Indebtedness of income tax system: Bangladesh Perspective

Posted on May 21, 2011 at 2:05 AM Comments comments (11)



Taxes are primary sources if governmental revenue in Bangladesh. Taxation means imposition of a non-penal yet compulsory levy for transfer of resources from private to public sector, imposed by the public representative based on pre-determined criteria and without reference to any specific commitment, in order to accomplish some nation’s economic and social objective. These are dues that we pay for the privileges of membership in an organized civil society. Tax is imposed in the assessment year based on income year. Tax is a internal revenue, which collected through two types of tax in many countries.[1] Those are direct tax and indirect tax, where direct tax deals with income tax and indirect tax deals with Value Added Tax (VAT) and Custom Duties.

In spite of the structure of taxation and the lack of unwillingness of citizens to fulfilling its citizenry duties, it is indeed very inconvenient task collecting taxes from tax payers in Bangladesh. [2] Bangladesh inheritances a week economic infrastructure from British era and later from Pakistan ruler although it nit posses a vast amount of natural resources. [3] These limitations have caused slow growth in production, saving, in capital formulation and in capital investments.[2] Moreover, the economic activities outside the agricultural sector are disjointed and fragmented, which has contributed the problem.

Basics of the Study:

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 change’. 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 on the basis of predetermined criteria. According to Article 152(1) of the Constitution of Bangladesh, taxation includes the imposition of any tax, rate, duty or import, whether general, local or special, and tax shell be constructed accordingly.

Taxes are the most important source of revenue of the modern governments. It is a compulsory levy, to be paid by the citizens who are liable to pay it, imposed by the government. Many economists like Seligman, Adam Smith, Bastable, Taussig and Dalton hold the unanimous opinion that tax is a compulsory payment to the government by taxpayers without any expectations of some specified return. But essence of the argument is this that the tax payer is not entitled to claim return of his taxes though he may receive benefits of the service which the State provides by means of the taxes collection from him and many other like him.

According to P. E. Taylor, “Taxes are compulsory payment to government without expectation of direct return in benefit to the tax payer.”

According to Dalton, “A tax is a compulsory contribution imposed by a public authority irrespective of the exact amount of service rendered to the tax payer in return and not imposed as a penalty for any legal offence.”

According to Section 2(62) of the ITO 1984, “ ‘tax’ means the income tax payable under the ordinance and includes any additional tax, excess profit tax, penalty, interest, fees or other charges leviable or payable under this ordinance.”

The above definitions make it clear about the tax, that it is a compulsory contribution by the tax payers to the government. [11]


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A Study on the Problems and Prospects of PLS Modes of Financing: Bangladesh Perspective.

Posted on May 21, 2011 at 1:55 AM Comments comments (0)

Executive Summary:

The lack of profit and loss sharing (PLS) financing is a global phenomenon affecting Islamic banks worldwide. This paper analyzes problems faced by Bangladesh’s Islamic banks using the Analytic Network Process (ANP) methodology. The preliminary step is to decompose the problem through questionnaires and in-depth interviews with customers (Borrower) and practitioners of Islamic banking to fully comprehend the envisaged problem and develop an appropriate ANP network. The study evaluated and measured the model using pair-wise comparisons and then to synthesize in order to find solutions. The root of the problem can be grouped into two aspects, namely Islamic bank internalities, which include upper management, human resources and technical aspects, and externalities that include society, the authorities and customers. The results show that internal problems have major influences in human resources (target oriented; risk averse) then upper management (business oriented; averse to risk) as well as technical aspects (higher risk; more complicated), while external problems have expanded largely regarding the Authority (lack of supportive regulations; incentives). The policies to be instituted by regulators should include not only directed market-driven policy, but also Shariah compliance. Moreover, the operational strategies for market development that should be implemented include service improvement programs as well as socialization and communication programs to address the most acute internal and external weaknesses of Islamic banking and PLS based finance in Bangladesh.

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Islamic Finance: International & Bangladesh Prospect

Posted on March 26, 2010 at 10:45 AM Comments comments (0)

[ABSTRACT: Finance is the science of funds management. Finance includes saving money and often includes lending money. The field of finance deals with the concepts of time, money and risk and how they are interrelated. It also deals with how money is spent and budgeted. Islamic finance is accordance with Islamic law. Islamic finance has been growing rapidly since its launch in the 1970s. The major market for this industry is typically the Middle East and it is gaining popularity in the UK, USA and Southeast Asia. Malaysia is the leading Islamic finance industry in Southeast Asia while its same region Bangladesh is relatively a former market player. Islamic financing as a new paradigm started in Bangladesh in 1983 with the establishment of the first Islamic bank "Islami Bank Bangladesh Limited". After that, 6 more banks have been established in the country to reach the outcome of this welfare banking to the doorsteps of the people. In the past two decades, it has shown its great robustness in achieving the goal of Islamic Shariah. Through its strategy of integrated financial and economic development, Bangladesh can create new opportunities for Islamic finance and related financial products in the region. The paper also observes that the performance of the Islamic banks could be further improved by upgrading the quality of manpower by enhanced R&D spending and pro-poor investment decisions.]

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