Topic of the Term Paper:

Indirect Tax of Bangladesh

Course title: Business Taxation Course No: 4201 Assign by:
Prof. Dr. Dhiman Kumar Chowdhury Department of AIS Dhaka University

Assign to:
Department: Accounting of Information Systems (AIS) Program: MBA (Evening) Batch: 20th Edy Josephine Toscano Dilara Afroze Sharmin Laboni ID NO: 11120016 ID NO: 11120039

Submission Date 26th December, 2011

University of Dhaka

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Table of Content
Subject Taxation and its history Tax Authorities of Bangladesh Types of Taxation Indirect Tax Tax Expenditure Measures under Indirect Taxes Customs Duty/Import Tax Excise Duty Value Added Tax(VAT) Conclusion References Page No. 3-5 5 6-7 8-12 12 13-14 15-16 16-19 20 21

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Taxation and its history

Taxation- one of the major sources of public revenue to meet a country's revenue and development expenditures with a view to accomplishing some economic and social objectives, such as redistribution of income, price stabilization and discouraging harmful consumption. It supplements other sources of public finance such as issuance of currency notes and coins, charging for public goods and services and borrowings. The term Tax has been derived from the French word Taxe and etymologically, the Latin word Taxare is related to the term 'tax', which means 'to charge'. Tax is 'a contribution exacted by the state'. It is a non-penal but compulsory and unrequited transfer of resources from the private to the public sector, levied based on predetermined criteria. According to Article 152(1) of the Constitution of Bangladesh, taxation includes the imposition of any tax, rate, duty or impost, whether general, local or special, and tax shall be construed accordingly. Rate is a local tax imposed by local government on its residents or the property owners of the locality, a duty is a tax levied on a commodity, and an impost is a tax imposed for an entry into a country. Under the provision of article 83 of the Constitution, "no tax shall be levied or collected except by or under the authority of an Act of Parliament". Bangladesh inherited a system of taxation from its past British and Pakistani rulers. The system, however, developed based on generally accepted canons and there had been efforts towards rationalizing the tax administration for optimizing revenue collection, reducing tax evasion and preventing revenue leakage through system loss. Taxes include narcotics duty (collected by the Department of Narcotics Control, Ministry of Home Affairs), land revenue (administered by the Ministry of Land and collected at local Tahsil offices numbered on average, one in every two Union Parishads), non-judicial stamp (collected under the Ministry of Finance), registration fee (collected by the Registration Directorate of the Ministry of Law, Justice and Parliamentary Affairs) and motor vehicle tax (collected under the Ministry of Communication).

The tax structure in the country consists of both direct (income tax, gift tax, land development tax, non-judicial stamp, registration, immovable property tax, etc) and indirect (customs duty,

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excise duty, motor vehicle tax, narcotics and liquor duty, VAT, SD, foreign travel tax, TT, electricity duty, advertisement tax, etc) taxes. The present land revenue system of Bangladesh has its base in the East Bengal state acquisition and tenancy act 1950 which established a direct contract between the taxpayer and the government.

The most important tax on the value of transferred property is the non-judicial stamp tax (levied under the Stamp Act 1899), which has been in existence since January 1899. Current rates of non-judicial stamp duty are provided in the First Schedule of the Finance Act 1998, ranging from Tk. 4 to Tk. 10,000 in case of absolute rate, or from 0.07% to 1.5% of the value of consideration in case of ad valorem rate. The judicial stamp tax is being levied under the Court Fees Act 1870, although the levy of court fees originated in the introduction of the Bengal Regulation No. 38 of 1795. The first sales tax was introduced in the former Central Provinces of India in 1938. In Bengal, sales tax was adopted in 1941. In 1948, sales tax was transferred as a central tax under the General Sales Tax Act of 1948. The Sales Tax Act 1951 came into force on 1 July 1951 by repealing the Pakistan General Sales Tax Act of 1948. Until 1982, sales tax was being collected under the 1951 Act, which was replaced by the Sales Tax Ordinance 1982. The VAT law was promulgated by repealing the Business. Income tax was first introduced in the subcontinent by the British in 1860 to make up the revenue deficit caused by the sepoy revolt, 1857. After independence of Bangladesh, income tax was made effective under the Income Tax Act 1922 passed on the basis of the recommendations of the All-India Income Tax Committee appointed in 1921. Currently, income tax has been imposed under the Income Tax Ordinance 1984 (ITO) promulgated on the basis of recommendations of the Final Report of the Taxation Enquiry Commission submitted in April 1979. Income taxpayers (assesses) are classified as individuals, partnership firms, Hindu undivided families (HUF), associations of persons (AOP), companies (publicly traded and private), local authorities, and other artificial juridical persons. Tax rates and scope of taxable income differ based on residential status of an assesses (resident or non-resident).

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From fiscal or assessment year, (AY) 2000-01, there is a filing threshold of annual total income of Tk. 100,000 applicable for individuals (including non-resident Bangladeshis), partnership firms, HUF, AOP and assesses other than companies and local authorities. In case an identity of this group has a total annual income less than this level, he is not required to submit tax return but if someone's income is higher, he is to pay a minimum tax of Tk. 1,000. Bangladesh inherited a system of taxation from its past British and Pakistani rulers.

Tax Authorities of Bangladesh

There are 3-divisions under the Ministry of Finance (MOF) and Secretary leads each division.

Ministry of finance

FD(Finance Division)

IRD(Internal Resource division)

ERD(Economic Relations Division)

The Chairman of NBR (National Board of Revenue) is working under Internal Resource Division (IRD).

NBR is the apex body of the Tax Administration.

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It consists of two parts: (1) Customs & VAT (2) Income Tax. Both are under the same authority. There are 4-members under NBR.

Under the NBR, a Commissioner of Taxes is the head of the department and he is in charge of a taxes Zone. There are 8-Zones in Bangladesh.

Types of Income

Income

Assessable Income

NonAssessable Income

Taxable Income

Non-Taxable Income

Income: Income means anything received in cash or in kind unless exempted by laws. 1) Assessable Income: Assessable Incomes are those incomes, which are included in the determination of total income of a taxpayer.

Taxable Income: Taxable Incomes are those incomes that the tax is to be paid on those incomes.

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Non- Taxable Income: Non taxable income is taken into total income for taxation rate purpose but no tax is to be paid on this part of income. 2) Non- Assessable Income: Non- assessable incomes are those incomes which are not included in the determination of total income of a taxpayer.

Types of Taxation

Types Of Taxation

a)Direct Tax b)Indirect Tax

a)Progressive Tax b)Regressive Tax

c)Proportional Tax

a) Direct Tax: Direct tax is a sort of tax the impact of effect incidents and which fall back on the person on whom it is imposed. i.e.: Income Tax, Marriage Tax etc. b) Indirect Tax: Indirect taxes are those burden of which can be passed on others through price vehicles. c) Progressive Tax: The tax rate increases as the taxable income/amount increases. d) Regressive tax: The opposite of a progressive tax is a regressive tax where the tax rate decreases as the taxable income/amount increases. e) Proportional Tax: In between is a proportional tax, where tax is fixed as the amount to which the rate is applied increases.

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Indirect Tax
An indirect tax is one in which the burden can be shifted to others. The tax payer is not the tax bearer. The impact and incidence of indirect taxes are on different persons. An indirect tax is levied on and collected from a person who manages to pass it on to some other person or persons on whom the real burden of tax falls. For e.g. commodity taxes or sales tax, excise duty, custom duties, etc. are indirect taxes.

Advantages / Merits of Indirect Taxes The merits of indirect taxes are briefly explained as follows :1. Convenient Indirect taxes are imposed on production, sale and movements of goods and services. These are imposed on manufacturers, sellers and traders, but their burden may be shifted to consumers of goods and services who are the final taxpayers. Such taxes, in the form of higher prices, are paid only on purchase of a commodity or the enjoyment of a service. So taxpayers do not feel the burden of these taxes. Besides, money burden of indirect taxes is not completely felt since the tax amount is actually hidden in the price of the commodity bought. They are also convenient because generally they are paid in small amounts and at intervals and are not in one lump sum. They are convenient from the point of view of the government also, since the tax amount is collected generally as a lump sum from manufacturers or traders. 2. Difficult to evade Indirect taxes have in built safeguards against tax evasion. The indirect taxes are paid by customers, and the sellers have to collect it and remit it to the Government. In the case of many products, the selling price is inclusive of indirect taxes. Therefore, the customer has no option to evade the indirect taxes. 3. Wide Coverage

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Unlike direct taxes, the indirect taxes have a wide coverage. Majority of the products or services are subject to indirect taxes. The consumers or users of such products and services have to pay them. 4. Elastic Some of the indirect taxes are elastic in nature. When government feels it necessary to increase its revenues, it increases these taxes. In times of prosperity indirect taxes produce huge revenues to the government. 5. Universality Indirect taxes are paid by all classes of people and so they are broad based. Poor people may be out of the net of the income tax, but they pay indirect taxes while buying goods. 6. Influence on Pattern of Production By imposing taxes on certain commodities or sectors, the government can achieve better allocation of resources. For e.g. By Imposing taxes on luxury goods and making them more expensive, government can divert resources from these sectors to sector producing necessary goods. 7. May not affect motivation to work and save The indirect taxes may not affect the motivation to work and to save. Since, most of the indirect taxes are not progressive in nature, individuals may not mind to pay them. In other words, indirect taxes are generally regressive in nature. Therefore, individuals would not be demotivated to work and to save, which may increase investment. 8. Social Welfare The indirect taxes promote social welfare. The amount collected by way of taxes is utilized by the government for social welfare activities, including education, health and family welfare. Secondly, very high taxes are imposed on the consumption of harmful products such as alcoholic
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products, tobacco products, and such other products. So it is not only to check their consumption but also enables the state to collect substantial revenue in this manner. 9. Flexibility and Buoyancy The indirect taxes are more flexible and buoyant. Flexibility is the ability of the tax system to generate proportionately higher tax revenue with a change in tax base, and buoyancy is a wider concept, as it involves the ability of the tax system to generate proportionately higher tax revenue with a change in tax base, as well as tax rates. Disadvantages / Demerits of Indirect Taxes Although indirect taxes have become quite popular in both developed & Under developed countries alike, they suffer from various demerits, of which the following are important. 1. High Cost of Collection Indirect tax fails to satisfy the principle of economy. The government has to set up elaborate machinery to administer indirect taxes. Therefore, cost of tax collection per unit of revenue raised is generally higher in the case of most of the indirect taxes. 2. Increase income inequalities Generally, the indirect taxes are regressive in nature. The rich and the poor have to pay the same rate of indirect taxes on certain commodities of mass consumption. This may further increase income disparities among the rich and the poor. 3. Affects Consumption Indirect taxes affects consumption of certain products. For instance, a high rate of duty on certain products such as consumer durables may restrict the use of such products. Consumers belonging to the middle class group may delay their purchases, or they may not buy at all. The reduction in consumption affects the investment and production activities, which in turn hampers economic growth.
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4. Lack of Social Consciousness Indirect taxes do not create any social consciousness as the taxpayers do not feel the burden of the taxes they pay. 5. Uncertainty Indirect taxes are often rather uncertain. Taxes on commodities with elastic demand are particularly uncertain, since quantity demanded will greatly affect as prices go up due to the imposition of tax. In fact a higher rate of tax on a particular commodity may not bring in more revenue. 6. Inflationary The indirect taxes are inflationary in nature. The tax charged on goods and services increase their prices. Therefore, to reduce inflationary pressure, the government may reduce the tax rates, especially, on essential items. 7. Possibility of tax evasion There is a possibility of evasion of indirect taxes as some customers may not pay indirect taxes with the support of sellers. For instance, individuals may purchase items without a bill, and therefore, may not pay Sales tax or VAT (Value Added Tax), or may obtain the services without a bill, and therefore, may evade the service tax.

Tax Expenditure Measures under Indirect Taxes

Under the various acts of indirect taxes, exemptions and deductions are given in the areas of customs duty, supplementary duty and value added tax (VAT). Customs and Supplementary Duty Exemptions from customs duty are granted to capital machinery, raw materials of medicine, poultry medicine, feed & machinery, defense stores, chemicals of leather and leather goods, private power generation unit, textile raw materials and machinery, solar power equipment, relief goods, goods for blind and physically retarded people and import by embassy and UN. (Ahmad

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P.15). Concessionary rates are applicable to agro-processing, textile and leather industry, educational institutions, hospitals, privileged persons, etc. 15% supplementary duty is applicable to sugar and kerosene (Bangladesh Economic Review, p.33). Tariff rate on any mobile is Tk. 1,500. 7.5% import duty is applicable to chemical color for textile industries. Incentives are also given to these sectors, which are complying with the international and bilateral agreements and conventions. Value Added Tax (VAT) To facilitate some industries and services VAT has been exempted in some selected areas. Goods exempted from VAT include food and agricultural products, animal products poultry sector, agriculture imputes, cloths made of cotton and synthetics, malaria. TB/ cancer preventive medicine, homoeopathic medicine, family planning items, books and periodicals, etc. Services exempted from VAT include fundamental services for livelihood, social welfare services, services relating to culture, services relating to money and finance, transport services, personal services and other services other than the above. Following table shows the share of contribution of tax to the total revenue in one hand and the share of direct and indirect taxes thereof on the other:
Table Total Revenue, Total Tax, Direct & Indirect Tax

(In crore TK) Particulars 2006-07 2007-08 2008-09 2009-10 2010-11 201112(Budgeted) Total Revenue Tax Revenue % Of tax to revenue Direct tax 52542 42915 81.68 8915 60539 48012 79.31 11500 23.95 69382 56789 81.85 13604 23.95 79461 63955 80.48 17220 26.92 95188 79052 83.05 23541 29.78 118385 95785 80.91 27547 28.75

% of direct tax to 20.77 total Tax Indirect tax 34000

36512 76.05

43185 76.05

46735 73.08

55511 70.21

68238 71.25

% of indirect tax to 79.23 total Tax

Source: Economic survey 2007

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Customs Duty/Import Tax:

Customs is an authority or agency in a country responsible for collecting and safeguarding customs duties and for controlling the flow of goods including animals, transports, personal effects and hazardous items in and out of a country. Depending on local legislation and regulations, the import or export of some goods may be restricted or forbidden, and the customs agency enforces these rules.[1] The customs authority may be different from the immigration authority, which monitors persons who leave or enter the country, checking for appropriate documentation, apprehending people wanted by international arrest warrants, and impeding the entry of others deemed dangerous to the country. In most countries customs are attained through government agreements and international laws. A customs duty is a tariff or tax on the importation (usually) or exportation (unusually) of goods. In the Kingdom of England, customs duties were typically part of the customary revenue of the king, and therefore did not need parliamentary consent to be levied, unlike excise duty, land tax, or other forms of taxes.

Of the three wings of the NBR, Customs Wing is responsible for the collection of customs duties on all imported goods. At present International trade (Export-Import trade) is conducted through Dhaka, Chittagong, Benapole, and Mongla Custom Houses and a few Land Customs Stations. At the import level Customs Duty, VAT, IDSC, SD, Advance Income Tax, and Advance Trade VAT are imposed. Although law provides for Regulatory Duty, Safeguard Duty and Antidumping Duty,these are rarely applied in Bangladesh. Over the past two decades consistent efforts have been made to rationalize the tariff structure with a view to achieving greater trade facilitation. As a result we have now only 4 slabs of customs duty (0%, 6%, 13%, 25%) as against a couple of dozens of them prevalent in the recent past. Customs department is also entrusted with the task of combating smuggling with the support and assistance of all law enforcing agencies of the country including Bangladesh Navy, Bangladesh Coast Guards, Bangladesh Police, Bangladesh Rifles, Bangladesh Ansar and the Narcotics Control Department. There is a special agency in the Customs Department called Customs
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Intelligence and Investigation Directorate, which plays an important role in anti-smuggling activities. In order to make customs procedures more transparent and achieve more trade facilitation, a number of measures have been taken over the past few years. With the introduction of ASYCUDA++ and DTI (Direct Traders Input) automation in customs clearance has begun. As a result clearance of goods has been accelerated, procedures simplified, lead-time reduced and collection of revenue augmented. The changes that have been undertaken over the past few years have significantly increased revenue collection thereby enhancing NBRs contribution to the national economy.

Exemptions from Customs Duty: i) ii) iii) iv) v) vi) vii) viii) ix) x) xi) Capital machinery; Raw materials of Medicine; Poultry Medicine, Feed & machinery; Defence stores; Chemicals of leather and leather goods; Private power generation unit; Textile raw materials and machinery; Solar power equipment; Relief goods ; Goods for blind and physically retarded people; and Import by Embassy and UN.

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Excise Duty
Excise Duty a tax on goods produced inland. The term 'excise tax' in lieu of 'excise duty' is more comprehensive and covers taxes levied on the manufacture, sale, or purchase of any commodity or service. Unlike the excise tax, which applies to domestic and imported goods alike, the excise duty is levied on domestic products only. Excise duty is a tool of government revenue collection. The government can use it with the motive of 'income distribution' or for implementing the benefit principle of
TOBACCO) TAXATION

ie, collection of funds through excise on particular products (like

and using the funds for assisting people affected by consumption of that product.

Excise duty is also imposed to discourage the consumption of certain so-called 'undesirable' commodities (eg, liquor and tobacco) or to control or ration the consumption of certain commodities in times of external scarcity (such as in wartime) or inflationary pressure. The basis of tax computation may be ad valorem (as in a the physical units). Of the three main indirect taxes CUSTOMS DUTY, VALUE ADDED TAX)

or specific or in rem (ie, on

excise and sales tax - customs duty was the

first to be introduced in Bengal as early as in the period of ancient India (before 300 BC). The subcontinent witnessed a similar tax known as chungi during the Mughal period and sales tax was introduced only in 1938. The Muslim rulers in India introduced the salt tax, considered equivalent to an excise duty, and although Emperor
AKBAR

had issued an order to abolish salt

tax, the order was not properly carried out in remote provinces. Muslim invaders brought opium to India from Persia and the tax on opium, similar to excise duty, was a major source of income of the Muslim rulers. Excise duty is imposed in Bangladesh under the Excise and Salt Act 1944 (Act I of 1944) enacted on 24 February 1944. This law was introduced to levy and collect excise duties on salt and on goods manufactured or produced in the sovereign territory of the country. Before introducing Value Added Tax (VAT) in July 1991, the excise constituted the second largest source of revenue for the government (about 22% of total revenue). But VAT had reduced the tax-coverage of excise duty to a minimum. In 1991-92, the tax-net of excise duty was reduced to only 25 items (22 items of goods and 3 items of services) from the 99 items (90 items of goods and 9 items of services) subject to excise duty until the end of the previous fiscal year. The
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change was caused by shifting 74.7 percent of coverage of excise duty to that of VAT. The share of excise duty in total tax in 1990-91was 26.53%, which fell to 17.8% in 1991-92, 3.68% in 1992-93, and to only 1.4% in 2000-2001. All kinds of produced alcohol are subject to narcotics duty at the rates specified in the Second Schedule of the Narcotics Control Act 1990, and not subject to excise duty or VAT. The excisable goods and services kept outside the VAT-net in 1991-92 include tobacco,
GAS NATURAL

and PETROLEUM products, newsprint, gold or silver and products thereof, salt, bank cheques

and ordinary bricks. The goods and services subject to excise duty are listed in the First Schedule of the Excise and Salt Act 1944 and their list includes
BIDI,

cloth and cloth goods, and bank

services. Excise duty is collected by the Customs, Excise and VAT wing of the NATIONAL BOARD
OF REVENUE.

[Swapan Kumar Bala]

Value Added Tax (VAT)

The origin of Value Added Tax (VAT) can be traced as far back as the writings of F Von Siemens, who proposed it in 1918 as a substitute for the then newly established German turnover tax. Since then numerous economists have recommended it in different contexts. Also, various committees have examined the tax in great detail. However, for its rejuvenation, the tax owes much to Maurice Faure and Carl Shoup. The recent evolution of VAT can be considered as the most important fiscal innovation of the present century1. VAT was first introduced in France in 1954. With the imposition of Taxe sur la Valeur Adjoutee, France become the first European country to implement VAT on an extensive scale. It was not, however, at first a complete system of VAT, since it applied only to transactions entered into by manufacturers and wholesalers. It was supplemented by a separate tax on services (Tax sur les Prestations de Services). In addition, there were special excises (Taxes

uniques) which were levied on services and distribution in lieu of the taxes sur les presentations de services.

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Value Added Tax in Bangladesh

The main features of VAT in Bangladesh are as follows: (1) A single stage VAT for import cum manufacturing. (2) A uniform rate of 15 per cent is applicable for both goods & services. (3) VAT for whole salers/retailers is compulsory (for selected items). (4) VAT is applicable for all items (except some of the unprocessed agricultural products) & thirty five listed services. (5) Exports are zero rated. (6) VAT is leviable at the time of supply of goods and services. (7) Turnover tax @ 2 per cent is leviable where turnover amount is less than 1.5 million taka. (8) Cottage industries are exempt from VAT. (9) Tax paid on inputs are creditable against output tax. (10) Tax returns are to be submitted on monthly or quarterly basis. (11) Luxurious and socially undesirable goods are subject to supplementary duties at different rates ranging from 5 per cent to 350 per cent. Cigarettes, natural gas and petroleum products which were the major sources of excise duties, initially were kept beyond VAT net work. In 1992-93 these items were brought under VAT. It may be mentioned that at present manually made cigarettes (known as Biri), part of textile items & services rendered by commercial banks are still under excise system.The primary requirement under VAT system in Bangladesh is to haveregistration numbers by all taxable persons from the local VAT authorities. Such registrations are compulsory for each location of a business. The taxable persons are to apply in a specific form to the VAT authority if their

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annual turnover exceeds 1.5 million taka . The taxpayers are given a registration number through a specific certificate. The registration certificate contains alongwith other information the activity codes in which the person is related. The registration numbers are used by the taxpayers in their business transactions. Registrations are done free of cost and are not subject to renewal. Any person whose annual turnover is less than 1.5 million taka or any person outside VAT may also apply for registration voluntarily. Any registration may be cancelled if the person discontinues his business or if his annual turnover is found to be less than 1.5 million taka. Under the VAT system in Bangladesh all tax payers are required to maintain books of accounts regarding purchases, sales, raw materials, finished products etc. They are also to maintain an account current book to help them to determine the amount of VAT due and the amount actually paid for taxable goods. Payment of taxes are made through adjustments in the account current book . Credit available for input taxes and refund against export can be used to settle the liability for output tax. The value of imported goods for levy and collection of VAT is considered to be the assessable value for levy of custom duties plus other duties and taxes. While for domestic goods, this value is consideration (the money value) at which the goods are supplied by the manufacturer, this value includes all costs, charges, commission, duties and taxes except the VAT amount. On the other hand, the gross receipts is considered to be the basis for determining the VAT liability for services in general. But in special cases, some narrow base values instead of gross value are taken into account for VAT calculation. Again in some cases, tariff values are fixed as base value for determining VAT. Each tax payer is required to issue a tax invoice, as proof of payment of VAT, for each supply of goods or services. However, the importers are not required to issue any tax invoice. But when importers sell their goods they may issue a supplementary tax invoice to a VAT registered person. VAT on imported goods are to be paid by the importers at the time when the customs duties on it are paid. In other words, VAT at import stage is paid before clearance of goods. But for the local manufactured goods VAT is payable at the time of supply of goods and services.
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Each registered supplier of goods or services is eligible to take instant credit of the VAT paid on inputs. The payment of VAT for goods (output tax) are made through adjustment in the account current book. Taxpayers are to keep sufficient balance in their credit in the current account book either through deposition of money to the Govt. treasury or through their input tax credit. System have also been introduced to collect taxes on certain services like Construction, Motor Garages & Workshops, Printing, Indentors, etc. at the source point of payment. Each taxpayer is to submit a tax return for each tax period (each calendar month) within 20 days of a month following the tax period. The VAT authorities examine the returns, and enters the data into the computer. All exports of goods & services are zero rated under VAT system. Moreover, all input taxes (VAT, Customs duty, Excise duty etc) paid on the inputs used for manufacturing the exported goods are refundable. Such input taxes against export are refunded either in actual or on a flat rate basis. Refund claims of input taxes are dealt with by a Duty Exemption and Drawback Office (DEDO). Value added tax system in Bangladesh gives special treatment to the small firms. Under the system, small manufacturers and services whose annual turnover is less than 1.5 million taka is exempt from VAT but they are to pay turnover tax @ 2 per cent. Such turnover tax can be paid either at a time or on quarterly basis. But they are not entitled to get credit benefit of their input taxes. Moreover, small firms whose annual turnover is less than 1.5 million taka and whose investment in capital machineries only during a particular year does not exceed 300,000 taka are treated as a cottage industry and is fully exempt from VAT or turn over tax. They are also free from VAT formalities. It is easy to have the benefits of VAT in an economy where it is implemented in a comprehensive form covering all tiers of production and distribution as well as to all economic activities. The single stage VAT in Bangladesh has undoubtedly widened the tax base as compared to excise or sales tax system and has brought a favorable result in collection of taxes but it had limited further results due to some limitation and distortion in its application.

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Conclusion
Though the rate of tax revenue is to GDP is very negligible, despite the government is trying to maximize its tax revenue through different method. But the government should also remind the cannon of convenience while collecting tax from assesses. As we are living in a civilized society - should come forward to pay taxes to government in order to conduct the administrative, defense and development activities of the country. Otherwise we would not be able to prove ourselves as civilized people. Elaborate analysis of merits and demerits of direct and indirect taxes makes it clear that whereas the direct taxes are generally progressive, and the nature of most indirect taxes is regressive. The scope of raising revenue through direct taxation is however limited and there is no escape from indirect taxation in spite of attendant problems. There is common agreement amongst economists that direct & indirect taxes are complementary and therefore in any rational tax structure both types of taxes must find a place. Tax is the most important in the hand of the government to control the economy as well as the inflection. It also helps in push money to the economy, develop certain source of the economy and control some other activities of the economy. No Government can run its and perform administration works without collecting tax as a source of revenue. So, the Government imposes tax over the company and the corporations. On the other hand Government can also intensive to the infant and certain basic industry for protection through its tax policy.

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Reference 1. http://www.banglapedia.org/httpdocs/HT/E_0078.HTM 2. WWw.nbr.netbd.com 3. http://www.icab.org.bd/journal/15.pdf

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