Course: Taxation (A 408)

Introduction

Key Words / Outline

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Issues to be discussed:
Overall Taxation System
Constitutional Provision of Taxation
Regulatory Framework of Taxation
Concepts of Business Taxation
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OVERALL TAXATION SYSTEM:
Taxes & Collection Authorities
Broad Authority Specific Authority Taxes
NBR (National Direct Tax Wing Taxes on Income and Profit
Board of Gift Tax
Revenue) Foreign Travel Tax
Indirect Tax Wing Customs Duty (Import Duty, Export
Duty, Regulatory Duty)
Value Added Tax
Supplementary Duty
Turnover Tax
Excise Duty
Non-NBR Narcotics Control Department, Narcotics and Liquor Duty
Ministry of Home Affairs
BRTA, Ministry of Taxes on Vehicles
Communication
Ministry of Land Land Revenue
Ministry of Land Stamp Duty (Non-Judicial)
NBR is established under the National Board of Revenue Order, 1972 (30.6.1972)
Amended by the NBR (Amendment) Ordinance 2008 [Ordinance No. 25 of 2008], promulgated by the
President on June 1, 2008, w.e.f. 21.4.1979. The Ordinance was repealed by the NBR (Amendment)
Act 2009 [Act No. 12 of 2009; 24.2.2009] with same content and effect..
 OVERALL TAXATION SYSTEM:
Recent Trend of Tax Structure
Budget
Actual Budget Revised 2012-
Tax Structure 2010-11 2011-12 2011-12 13
Tax-GDP Ratio 10.10 10.65 10.53 11.22
Revenue-GDP Ratio 11.81 13.16 12.56 13.41
Total Tax
Structure:
Direct Tax : Indirect 32.7 : 32.9 : 33.8 : 34.9 :
Tax 67.3* 67.1 66.2 65.1
Indirect Tax
Structure:
Border Tax : 34.0 : 33.6 : 32.0 : 30.5 :
Domestic Tax 33.3* 33.5 34.1 34.6
Total Revenue
Structure:
* Revised Budget 85.5 : 80.9 : 83.8 : 83.6 :
Tax : Non-Tax 14.5 19.1 16.2 16.4
 National Budget 2012-13 at a Glance
(Amount in crore Taka)
Actual Budget Revised % of Budget % of
Particulars 2010-11 2011-12 2011-12 TE 2012-13 TE % incr
Revenue 92,991 118,385 114,885 71.3 139,670 72.8 21.6
Tax Revenue 79,548 95,785 96,285 59.7 116,824 60.9 21.3
NBR Tax Revenue 76,248 91,870 92,370 57.3 112,259 58.5 21.5
Non-NBR Tax Revenue 3,300 3,915 3,915 2.4 4,565 2.4 16.6
Non-Tax Revenue 13,443 22,600 18,600 11.5 22,846 11.9 22.8
Total Expenditure (TE) 128,268 163,589 161,213 100.0 191,738 100.0 18.9
(% of GDP) (16.29) (18.18) (17.62) (18.41)
ADP 33,284 46,000 41,080 25.5 55,000 28.7 33.9
Non-ADP 94,984 117,589 120,133 74.5 136,738 71.3 13.8
Deficit (excl. For. Grants) -35,277 -45,204 -46,328 -28.7 -52,068 -27.2 12.4
(% of GDP) (4.5) (5.0) (5.1) (5.0)
Financing 35,276 45,204 46,328 28.7 52,068 27.2 12.4
Foreign Grants 2,058 4,938 4,460 2.8 6,044 3.2 35.5
Foreign Borrowing-Net 2,629 13,058 7,399 4.6 12,540 6.5 69.5
Domestic Borrowing 30,589 27,208 34,469 21.4 33,484 17.5 -2.9
GDP 787,495 899,670 914,784 1,041,360
Tax GDP Ratio 10.10 10.65 10.53 11.22
 Tax Revenue Target
Tax Revenue Rev. Budget 2011-12 Budget 2012-13 % Incr
NBR Portion Tk. (crore) % Tk. (crore) % FY12
Taxes on Income and Profit: 28,061 29.14 35,300 30.22 25.80
Companies 18,061 18.76 21,886 18.73 21.18
Other than companies 10,000 10.39 13,414 11.48 34.14
Value Added Tax (VAT): 34,304 35.63 40,466 34.64 17.96
VAT on Imports 13,739 14.27 15,832 13.55 15.23
VAT on Domestic Goods & Services 20,560 21.35 24,628 21.08 19.79
Turnover Tax (TT) 5 0.01 6 0.01 18.40
Customs Duty: 12,664 13.15 14,568 12.47 15.04
Import Duty 12,634 13.12 14,528 12.44 14.99
Export Duty 30 0.03 40 0.03 33.33
Excise Duty 450 0.47 997 0.85 121.58
Supplementary Duty (SD): 16,220 16.85 19,969 17.09 23.11
SD on Imports 4,373 4.54 5,200 4.45 18.91
SD on Domestic Goods & Services 11,847 12.30 14,769 12.64 24.66
Other Taxes and Duties: 671 0.70 959 0.82 42.92
Travel Tax 671 0.70 959 0.82 42.93
Other Taxes & Duties 0.4 0.0004 0.5 0.0004 28.57
Sub-Total: NBR Portion 92,370 95.93 112,259 96.09 21.53
Non-NBR Portion
Narcotics and Liquor Duty 65 0.07 72 0.06 10.77
Taxes on Vehicles 900 0.93 1,100 0.94 22.22
Land Revenue 550 0.57 608 0.52 10.58
Stamp Duty (Non-Judicial) 2,400 2.49 2,785 2.38 16.04
Sub-Total: Non-NBR Portion 3,915 4.07 4,565 3.91 16.61
Total Tax Revenue 96,285 100.00 116,824 100.00 21.33
 Tax Structure in the Budget
Rev Budget 2011-12 Budget 2012-13 % Incr over
Tk. (crore) % Tk. (crore) % FY12
Direct Tax: NBR 28,732 29.84 36,259 31.04 26.20
Direct Tax: Non-NBR 3,850 4.00 4,493 3.85 16.71
Total Direct Tax 32,582 33.84 40,752 34.88 25.08
Indirect Tax: NBR 63,638 66.09 76,000 65.06 19.43
Taxes at Import Stage 30,776 31.96 35,600 30.47 15.67
Taxes at Local Stage 32,862 34.13 40,400 34.58 22.94
Indirect Tax: Non-NBR 65 0.07 72 0.06 10.77
Total Indirect Tax 63,703 66.16 76,072 65.12 19.42
Total Tax 96,285 100.00 116,824 100.00 21.33
(% of Total Revenue) (83.81) (83.64)
Total Non-Tax Revenue 18,600 22,846 22.83
(% of Total Revenue) (16.19) (16.36)
Total Revenue 114,885 139,670 21.57
Tax-GDP Ratio 10.53 11.22
Revenue-GDP Ratio 12.56 13.41
Tax-GDP Ratio in Sixth FYP 10.60 11.20
Revenue-GDP Ratio in SFYP 13.20 13.40
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Constitutional Provision of Taxation

The Constitution of the Peoples Republic of Bangladesh
CHAPTER II: LEGISLATIVE AND FINANCIAL PROCEDURES (Article 80 to
Article 92)
Article 83: No taxation except by or under Act of Parliament
No tax shall be levied or collected except by or under the authority of an Act of
Parliament
Article 152: Interpretation
Taxation includes the imposition of any tax, rate, duty or impost, whether
general, local or special, and Tax shall be construed accordingly.
Article 81: Money Bills
Provisions dealing with the imposition, regulation, alteration, remission or
repeal of any tax shall be treated as a Money Bill [Article 81(1)(a)]
Article 82: Recommendation for financial measures
No Money Bill shall be introduced into Parliament except on the
recommendation of the President. But in any Money Bill no recommendation
shall be required under this article for the moving of an amendment making
provision for the reduction or abolition of any tax.
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Constitutional Provision of Taxation

Accountability of Budget
Article 85 of the Constitution: Regulation of Public moneys
under the Act of Parliament

Public Finance and Budget Management Act 2009 (Act No.

40 of 2009; dated 24.02.2009):
Sec. 10: Budget before starting the FY
Sec. 12: Revised Budget by March as far as possible
Sec. 15(4): Quarterly review of revenue collection expenditure
trend and a report on the result of the review and the actions to
be taken has to be presented in the next session of the
Parliament
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Constitutional Provision of Taxation

Legislative procedure under Article 80 of the Constitution
(1) Every proposal in the Parliament for making a law shall be made in the form
of a Bill.
(2) When a Bill is passed by the Parliament it shall be presented to the
President for assent.
(3) The President, within 15 days after a Bill is presented to him, shall assent to
the Bill or, in the case of a Bill other than a Money Bill, may return it to
Parliament with a message requesting that the Bill or any particular
provisions thereof be reconsidered and that any amendments specified by
him in the message be considered; and if he fails so to do he shall be
deemed to have assented to the Bill at the expiration of that period.
(4) If the President so returns the Bill Parliament shall consider it together with
the Presidents message, and if the Bill is again passed by Parliament with
or without amendments by the votes of a majority of the total number of
members of Parliament, it shall be presented to the President for his assent,
whereupon the President shall assent to the Bill within the period of 7 days
after it has been presented to him, and if he fails to do so he shall be
deemed to have assented to the Bill on the expiration of that period.
(5) When the President has assented or is deemed to have assented to a Bill
passed by Parliament it shall become law and shall be called an Act of
Parliament.
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Constitutional Provision of Taxation

Legislative prepares the draft Act

IRD/NBR
Process of
Enacting a Ministry of Law verifies the technical aspects an Act
Tax Law places the Act to the Cabinet for approval
Return to IRD/NBR
approves the draft Act
Cabinet
Finance Minister places the Act in the Parliament as a Bill
Parliament
finalizes the Act with detailed scrutiny
Standing Committee
Ministry of Finance has 4 debates organized & the Act passed
Divisions: Finance Division, Parliament
Internal Resource Division (IRD),
given to the Act for final enactment
Economic Relations Division Presidential Assent
(ERD), and Banking & Financial
Institution Division from publishes & then circulated
Official Gazette
21.12.2009. NBR is the apex tax
body & its Chairman is IRDs
Secretary.
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Regulatory Framework of Taxation

Sources of Regulatory Power
Primary Authorities
Legislative Code: Tax Statutes
Treasury regulations: Tax Rules & SRO (Statutory Rules and
Order);
Administrative pronouncements: NBRs Circulars, Explanations,
Orders
Judicial decisions: Verdicts of the High Court Division and the
Appellate Division of the Supreme Court
Parliamentary Standing Committee Reports: Reports containing
any ruling or clarification on Tax Matters
Secondary Authorities consist primarily of tax
professionals, commercial tax services, and tax journals
Published Sources
Web-based materials

Regulatory Framework of Taxation:
Taxes & Tax Laws
Taxes
Taxes on Income and Profit
Gift Tax
Foreign Travel Tax on travel by
air/land/water
Customs Duty (Import Duty, Export
Duty, Regulatory Duty)
Value Added Tax
Supplementary Duty
Turnover Tax
Excise Duty on Bank Account &
Domestic Air Travel
Narcotics and Liquor Duty
Taxes on Vehicles
Land Revenue: Land Development Tax
Stamp Duty (Non-Judicial)
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Tax Laws
The Income Tax Ordinance 1984 and the
Income Tax Rules 1984
The Gift-tax Act 1990
The Travel Tax Act 2003
The Customs Act 1969
The Value Added Tax Act 1991 and The
Value Added Tax Rules 1991
The Excise and Salt Act 1944
The Narcotics Control Act, 1990
The Motor Vehicles Tax Act 1932
The Land Development Tax Ordinance, 1976
The Stamp Act, 1899
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Concepts of Business Taxation

Entity-Level Tax vs. Owner-Level Tax on Income
Pass-through Entity: single-level taxation at entity-level only;
owner will pay tax on his/her total income including income from
the entity (e.g., sole-proprietorship)
Non-Pass-through Entity: double-level taxation both at entity-
level as well as owner-level; first entity will pay tax on its income
and then owner will pay tax on his/her total income including
income from the entity if distributed (e.g., company) or total
income including share of income from the entity even if not
distributed and then subject to tax rebate at average tax rate on
the entity-level income if the entity has already paid tax on its
income (e.g., partnership firm).
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Concepts of Business Taxation

Role as Withholding Tax Collector and/or
Taxpayer
Business entities may or may not be taxpayer (company is
normally a taxpayer if there is any gross receipt, partnership
firm is normally a taxpayer if it has taxable income; but sole-
proprietorship is never a tax paying entity although its
income is taxable)
Business entities (company always, partnership firms in
certain cases such as employer, but usually not the sole-
proprietorship) have to withhold taxes in prescribed cases
and to deposit the same within 3 weeks in case of income tax
and 15 working days in case of VAT from the date of
deduction or realization of tax at source.
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Concepts of Business Taxation

Tax-deductible vs. Non-deductible Modes of
Distribution to Owners
Payment to owners as dividend in case of company or as
drawing in cases of partnership firm and sole-proprietorship
is never tax-deductible
Payment to owners in a form other than dividend (salary,
remuneration, commission, fees, etc.) in case of company
may be tax deductible; but not usually deductible in cases of
partnership firm and sole-proprietorship.
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Concepts of Business Taxation

Explicit vs. Implicit Tax Payment
Explicit Tax Payment is done through depositing to the
Treasury as statutory tax.
Implicit Tax Payment is done through adopting tax-
favoured scheme of investments through lower pretax
rate of return (pretax return in taxable savings scheme is
10%; and pretax return in tax-exempted savings scheme
is 7%; an investor through investment in tax-exempted
scheme having 20% marginal explicit tax rate will lose
1% return, which is due to implicit tax).
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End of the Presentation

Thank you.