Introduction The peoples republic of Bangladesh is a country in south Asia.

It is a low lying riverine country located between the foothills of the Himalayas and the Bay of B engal. It has border with neighbor country India which surround it in all the we stern, northern and most of the eastern side and with Myanmar at south eastern t erritory. It has long coastal territory with Bay of Bengal. Almost all the area is deltaic plain land which is blessed with upper stream from the Himalayas and passes through the country to the Bay of Bengal, with some Pleistocene hills are a in the south eastern and north eastern territory areas. In territorial conside ration it is a small country but in terms of population it is one of the most de nsely populated in the world. Bangladesh has achieved its independence in 1971 t hrough a nine month blood shed war against Pa istan which was intensified due to economic, political and linguistic discrimination and suppression. The state la nguage of Bangladesh is bangle which have similar ethno linguistic ties with Ind ian state of West Bengal. Due to deltaic origin and pluvial fertile land the cou ntry has a strong ties with agriculture. It is a land of different religious and cultural diversify but people are living with harmony and peace. History: The ancient history of this region is several thousand years old . The ancient civilization in this area was established by the Dravidian. Histor ian believes that Bengal, the area presently comprises present day Bangladesh an d the Indian state of west Bengal was settled in about 100 BC by Dravidian spea ing people who were later nown as the Bang. Their home land bore various titles that reflected earlier tribal names such as Vanga, Banga, Bangala, Bangal and B engal. The region was ruled by different emperor and ruler and according to the religious influence of the ruler the area went into different religious replacem ent from Buddhism, Hinduism to Islam.

The Income Tax history in Indian Sub-Continent: The Income Tax history in modern India dates bac to 1860. In this year first In come Tax Act was introduced and which remained in force for a period of 5 years. This Act lapsed in 1865. Thereafter Act-II of 1886 was in force. This Act of 18 86 was the improved version. It introduced the definition of agricultural income and the exemption it granted in respect of agricultural income has continued to be a feature of all subsequent legislations. The Indian Income Tax Act, 1922 wh ich came into being as a result of the recommendations of the All India Income T ax Committee is a milestone in the evolution of Direct Tax Laws in India. Its im portance lies in the fact that the administration of the Income Tax hitherto car ried on by the Provincial Governments came to be vested in the Central Governmen t. The Act of 1922, similar to the Act of 1918, applied to all incomes "acc ruing or arising", or received in British India, or deemed to be accrued, arisen or received. This Act mar ed an important change from the Act of 1918 by establ ishing the charge in the year of assessment on the income of the previous year i nstead of merely adopting the previous year s income as a measure of income of t he year of assessment. 1860 1860 Introduced for the first time for a period of five years to cover t he 1857 mutiny expenses. It was abolished in 1873. 1877 1877 The tax system was revived as a result of the Great Famine of 1876.

1886 1886 Introduced as Act II of 1886. It laid down the basic scheme of inco me tax that continues till the present day. 1918 1918 Introduced as Act VII of 1918. It had features li e aggregation of income from various sources for the determination of the rate, classification of income under six heads and application of the Act to all income that accrued or arose or was received in India from whatever source in British India. 1922 1922 On the recommendations of the All-India Income Tax Committee, the f ather of the present act was introduced. The central government was vested with the power to administer the tax. 1961 1961 The Act came into force from 1 April 1962, it extended to the whole of India. 1997 1997 Establishment of the Tax Reform Committee under the chairmanship of Dr. Raja J. Chelliah. It was followed by restructuring the income tax with para meters li e lower taxes, fewer slabs, higher exceptions, etc. 2003 The Kel ar Tas Force, which was followed by outsourcing of PAN/TAN, exe mption of dividend income, compensated by levy of the dividend distributed tax t o be paid by the company. The Act made a departure by abandoning the system of specifying the rates of tax ation in its own Schedules. It left the rates to be announced by the Finance Act s, a feature which survives to this day. The Act of 1922 remained in force till the year 1961. In 1956 the Government had referred the Act to the Law Commission to recast it on logical lines and to ma e it simple without changing the basic tax structure. The present Income Tax Act is the Act of Sept., 1961. 1939 Appellate functions separated from inspecting functions. A class of officers nown as AACs came into existence. Jurisdiction of Commissioners of Income tax extended to certain classes of cases and a central charge was created at Bombay.

1943 Special Investigation Branches set up. 1946 A few officers of Class-I directly recruited. Demonetisation of high denomination notes made. Excess Profits Tax Act repealed.

1952 Directorate of Inspection (Investigation) set up. Inspector of Income-tax declared as an I.T. authority.

1954 Internal Audit Scheme in the Income-tax Department introduced. Taxation Enquiry Commission nown as John Mathai Commission set up.

1963 1964 Central Board of Revenue bifurcated and a separate Board for Direct Tax es nown as Central Board of Direct Taxes (CBDT)constituted under the Central Bo ard of Revenue Act, 1963. For the first time an officer from the department became Chairman of the CBDT w .e.f. 1-1-1964. The Companies (Profits) Sur -tax Act, 1964 was introduced. Annuity Deposit Scheme, 1964 introduced.

1968 Valuation Cell came into existence in the Income tax Department. Report of rationalisation and simplification of tax structure (Bhoothalingam Co mmittee) received. Administrative Reforms Commission set up. 1969 Direct Recruitment to Class II Income-tax Officers made. The post of IAC (Audit) created in the Income-tax Department. 1970 The posts of Addl. Commissioner of Income-tax created and abolished aft er one year. Recovery functions which were hitherto performed by Incometax Officers, gi ven to Tax Recovery Officers. Prior to that State Government officials exerc ised the functions of a Tax Recovery Officer. 1971 A new cadre of posts nown as Tax Recovery Commissioners w.e.f. 1.1.1972. Report of Direct Taxes Enquiry Committee received. Summary Assessment Scheme introduced w.e.f. 1-4-1971.

1972 A Special Cell within the Directorate of Inspection (Investigation) cre ated to oversee the cases of big industrial houses. A new cadre of posts nown as IAC(Acq.) created and IAC appointed as Compet ent Authority with the insertion of new Chapter XXA in the Income Tax Act, 1 961 on the acquisition of immovable properties in certain cases of transfer to counter evasion of tax. Directorate of Organisation & Management Services (Incometax) created. The post of I.T.O. (Internal Audit) created. Bradma Scheme in the Income-tax Department introduced. System of Permanent Account Number introduced. Valuation Officers given statutory powers under the Income-tax Act, 1961 and We alth-tax Act, 1957. 1974 Compulsory Deposit Scheme (Income-tax Payers) Act, 1974 introduced. Action Plan for the Income-tax Officers introduced for the first time.

introduced

 Concept of M.B.O introduced. 1975 Voluntary Disclosure Scheme for Income and Wealth implemented. Special Cell for dealing with Smugglers cases created. 1976 Settlement Commission created and Taxation Laws (Amendment) Act,1975 in serted a new Chapter XIXA in the Income Tax Act w.e.f.1-4-1976. Smugglers and Foreign Exchange Manipulators (Forfeiture of Property) Act, 1976 introduced w.e.f. 25-1-1976. A new scheme for departmentalization of accounts introduced. Cho shi Committee submitted its interim report.

1977 A new cadre of posts nown as IAC (Assessment) created. 1978 Appellate functions given to a new cadre of Commissioners nown as Commissioner (Appeals). Directorate of Inspection (Recovery) set up. A new directorate nown as Directorate of Inspection (Vigilance) came into existence by bifurcating the functions of Directorate of Inspection (Investi gation). Cho shi Committee submitted its final report. 1979 A new directorate designated as Directorate of Inspection (Publicat ion & Public Relations) created out of the Directorate of Inspection (RS&P). 1980 Hotel Receipt Tax Act, 1980 came into force w.e.f. 1.4.1981. 1981 Economic Administrative Reforms Commission set up. Three new Directorates viz. Directorate of Inspection (Intelligence), Direc torate of Inspection (Survey) and Directorate of Inspection (Systems) create d. Within the Directorate of Inspection (Income Tax and Audit), a separate Dir ector of Inspection (Audit) appointed. Directorate of Inspection (RS&P) re-organised and Directorate of Inspection (P&PR) re-designated as Directorate of Inspection (Printing & Publications) . I.R.S.(DT) Staff College, Nagpur, re-designated as National Academy of Dire ct Taxes. Special Bearer Bonds (Immunities & Exemptions) Act promulgated. Director General (Special Investigation) and Director General (Investigatio n) appointed to control the functioning of various Directorates under the co ntrol of Central Board of Direct Taxes. Five posts of Chief Commissioner (Administration) created. A few posts of Commissioner of Income-tax were earmar ed as Commissioner of Income-tax (Inv.) and Commissioner of Incometax (Recovery).

1983 The vigilance set up reorganised and the strength of Dy. Director (Vigi lance) and Asstt. Director(Vigilance) augmented. Computerised systems for processing challans and PAN designed and developed. 1984 Taxation Laws(Amendment) Act 1984 passed to streamline procedures i n the interest of better wor management; avoid inconvenience to tax payers; reduce litigation; remove anomalies and rationalise some provisions. 1985 Post of Director General (Investigation) created for more effective chec ing of tax evasion. E.D.(Amendment) Act 1985 discontinues levy of estate duty on deaths occurri ng on or after 16.03.1985. Compulsory Deposit Scheme (Income Tax Payers) Act 1974 discontinued w.e.f. 1.4.1985. Interest Tax Act, 1974 discontinued w.e.f. 31.3.1985 A new "Reward Scheme" for motivating officers introduced w.e.f. 1.4.1985.

1996 77 posts of Commissioners of Income-tax created. Infrastructure for operational needs strengthened. Study report on 4th cadre review of Group A officers (IRS) of the Department prepared by Directorate of Income Tax (Organisation and Management Services) .

2000 The process of implementation of restructuring of the Department co mmenced to increase efficiency and to deal with increased wor load. Total sanctioned wor force reduced from 61,031 to 58,315. Certain rationalisation measures at structural levels introduced. Interest-tax Act terminated with effect from 1-4-2000.

ed as

1999 Furnishing details of ban account and credit cards in the prescrib form made mandatory for refund purpose. Prima-facie adjustments to return done away with; ac nowledgments to serve intimations. Samman Scheme introduced in 1999 to honour deserving tax payers.

Taxation in Bangladesh since its Independents: Bangladesh inherited a system of taxation from its past British and Pa istani ru lers. The system, however, developed on the basis of generally accepted canons a nd there had been efforts towards rationalizing the tax administration for optim izing revenue collection, reducing tax evasion and preventing revenue lea age th rough system loss. To develop manpower for efficient tax administration, the gov ernment runs two training academies - BCS (Tax) Academy at DHAKA for direct tax training and Customs, Excise and Value Added Tax Training Academy at CHITTAGONG for indirect tax training. The NATIONAL BOARD OF REVENUE (NBR) is the apex tax a uthority of Bangladesh and it collects around 93% of total taxes or 76% of total public revenues. The NBR portion of total taxes includes CUSTOMS DUTY, VALUE AD DED TAX (VAT), supplementary duty (SD), EXCISE DUTY, income tax, foreign travel tax, electricity duty, wealth tax (collected as a surcharge of income tax since fiscal year 1999-2000), turnover tax (TT), air tic et tax, advertisement tax, gi ft tax and miscellaneous insignificant taxes. Other taxes (amounting to around 7 % of total taxes or 5% of total revenues) are often referred to as non-NBR port ion of tax revenue. These taxes include narcotics duty (collected by the Depart ment of Narcotics Control, Ministry of Home Affairs), land revenue (administered by the Ministry of Land and collected at local Tahsil offices numbered on avera ge, one in every two Union Parishads), non-judicial stamp (collected under the M inistry of Finance). Bangladesh is unable to raise enough resources in taxes. The tax-GDP ratio was o nly 3.4% in 1972-73 and it remained below 9% until the introduction of VAT in th e country in 1991. The ratio was 9.8% in 1992-93 and although it was more than 9 % in the successive years, it never reached 10%. The revised budgets of 1999-200 0 and 2000-01 estimated the ratio at 8.6%. The budgeted expenditure of 2001-02 w as T 447.65 billion against projected total revenues of T 272.39 billion ie, t he overall deficit was T 175.26 billion. The revenue receipts included tax reve nue of T 220.23 billion (13% higher than that in the preceding year) and non-ta x revenue of T 52.16 billion (11% higher than that in the preceding year). The tax revenues covered only 40% of total expenditures. 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 J anuary 1899. Current rates of non-judicial stamp duty are provided in the First Schedule of the Finance Act 1998, ranging from T 4 to T 10,000 in case of abso lute rate, or from 0.07% to 1.5% of the value of consideration in case of ad val orem 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 Re gulation No. 38 of 1795. The present customs system was introduced by enacting the Sea Customs Act 1878. The Land Customs Act was promulgated in 1924 to enable the central government to enforce control on the movement of goods and passengers by the land routes. The Customs Act 1969 was enacted to consolidate and amend the law relating to custo ms duties and provide for allied matters and this Act was made effective in inde pendent Bangladesh since January 1970.

Excise duty is currently imposed in Bangladesh under the Excise and Salt Act 194 4 introduced to levy and collect duties of excise on domestically manufactured g oods and also to salt. Before introducing VAT since July 1991, the excise consti tuted the second largest source of revenue for the government (about 22% of tota l revenue), but out of 99 excisable items, 74 were shifted under VAT in 1991-92. The goods and services subject to excise duty are listed with the tax rates in the First Schedule of the Excise and Salt Act 1944, which now include BIDI, clot h and cloth goods, and ban services. Narcotics duty continued to be collected f rom all inds of produced alcohol at rates specified in the Second Schedule of t he Narcotics Control Act 1990 and alcohol products are not subject to excise dut y or VAT. The first sales tax was introduced in the former Central Provinces of India in 1 938. In Bengal, sales tax was adopted in 1941. In 1948, sales tax was transferre d as a central tax under the General Sales Tax Act of 1948. The Sales Tax Act 19 51 came into force on 1 July 1951 by repealing the Pa istan General Sales Tax Ac t of 1948. Until 1982, sales tax was being collected under the 1951 Act, which w as replaced by the Sales Tax Ordinance 1982. The VAT law was promulgated by repe aling the Business Turnover Tax Ordinance 1982 and the Sales Tax Ordinance 1982 with effect from 1 July 1991 by imposing three types of taxes, VAT, SD and TT. N ow VAT is being imposed at 15% on value added at import and all production and distribution stages of taxable goods and services and collected from VAT-regist ered persons having annual turnover of T 2 million or more. In case of annual t urnover of less than T 2 million, TT is imposed at 4% on gross turnover. National Board of Revenue (NBR): The Central Tax Revenue Authority: National Board of Revenue (NBR) is the apex authority of the government responsi ble for collecting tax revenue, administering taxation administration and framin g taxation policies and laws for the government relating to tax. The main respon sibility of NBR is to mobilize domestic resources through collection of Income t ax, Import Duties, Value added tax (VAT) and Excise duty for the Government. NBR through its different taxation sources collects more than 95% of the tax revenu e for the government. NBR was created by a Presidential Order in the year 1972 a nd placed under Internal Resource Division (IRD) of Ministry of Finance. Secreta ry of IRD acts as the Chairman of NBR. Four Members of NBR from Direct Tax wing and four Members from Indirect taxation wing assist the chairman in executive, l egislative and policy matters. Main functionalities of NBR Formulation of different statutes, rules and orders regarding collection of dire ct and indirect taxes Monitoring of collection of Direct and Indirect Taxes Interpretation of laws and rules related with Customs, Excise, VAT and Income Ta x Drafting and signing agreements/treaties related to avoidance of double taxation with other countries Disposing Appeal and Revision cases by dint of the authority vested upon NBR Allowing exemptions by dint of the authority vested upon NBR Import-export policy implementation, prevention of smuggling Facilitation of investment through policy implementation, etc. Tax Revenue Tax revenue is the main source of the government revenue. Public revenue princip ally consists of direct and indirect taxes which it accounts for more than 80 pe rcent of total government revenue. The rest of the public revenue comes from dif ferent non-tax collection such as fee, charge, toll etc.

Performance of revenue collection as percentage of GDP is not significant. Over the last few years it shows gradual increasing trend but the improvement is not so remar able. In FY 2001-02, revenue/GDP ratio was 10.21 percent, which gradual ly rose to 10.79 percent in FY2005-06. In FY 2007-08 the revenue/GDP further ros e to 11.17 percent and the increasing trend of revenue-GDP ratio further enhance d to 11.24 percent in FY2008-09 which has reached to 11.52 in 2009-10. Table 47 shows revenue receipts as percent of GDP r during the period from FY2001-02 to F Y2009-10.

Income Tax In Bangladesh: Income tax was first introduced in the subcontinent by the British in 1860 to ma e up the revenue deficit caused by the SEPOY REVOLT, 1857. After independence o f 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 appoi nted in 1921. Currently, income tax has been imposed under the Income Tax Ordina nce 1984 (ITO) promulgated on the basis of recommendations of the Final Report o f the Taxation Enquiry Commission submitted in April 1979. Income taxpayers (ass essees) are classified as individuals, partnership firms, Hindu undivided famili es (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 on the basis of residential status of an assessee (res ident or non-resident). Income Tax Legal Framewor The legal framewor of Income Tax in Bangladesh is as follows: 26 March 1971 to 30 June 1984: The Income-tax Act 1922; and 01 July 1984 and onwards: The Income Tax Ordinance 1984. However, the income tax laws do not consist of only the main statute, rather the se encompass a number of statutory elements as follows: Income Tax Ordinance 1984 the parent statute; Income Tax Rules 1984; S.R.O. (Statutory Rules and Order)/Gazette Notification; Income Tax Circular; General or Special Order; Explanation/Office Memorandum; Verdicts of Appellate Tribunal for equivalent fact; Verdicts of the High Court Division on question of law; and Verdicts of the Appellate Division on judgment of the High Court Division. Income Tax Rates: To rationalize the tax burden and to establish equity, government has introduced different tax rate for different section of people from the last two years. NBR introduced separate tax rate for female, senior taxpayers of 65 years old and a bove for and retarded taxpayers. Female and old taxpayers will be required to pa

y tax if their initial income exceeds TK.180, 000 and retarded taxpayers will pa y if their income exceed T 2,00,000. The overall tax rates for assessment year 2010-11 is as follows: Value Added Tax (VAT) Value Added Tax (VAT) was introduced in Bangladesh on 1 July in 1991 replacing E xcise duties partially and Sales Tax completely. The single rate of VAT is 15%. This uniform rate is applicable on both service and product at import stage as w ell as domestic level. Besides, in some cases VAT is calculated on truncated bas e. The VAT administration is run by the officers of indirect tax department who are recruited as officers of Customs and Excise department. They are being poste d in Customs and VAT department in a regular rotation. Member (VAT) of NBR is th e head of VAT department who has to report to the Chairman NBR. At present, ther e are eight VAT commission including one Large Taxpayers Unit (VAT). The head of VAT commissioner is Commissioner. Each commissioner is responsible for the admi nistration and management of his commissioner. There are some Divisions under ea ch commissioner ate and under each Division there are some Circle offices. The main function of The VAT audit department is to conduct audit, intelligence and investigation of the vulnerable VAT units throughout the country. The offici als of this office conduct secret investigation and intelligence wor to find VA T evaders and on confirmation, they ta e intensive to audit the selected busines s unit. VAT Revenue: Performance of VAT revenue in national budget is significant. In spite of many e xemptions, VAT is the leading revenue in NBR. Its contribution is the highest in the total revenue of NBR.

One can appeal to the Commissioner (appeal) if one is not satisfied with the dec ision of Commissioner (appeal), one can appeal against the order of Commissioner (Appeal) to the President, Customs, Excise and VAT Appellate Tribunal. Conclusion: The Tax-GDP ratio in Bangladesh is very low. It crosses 9 percen t only in 2007-08 (9.2 percent) and 2009-10 (9.33) which is not at all satisfact ory compared with other developing countries of south Asian region. Many reasons wor s behind this low tax GDP ratio. In 2008-09, the National Board of Revenue (NBR) realized Ta a 530 billion against the revised target of Ta a 518 billion ( around 2.4 percent higher than target). In 2009-10 the NBR has collected Ta a 62 1.57 billion against the target of Ta a 610 billion (around 3.53 percent higher than target). This collection might be higher if the holders of TIN (Taxpayers Id entification Number) properly submitted the income tax returns. Ta ing help of t he tax practitioners is not only costly but also might lead to further hassle du e to lac of professionalism of the tax lawyers/practitioners. On the other hand tax payers are not enough aware and eager about the duties to pay tax properly due to lac of consciousness and sometimes due to unwillingness. To improve this situation through changing the tax culture, steps is necessary to ma e the tax office environment taxpayer friendly. On the other hand steps should be ta en to ma e the taxpayers conscious and ware about paying the fare share to government exchequers through regular payment of tax according to the government rules. Go vernment is encouraging the taxpayer through implementation of self assessment s ystem to create a tax payers friendly environment and improving voluntary compli

ance to increase the number of tax payers. To augment collection of VAT from domestic sources, the following measures can b e ta en: In order to broaden the scope for collection of VAT at source, include under it any purchase of goods or services through tender by government organiza tions, semi- government organizations, autonomous bodies, NGO, ban , insurance c ompany or any other financial institutions, limited companies and educational in stitutions. After review of truncated base value in certain cases, withdraw trun cated base value for some services. Besides, to include some goods and services under VAT net that are at present outside it. Ta ing tobacco related health ris s into account, a rational enhancement of price-slab and supplementary duty of c igarettes. In 2004, small businesses were given the opportunity to pay VAT at a low fixed rate. This low fixed rate remained unchanged till to date. The rate of minimum VAT should be introduced in potential sectors. References Annual Report 2005-06, National Board of Revenue. Annual Report 2008-09, National Board of Revenue. Bangladesh Economic Review 2010, Ministry of Finance, available at www.mof.gov.o rg Bangladesh Economic Review 2009, Ministry of Finance, available at www.mof.gov.o rg Bangladesh Statistical Poc et Boo 2008, Bangladesh Bureau of Statistics. Bangladesh Ban , www. bangladesh-ban .org Banglapedia, the National Encyclopedia of Bangladesh. Customs Act 1969, Bangladesh. India Economic Review 2000, Ministry of Finance, available at www.indp.gov.org India Economic Review 2002, Ministry of Finance, available at www.indp.gov.org Income tax law and practices by R. Gupta 16th edition Revenue Administration (RIRA) project website,www.riraprojectbd.com VAT Act, 1991& VAT Rules, 1991. Wi ipedia, the free encyclopedia. World Ban (2010) doing business report .