Basis for Allowable Deductions
Professor Dr. Dhiman Chowdhury
Course Code # 4201
Kumary Minu Rani Paul
Department of Accounting and Information Systems
University of Dhaka
Date of submission: August 11, 2010
Definition of Tax:
The term 'tax' has been derived from the French word 'taxe' and etymologically, the Latin word 'taxare' is related Jo 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 4o 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 impost, whether general, local or special, and tax shall be construed 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 taxpayer without any expectation of some specified return. But essence of the argument is this that the taxpayer, is not entitled to claim return of his taxes though he may receive benefits of the services which the State provides by means of the taxes collected from him and many other like him. The followings are the various definitions of tax given by rent economists: According to P. E. Taylor, "Taxes are compulsory payment to government without expectation direct return in benefit to the tax payer” According to Leroy Beaulieu, "A tax. is purely and simply a contribution, whether direct or masked which the public authorities impose upon the inhabitants or goods for the purpose of defraying government expenditure." According to Seligman, "A tax is a compulsory contribution from the person to the government to defray the expenses in the common interest of all without reference to special benefits”. The above definitions make it clear that taxes are compulsory contribution by the taxpayer to the government. Characteristics of Tax:
The characteristics of a tax may be studied under the following heads: 1. Tax is a payment to the Government by the people as it is levied by the government as per the Section 83 of the Constitution of Bangladesh. 2. Payment of taxes is non-penal and compulsory; hence refusal to pay a tax is a punishable offence. 3. An element of sacrifice is there in the payment of a tax as they pay the taxes in order to ensure public interest. 4. The aim of tax collection is to finance the government expenditure to ensure public interest and welfare. 5. Tax is not the cost of the benefit conferred by the government on the public. The
benefit received from the country is not directly the return of tax. 6. It is one of the prime sources of revenue for the government. 7. Tax is not any fine or penalty.
8. Tax can only be imposed by the government of a country.
Purposes or Objectives of Taxation:
Taxation is a major source of revenue for the government. In order to accelerate economic development as well as to ensure the defense, administration, social welfare and other development activities government needs huge amount of resources. Taxation is a way to transfer the resources from private or non-government sectors to government sectors. The main purposes or objectives of tax are enumerated below: 1. Revenue collection: Tax is a major source of revenue for the government. In Bangladesh tax revenue accounts for nearly80 percent total government revenue. Therefore, the first and foremost aim of taxes is to raise public revenue to meet the over increasing public expenditure. 2. Reduction of inequalities in...
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