05.10.

2010(Tuesday)

Tax : Taxes are general compulsory contributions of wealth levied upon persons, natural or corporate,
to defray the expenses incurred in conferring common benefit upon the residents of state.

Example: Income tax, Sales tax, Excise tax, Property tax, Water tax etc.

Characteristics:
1. enforced contribution.
2. Generally payable with money.
3. Proportionate in character.
4. Levied on persons or property
5. Levied by the state which has jurisdiction over the subject
6. Levied by the law-making body of the state.
7. Commonly required to be paid at regular periods or intervals.

Objectives:
1. Collection of revenue

2. Redistribution of income

3. Macroeconomic control

4. Protection of industry

5. Economic growth

6. Control of consumption

Cannons or Principle of taxation:

1. Canon of Equality/Equity

2. Canon of certainty

3. Canon of convenience

4. Canon of Economy
 5. Canon of productivity

6. Canon of diversity

7. Canon of flexibility

8. Canon of social objective

06.10.2010(Wednesday)

Classification of taxes:
i. On the basis of incidence
1. Direct Tax
2. Indirect Tax

ii. On the basis of progression

1. Proportionate tax
2. Progressive tax
3. Regressive tax

iii. On the basis of number of bases

1. Single tax
2. Multiple tax

Exercise:

Amount of income(taka) Progressive Proportionate Regressive

0 – 1,00,000 0% 0% 0%
1,00,001 – 3,00,000 10% 10% 10%
3,00,001 – 6,00,000 15% 10% 9%
6,00,001 – 10,00,000 20% 10% 8%
Above 10,00,000 25% 10% 7%

Requirement:
1. Calculate the amount of taxes to be paid under each of the above system
a. The income of a person is tk. 5, 00,000
b. The income of a person is tk. 12, 00,000
Solution:

(a) For 5,00,000

In case of progressive:

0 – 1, 00,000 = Nil
Next Tk. 2,00,000@10% = 20,000
Next Tk. 2,00,000@15% = 30,000
Total = tk. 50,000

In case of Proportionate:

On tk. 1, 00,000 = Nil

on tk. 4, 00,000@10% = tk. 40,000
Total = tk. 40,000

In case of Regressive:

0 – 1, 00,000 = Nil
Next tk. 2,00,000@10% = 20,000
Next tk. 2,00,000@9% = 18,000
Total = tk. 38,000

(b) For 12,00,000

In case of progressive
0 – 1, 00,000 = Nil
Next 2,00,000@10% =tk. 20,000
Next 3,00,000@15% =tk. 45,000
Next 4,00,000@20% =tk. 80,000
Next 2,00,000@25% =tk. 50,000
Total =tk. 1, 95,000

In case of proportionate

0 – 1, 00,000 = Nil
Next 11, 00,000@10% =tk. 1, 10,000
Total =tk. 1, 10,000

In case of Regressive

O – 1, 00,000 =Nil
Next 2, 00,000@10% = tk. 20,000
Next 3, 00, 000@9% = tk. 27,000
Next 4, 00,000@8% = tk. 32, 000
Next 2, 00,000@7% = tk. 14,000
Total = tk. 93,000
Tax System of Bangladesh