedin, 2022). The purpose of this
inducement is to encourage businesses to enter the stock market and become public.

Tax Rate for Power and Energy Companies: Enterprises involved in the discovery,
extraction, and distribution of energy or electricity in Bangladesh could be eligible for certain
tax breaks. One of these incentives may be a lower tax rate. Regarding the most up-to-date
data, it is important to check the most recent guidelines.

Tax Rate for Companies in Special Economic Zones (SEZs): Businesses that operate in
technologically advanced areas or Special Economic zones (SEZs) benefit from advantageous
tax rates, which encourage the creation of these areas. During the first three years and the
next five years, consumers are taxable at a lower tax rate of 10% and 15%, respectively.

Value Added Tax (VAT): Value Added Tax (VAT) is an important component of taxes in
Bangladesh, even though it does not belong directly to corporate tax on earnings (Dey, 2018).
The majority of products and services are subject to a normal 15% VAT charge. Companies
must collect and return VAT on transactions in order to support government spending.

4.1.3 Capital Gains

The term "capital gains" describes the profit made when a capital asset—like stocks, real
estate, or pricey personal belongings—is sold for more money than it was originally
purchased. This signifies the variation between the commodity's selling price and its purchase
expenses, often known as its basis (Piketty, 2023). In most nations, the gain is taxable, either
at a reduced rate or in the person's relevant tax band.

Capital gains come in two types: short-term and long-term. Investments kept for a year or
shorter provide short-term capital gains, whereas investments kept for more than a year
produce long-term gains. To encourage long-term investment, long-term capital gains usually
pay tax at a rate that is cheaper (Campbell, 2023). When considering investment choices,
people as well as organisations often take capital gains into account. Tax considerations also
have a big impact on when and how selling assets should be timed. Furthermore, a number of
tax breaks and reductions may be available to lower the tax liability of capital gains,
promoting economic expansion and participation.

Particulars Rate (%)

 Statutory Tax Rate 10
Surtax Based on Taxable Income 0
Surtax Based on Statutory Tax 0
Surtax Deductible from Taxable Income 0
Statutory Tax Deductible 0
Effective Tax Rate 15

Table 02: Capitan Gain

15% tax is applied on capital gains from the exchange of shares and assets with capital (apart
from shares in a listed firm). Capital gains from the selling of shares in a publicly traded
corporation are liable to a 10% tax.

4.1.4 VAT and Other Taxes

The corporate taxation system in Bangladesh includes withholding tax, value-added tax
(VAT), and many additional taxes and penalties. These components are crucial to the nation's
overall revenue from taxes and spending control.

Value Added Tax (VAT): VAT is a crucial part of Bangladesh's tax structure. The usual
VAT rate is 15% as of September 2021, when the latest updated. VAT is charged on the
majority of products and services that are supplied. VAT must be collected from sales by
registered firms and remitted to the authorities. Companies may use the contribution tax
credit to balance the VAT they earn from sales against the VAT they spend on imports.

Withholding Tax: A person or organisation obligated to submit purchases for someone else
is obliged to gather withholding tax (Rahman, 2017). The charge of withholding tax in
Bangladesh varies based on the kind of trade. For instance, the percentage of withholding tax
that is deducted from payments for expert services might vary from 5% to 15%.

Customs Duties: Goods that are shipped or imported are subject to regulatory charges. In
addition to providing the government with income, these charges safeguard home grown
businesses. The kind of products being transported or shipped might affect the customs duty
rates.

Excise Duties: Indirect taxes known as sales taxes are imposed on certain locally created or
produced commodities, usually at the point of production. These may include things like
alcohol, cigarettes, and a few luxuries (IslaM, 2016). These fees are used to raise money for
the government while limiting the availability of certain products.

Advance Trade VAT: Develop Trade VAT is usually collected on goods or at an argument
of sale to retailers, and it is collected at several points in the manufacturing and distribution
cycle. It serves to guarantee the efficient gathering of VAT during the creation and delivery
method through prepaying the ultimate VAT obligation.

Supplementary Duty: A supplementary duty is an extra charge levied on certain luxury and
non-essential commodities in order to help the government make more money (Nurunnabi,
2016). The rates of additional duty are intended to discourage the use of certain commodities
and vary depending on the kind of goods.

4.1.5 Double Taxation Treaties

In an effort to circumvent the problem of double taxation, improve international trade and
spending, and foster bilateral trade, Bangladesh has signed a number of Double Taxation
Avoidance Agreements (DTAAs) with other nations. These deals aid in bringing clarity and
direction to the tax obligations of people and companies conducting business in both nations.

Number of DTAAs: Like other nations, Bangladesh has ratified DTAAs in an effort to
minimise or completely eradicate double taxation (Beasley, 2021). The United States, the
United Kingdom, India, China, Japan, and Singapore are prominent nations; the number of
agreements may have increased since the previous review.

Objective: Avoiding the responsibility of double taxation on identical money in both the
nation where it lives and the nation where it is generated is the main goal of these deals. Tax
avoidance and avoided taxes are other topics covered by DTAAs.

Taxation of Income: DTAAs specify the tax laws pertaining to various income streams,
including capital appreciation, interest, dividends, company earnings, and rights. According
to the kind of income, they usually assign taxation responsibilities to the taxpayer's home
nation or country of origin.

Tax Relief and Credits: To prevent people from paying twice, agreements frequently offer
assistance in the form of exceptions, lower tax rates, or tax refunds (Derbali, 2022). These
procedures make it easier for the two nations to divide tax money fairly.
Permanent Establishment: The definition of an ongoing presence in the source nation is
provided by DTAAs, and this definition is crucial for figuring out how much tax companies
that operate internationally must pay.

Exchange of Information and Dispute Resolution: These contracts frequently contain

clauses allowing data to be shared between the tax agencies of the signatory nations as well
as procedures for settling disagreements about how the treaty should be interpreted or put into
practise.
4.2 Contribution of Corporate Tax in GDP

Overall Tax Revenue in Bangladesh

Figure 03: Bangladesh Tax Revenue: % of GDP

When it comes to the government's attempts to generate income and carry out its fiscal
strategy, tax revenue is an essential component. In Bangladesh, a substantial portion of the
total money received by the government comes from taxation of its citizens and businesses
(Alam, 2017). Income tax, value-added tax (VAT), customs charges, and other taxes are
included in the category of numerous taxes that make up tax revenue.

Contribution of Corporate Tax to Total Tax Revenue

One of the most significant contributors to total tax income in Bangladesh is the corporate
tax. It is a large chunk of the overall tax money that the government brings in every year.
Variations in tax laws, shifts in economic circumstances, and other elements may cause
annual fluctuations in the proportion of overall tax income that is attributable to the money
collected by corporations.

Role of Corporate Tax in GDP

The percentage of the country's total economic production that is contributed by companies
and corporations is represented by the amount of tax revenue collected from such entities and
added to the GDP (Muttakin, 2015). The corporation tax is a direct tax that is charged on the
earnings and earnings of firms, and the money that is produced from the corporate tax plays a
vital part in the financing of both public services and growth initiatives.
Tax-to-GDP Ratio

The ratio of the country's total tax income to its gross domestic product (GDP) is an
important metric of the country's fiscal health compared to its overall GDP. In general, a
greater tax-to-GDP ratio indicates a bigger tax base as well as better revenue collection
measures. The ratio is affected by a variety of taxes, one of which is the tax on corporations
(Muhammad, 2015). Bangladesh's Tax-to-GDP Ratio is 7.4% in fiscal year 2022-2023, which
is 0.5 percent less than last year. However, it is essential to keep in mind that the proportion
of taxes to GDP is subject to vary as a result of adjustments in both tax policy and economic
circumstances.

Figure 04: Bangladesh Tax contribution to GDP

The NBR had earned Tk. 1,03,791 crore in FY22, which is 2.61 per cent of the country’s
GDP, show latest provisional data from the NBR and Bangladesh Bureau of Statistics (BBS).
Due to economic headwinds triggered by the Russia-Ukraine war, corporations and business
establishments could not regain their previous positions after Covid-19, which caused a
deficiency in the revenue collection, claimed NBR officials. Besides, a decrease of imports
abated domestic production and the overall business profits. Peoples’ purchase capacity
shrunk due to the high inflation Bangladesh witnessed during the last FY, which is also a
cause of the lesser contribution to tax to GDP, insiders said. Meanwhile, the NBR will face
significant pressure in the ongoing financial year, mostly to meet the International Monetary
Fund’s (IMF) $4.7 billion loan conditions. One of the IMF conditions is that Bangladesh has
to increase the tax-to-GDP ratio by 0.5 percentage points in FY24.

Government Revenue from Corporate Tax

Bangladesh Tax Revenue was reported at 4.631 USD bn in Jun 2023. The sum of all taxes
paid by companies and enterprises contributes to the overall amount of income received by
the public through corporate taxes. This money is used for a variety of public expenses, such
as the construction of important infrastructure, educational and medical programmes, as well
as other necessary services.

Trends and Growth Rates

A better understanding of the dynamics of business taxation in Bangladesh may be gained via
an analysis of the patterns and growth rates of collection from company taxes throughout the
years (Mahmood, 2022). It is possible for it to disclose trends in growth, uncover economic
variables that influence tax income, and assist in estimating the future impact of corporation
tax on the GDP.

Policy Impact on Corporate Tax Contribution

Modifications in tax legislation, including shifts in tax rates, reward programmes, and
regulatory frameworks pertaining to company tax, have the potential to have a substantial
influence on the proportion of corporate taxes to GDP. Assessing the regulatory-driven nature
of corporation taxes is made easier by doing an analysis of how different policy shifts affect
the production of income.

4.3 Problems with the Corporate Taxation System in Bangladesh

4.3.1 Complexity
Complex Tax Laws and Regulations: Bangladesh's tax rules and regulations are sometimes
complex and detailed, which makes it difficult for firms to comply (Titumir, 2021). Tax rules
are quite complicated and may need substantial resources for firms to stay up to speed with
changing legislation due to their frequent modifications and revisions.

Multiple Tax Authorities: Bangladesh has many tax authorities, each with its own set of
guidelines and protocols, such as the National Board of Revenue (NBR) and municipal
authorities. Companies may experience uncertainty and an increased administrative cost due
to similarities and the absence of harmonisation among various bodies.

Diverse Tax Rates and Incentives: The tax system of the nation has a complicated structure
since it includes different tax rates and benefits depending on the region, industry, and kind
of company (Belnap, 2023). Companies find it difficult to manage and successfully plan their
tax strategy due to the varying tax rates and exclusions across various industries.

Inefficient Tax Administration: Companies encounter difficulties as a result of

inadequacies in the taxation system, which include complicated audit processes, lags in
refunding taxes, and administrative roadblocks. These mistakes may make adherence more
expensive and make it more difficult for businesses to operate.

Lack of Clarity and Transparency: Companies may experience uncertainty due to

inconsistent implementation and unclear meaning of tax legislation. Inconsistencies in tax
laws and uneven application may give rise to disagreements and legal issues, which adds to
the tax system's complication.

4.3.2 High Tax Rates

Corporate Tax Rate (2014-2023)

35.00%

30.00%

25.00%

20.00%

15.00%

10.00%

5.00%

0.00%
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023

Corporate Tax Rate (2014-2022)

Figure 05: Bangladesh Corporate Tax Rate – 2023 (Belnap, 2023)

High Corporate Tax Rates: Bangladesh has a comparatively high corporation tax rate; since
June 2023, openly listed firms and banks have been liable to a 20% income tax rate. The rate
for non-publicly listed firms is significantly greater, at 27.5%, which makes it difficult for
enterprises to save a sizeable amount of their revenues for expansion and development.

Impact on Competitiveness: Companies in Bangladesh may be unable to compete with

those in nations with lower corporation tax rates as a result of high tax rates. Both luring in
foreign capital and keeping in-country companies are impacted, which might impede
economic expansion and create jobs.

Inhibiting Investments: Future investors may be discouraged from making capital

investments in the nation by the high tax rates (Asaduzzaman, 2021). Acquisitions are
essential to the growth of economies and enterprises, and since tax rates rise, entrepreneurs
may choose to locate in other countries with more tax-friendly policies.

Constraints on SMEs: It may be especially difficult for small and medium-sized enterprises
(SMEs), which often constitute the foundation of a nation's economy, to deal with high tax
rates. High taxes may put a strain on company finances and make it more difficult for them to
grow, develop, and successfully trade.

Discouraging Entrepreneurship: High tax rates might deter businesses and initiatives since
they can result in excessive expenses in taxes in the initial stages of a company's existence.
This might inhibit creativity and the formation of new businesses.

4.3.3 Tax Evasion

Widespread Tax Evasion: In Bangladesh, tax evasion is a widespread problem where both
big and small companies use illicit means to avoid paying taxes (Dhar, 2022). The
government's attempts to gather the funds required for infrastructure development and
essential services are hampered by this pervasive avoidance.

Underreporting of Income: Several companies intentionally understate their revenue in

order to pay less in taxes. This may be done in a number of ways, including falsifying
invoices, disguising income sources, and tampering with financial documents.

Underreporting of Income: A substantial portion of the economy in Bangladesh is informal,

with most economic activity being unregistered (Muttakin, 2015). To avoid paying taxes and
complying with regulations, a large number of enterprises engage in the informal sector,
which exacerbates tax evasion and reduces profits.
Lack of Effective Enforcement: Because tax rules and regulations are often not adequately
enforced, tax evaders might escape unnoticed and unjustly. This inadequate regulation
promotes tax evasion and inhibits participation.

Complex Tax Laws and Compliance Challenges: There is potential for tax evasion since
tax rules and compliance processes are complicated. Smaller enterprises in particular may
find it challenging to understand the complex tax code, which might unintentionally result in
failing to comply or tax evasion.

Need for Enhanced Monitoring and Compliance Measures: In order to successfully fight
tax evasion, more transparent tax legislation, better monitoring systems, and simpler tax
regulations are urgently needed (Alam, 2017). Tax evasion may be reduced by putting
policies in place including digitising tax procedures, bolstering the tax system, and
encouraging tax literacy.

4.3.4 Lack of Transparency

Opaque Tax Regulations and Procedures: Bangladesh's tax laws and processes may be
confusing and complicated, rendering it challenging for companies to completely
comprehend their tax responsibilities. Tax regulations that are unclear might give rise to
disagreements, misunderstandings, and infringement.

Inconsistencies in Tax Application: A lack of transparency may result from variations in

how tax laws and rules are applied in various areas or industries (Rahman, 2017).
Unpredictability in the application of tax regulations may affect a company's capacity to
successfully plan and spend.

Limited Access to Information: It is sometimes difficult to get thorough, current, and

readily comprehensible tax data and counsel. The inaccessibility of this information makes it
difficult for firms to comprehend their tax obligations and relevant advantages.

Informal Economy and Underreporting: Transparency in tax collection is hampered by the

existence of an informal sector, where activities often go undetected (Burgers, 2017). Tax
revenues for the government may decrease as a consequence of inadequate reporting of
activities and earnings.

Challenges in Tax Administration: The effectiveness and openness of the tax

administration system are now facing problems. Understaffing, a lack of resources, and
regulatory roadblocks may make it difficult to handle tax cases quickly and provide
consumers with exact data.

Need for Enhanced Disclosure and Public Awareness: Public education programmes and
stricter disclosure rules are important to combat the lack of openness (Masud, 2020). A more
transparent tax system may be promoted by making details regarding tax rules,
responsibilities, and benefits readily available.

4.3.5 Inefficient Tax Collection

Tax Evasion and Underreporting: In Bangladesh, tax evasion and underreporting of
income are common problems that result in economic breaches. In order to prevent spending
the proper quantity of taxes, companies may resort to unlawful activities, which would lead to
ineffective tax collection.

Inadequate Tax Compliance: Insufficient adherence to tax regulations by companies is a

prevalent issue that arises from insufficient knowledge, complex tax regulations, and
ineffective management processes. This impedes effective tax collection by causing
inaccurate or late returns.

Burdensome Administrative Procedures: In the tax collecting manipulation, inefficiency,

and onerous administrative processes may hinder attempts to collect taxes (Hassan, 2016).
Protracted procedures and needless bureaucracy may deter companies from complying on
time.

Limited Enforcement Capacity: The tax administration' capacity to effectively track and
enforce tax compliance may be hampered by a lack of resources, particularly cutting-edge
technology, and a paucity of experienced workers.

Delayed Refunds and Disputes: Taxpayers may get irate over disagreements over the
calculation of taxes and delays in receiving their returns (Andersen, 2018). Refunds and
dispute resolutions that take a long time to process have an impact on firms' ability to pay
taxes.

Informal Economy Challenges: Since the underground economy is so prevalent in

Bangladesh, it is difficult for tax officials to successfully collect taxes from companies in this
industry. In the informal sector, operations often go undetected.
4.4 Remedial Measures

4.4.1 Simplify Tax Laws

A crucial corrective action is to streamline tax legislation in order to improve Bangladesh's
business taxation system. Simplifying tax laws and processes may result in more adherence
and more efficient tax collection as they are brief, simple to comprehend, and
straightforward. Eliminating these regulations may lower firms' compliance expenses and
promote voluntary tax adherence. More clear and consistent tax surroundings, for example,
may be achieved by simplifying the tax system, lowering the variety of tax rates, and getting
rid of uncertainties. Cost reductions are another benefit of reduction (Darcy, 2017). A World
Bank analysis claims that nations with streamlined tax-filing procedures have seen reduced
enforcement costs, which makes it simpler for companies to pay their taxes. Bangladesh can
foster a profitable atmosphere and increase revenue generation by streamlining tax rules and
processes, which would eventually support economic development.

4.4.2 Lower Tax Rates

Reducing tax rates is an essential corrective action to improve Bangladesh's business taxation
framework. Raising taxes may discourage investment, impede economic expansion, and
promote tax avoidance. Bangladesh may encourage corporate development, draw in
international investment, and foster indigenous entrepreneurship by lowering tax rates. In
Bangladesh, the corporation tax rate for banks and openly listed firms is 25%, while the rate
for non-publicly listed firms is higher at 32.5%. Companies, in particular small and medium-
sized firms (SMEs), may benefit from a reduction in these rates, particularly for non-publicly
listed organisations. The influence of tax rates on financial decisions is shown by statistics
from throughout the world. Lower tax rates are linked to stronger business environments and
greater levels of fiscal responsibility, according to the World Bank's Doing Business 2020
report (Sarker, 2020). By creating a larger tax base, an equitable tax rate decrease may boost
tax compliance, boost economic development, and eventually raise government income.

4.4.3 Enhance Tax Compliance

Improving tax compliance is an essential corrective action to strengthen Bangladesh's
business taxation framework. Good compliance guarantees that companies pay their taxes on
time and correctly, which supports a just tax structure and higher tax revenue generation.
Bangladesh has difficulties with tax compliance because of the intricacies of the tax code and
the ineffectiveness of its administration. Enhancing tax compliance procedures, including
rendering tax payments simpler, quicker, and less expensive, is linked to greater instances of
tax compliance, according the World Bank's Doing Business 2020 report. Tax compliance
rates may be greatly increased by putting innovative technologies into practise, streamlining
tax forms and processes, holding educational and outreach events for taxpayers, and making
sure that taxes are administered transparently and effectively. Bangladesh can increase tax
collection, back up essential services, and foster economic growth by encouraging a culture
of tax compliance and simplifying the procedure for enterprises.

4.4.4 Improve Transparency

Enhancing the level of openness in Bangladesh's corporate taxation system is an essential
corrective action to deal with a number of issues. Transparency increases taxpayer-
government confidence while promoting a fair tax environment and fewer chances for
evading taxes. Bangladesh was dealing with problems with uneven tax implementation,
complicated tax legislation, and a lack of transparency. The Global Competitiveness Report
2019 states that for firms to properly plan their tax tactics, there must be clarity in tax rules
and an intimate knowledge of the tax code (Masud, 2020). Transparency may be greatly
increased by putting into practise policies like publishing simple and easy-to-understand tax
rules, making tax duties and rewards widely available, strengthening disclosure standards,
and encouraging efforts to educate the public. Improved tax compliance and a positive
business climate are two benefits of transparency, which also helps Bangladesh's economy
expand sustainably and generate income.

4.4.5 SME-Focused Policies

One of the most important corrective actions to fortify Bangladesh's corporate taxation
structure is the implementation of SME-focused legislation. Since they account for a sizeable
share of the economy, small and medium-sized enterprises (SMEs) demand tax strategies that
are specifically adapted to their requirements in order to encourage development and
stability. The International Finance Corporation (IFC) asserts that Bangladesh's GDP and
employment are greatly boosted by SMEs. According to statistics from the World Bank,
SMEs have particular difficulties complying with tax laws because of their limited funding
and the complexity of tax laws (Burgers, 2017). This industry may gain a great deal from the
implementation of policies including lower tax rates for SMEs, streamlined tax filing
processes, tax credits for expenditures and creativity, and focused on educating taxpayers.
These actions may improve tax adherence, lessen the cost of compliance on SMEs, and create
an atmosphere that is favourable to their expansion, all of which will eventually aid in the
financial growth of Bangladesh.

4.4.6 Invest in Tax Infrastructure

Developing tax infrastructure is an essential corrective action to fortify Bangladesh's
corporate taxation framework. Tax authorities may increase total tax collection, simplify tax
procedures, and increase productivity by investing in more employees and more advanced
technology. Bangladesh has difficulties because of its limited ability to handle taxes. Greater
amounts of tax compliance may result from updating tax management processes and making
information technology investments, based on the World Bank's Doing Business 2020 report.
A nation's competence is favourably impacted by effective management of taxes, which is
made possible by cutting-edge technology and highly competent staff members, according to
data from the World Economic Forum Global Competitiveness Report 2019-2020 (Saha,
2019). Bangladesh can greatly improve its tax gathering performance, lower business
compliance expenses, and eventually spur economic growth by putting money into tax
infrastructure, such as updating tax collection systems, digitising procedures, instructing tax
collectors, and implementing sophisticated analytics for data.

4.4.7 Capacity Building

One of the most important corrective actions to strengthen Bangladesh's business taxation
system is the enhancement of capacity. Improving the talents, know-how, and expertise of tax
administrators, individuals, and other parties involved in the areas of taxation, regulations,
and conformity is what it entails. Based on the Doing Business 2020 report by the World
Bank, there exists a positive correlation between enhanced knowledge and abilities of tax
officers and better tax compliance. The World Economic Forum's Global Competitiveness
Report 2019-2020 highlights the significance of competent tax administration knowledge and
regulatory efficacy in determining a nation's viability (Shao, 2019). Engaging in tax officials'
education via seminars, conferences, training programmes, and exchange of information
portals helps improve their comprehension of changing tax legislation, global best practises,
and contemporary tax management methods. This may eventually support Bangladesh's
economic development by resulting in better user amenities, more efficient tax collection, and
a business-friendly atmosphere.
4.4.8 International Collaboration
One of the most important corrective actions to fortify Bangladesh's business taxation system
is a global partnership. When tackling tax-related issues, working together with other nations
and international organisations can offer insightful information, best practises, and support
(Nargis, 2019). According to the Organisation for Economic Co-operation and Development
(OECD), governments can combat tax fraud and escape by working together internationally,
especially via programmes such the Base Erosion and Profit Shifting (BEPS) project.

Conclusion
5. Conclusion

5.1 Findings

1. Proper collection and increment in tax revenue encourage gross saving and reduce
consumption. Which directly raises more awareness of economic development and the proper
use of funds. Although taxes on trade activities increases the GDP rate it harms gross savings
as the tendency of demand and consumption for local goods increases. A balanced structure
should be maintained so that people largely depend on local products rather than imported
ones and this may help in increasing national revenue.

2. Imposing indirect taxes on certain areas like education and scholarly works may affect
economic growth adversely. The unemployment rate in Bangladesh is currently 5.40% which
is on decreasing trend. Corporate Tax should not be imposed on growing business sectors
rather decreasing the charges in such sectors may contribute positively to economic
development.

3. In the post-pandemic period most of the business and economic activities are adopting
changed mechanisms of selling products and services. For example, increases in online sales,
and activities have dramatically changed over the past years. Revenue generation through
Corporate Tax incurred from online sales have great importance in developing the country
and increases the rate of GDP as it removes the obstacles of operating in international
markets.

4. The inflation rate harms the growth rate of GDP and hence economic development. The
current market crisis arising out of the Ukraine and Russia Wars and the Dollar market crisis
has been impacting negatively on the purchasing power of the people. Which has reduced
their power of buying as well as decreased the capacity of sellers and manufacturers to
produce and so contribute through their income and Corporate Tax collection. Customized
plans like reducing Corporate Tax on necessary consumer products may reduce such crises as
well as enhance customers’ motivation Corporate Taxation on paying Corporate Tax.

5. Although Corporate Tax has great importance in the economic development and growth of
GDP in Bangladesh it is not as significant as that of the developed countries. One of the
major reasons of it that most of the retail shops like groceries, services centres and online
shops are not enlisted in the NBR of Bangladesh. Hence they do not collect Corporate Tax
and provide a share of their earnings through TAX. Hence this has been reducing the pace of
such development. All business entities despite their types of proprietorship and operation
may be brought under the enlisted of NBR.

5.2 Recommendation

1. Currently, the waning pandemic situation and faster economic recovery have been
opening up greater opportunities. There are opportunities for plentiful jobs and fast-
growing personal and corporate incomes. Though there is the challenge of high and rising
inflation and the Russian war, the dollar market crisis. Hence the policymakers need to
focus on boosting the capacity of productivity in agricultural, technological,
pharmaceutical, RMG sectors etc. through implementing reformed Corporate Tax and
taxation codes. So that the collective revenue can be utilized for further and greater
economic development and GDP growth of the country.
2. Corporate Tax is the major portion of business taxation and one of the crucial sources of
revenue for government expenditure. In Bangladesh, there are still many small and
medium-sized business organisations which are not brought under the umbrella of the
taxation process properly. Hence the tax code through Corporate Tax should be brought
effectively to encourage innovation Corporate Taxation, competitiveness, investment, and
the dynamism which can lead to better productivity and opportunities for economic
growth. Streamlining the benefits of paying corporate tax, reducing the complicated
provisions and removing the tax penalties may assist in the more efficient collection and
utilization of indirect taxes.
3. Every year the National Board of Revenue (NBR) arranges events and awards ceremonies
to acknowledge the business entities that pay the highest amount of Corporate Tax. This
is done to encourage the companies to fulfil their responsibility and contribute to national
economic progress. Such acknowledgement should be provided more for paying
Corporate Tax on time and using effective mechanisms for such collection to enhance the
positive impact of Corporate Tax on the economy.
4. A country gets wealthy when its government becomes able to collect tax revenue
properly. This plays an enormous positive contributor in the country’s GDP. In the study,
it has been observed that over the years and after the adoption of Corporate Tax policies
in Bangladesh the growth rate of GDP has been growing high and this reached about
15.2% on average over the fiscal year 1991/92 to 2019-2020. Hence to streamline this
growth and avail greater possibilities both public and Private Sector corporations and
 businesses should be aware of the proper taxation systems at both personal and business
levels.
5. Economic activities using online platforms and social media like Facebook has been
increasing rapidly. This has been raising the chances of incidents related to tax evasion. In
this situation integration and adoption of the technology-based process to collect
Corporate Tax may contribute to compliance towards Corporate Tax.
6. In control of the Corporate Tax regression and its consequent impact on low-earning
households, the government needs to adopt social protection policies, especially for the
urban areas. These programmes should be designed and implemented to assure that the
eligible people and their businesses know which benefits are they entitled to through the
Corporate Tax proof and how to get access to them. Nevertheless, these efforts should
majorly be focused on accelerating revenue mobilization from more equitable and
advanced tax levers and to contribute the growth of the GDP of the country.

5.3 Conclusion

From the analysis, it can be said that indirect taxes have a mentionable contribution to the
GDP of Bangladesh where the collection of indirect tax has an almost perfect positive
correlation with GDP. The statistics support that, the collection of indirect taxes has been
increasing with the increase of GDP over the period though its speed fell a bit in the year
2006-07. If the collection efficiencies of indirect taxes under two broad categories are
compared, it is noticed that the collection of both import-export level and local-level indirect
taxes is gradually increasing although it is evident that the collection of local-level indirect
taxes is increasing faster than the collection of import-export level indirect taxes. Up to 2009-
10, the collection of import-export level indirect taxes was healthier than the local-level
indirect taxes. Afterwards, the contribution of locally collected indirect taxes gradually
increased faster and its amount exceeded the collection of import-export level indirect taxes.
As a result, presently local indirect taxes have more contribution to the GDP of Bangladesh.
The review of the literature claims that the proportion of indirect taxes must be less than that
of direct taxes. And the more indirect taxes in a country, the larger will be the gap between
the rich and the poor classes of people. Since taxes are the most important and reliable source
of government revenue in any country, taxes must be imposed and collected for the smooth
operation of the government. But while designing and redesigning the taxation system, the
authority should try to decrease the dependency on indirect taxes by increasing the collection
of direct taxes. If it can be done, the exploitation of the poor class people will decrease which
will act to lowering the gap between the poor and rich class’s people, the fundamental goal of
taxation
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