Tax System of Bangladesh

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Proceedings of the AABEA Biennial Convention, October 12th, 2002, Washington DC, USA

Review of the Tax System in Bangladesh A Prerequisite for Industrial Growth T. A. M. Nurul Basher*
E-mail: nurul-basher@betelco.com

Abstract - This paper has been written to highlight the sustainable industrial growth problems being faced by the entrepreneurs in Bangladesh. There are multifarious problems for Industrial growth in Bangladesh but the major bottleneck is the adverse tax system. There exists no consideration for industrial raw materials import in so far as application of duties and taxes compared to those of finished consumer goods. The net result is increase in production cost which in turn makes the product noncompetitive. So as not to create an extra burden on industrial productions, the government needs to remove duties and taxes from imported raw materials as in many Middle Eastern countries and Thailand. The government implicitly accepts the adverse effects of the improper taxes on our industrial growth and has tried partially to alleviate some of these impediments by creating Export Processing Zones and Bonded Ware Houses; this paper explores the benefits doing away with these high import duties altogether. It also looks at the paybacks to the economy from industrial growth. Finally, the expansion of the income tax umbrella is considered and in particular its effects on growing a greater sense of national civic duty and its impact on the voting patterns of the electorate. [1]

to this, the average per-capita income of developed countries range around or exceed US$ 26,000 per year. While it is unthinkable to raise the income of a Bangladeshi to a level comparable to those of people in developed nations, one should make continued efforts towards attaining a minimum level of life sustenance that could be termed as economic solvency. Bangladesh covers an area of about 56,000 square miles most part of which is agricultural land. Although it has attained selfsufficiency in food it still has vast areas where there are scopes for production of adequate food and other agricultural items with export potential. However, whatever possible expansion it makes in agriculture it is not possible to reduce the unemployment to a reasonably acceptable level. Hence, Bangladesh needs to explore other avenues of job creation.

I - INTRODUCTION
Bangladesh has been independent for about 54 years. It gained independence first from the British Rule in 1947 and then again for the second time in 1971 from the Pakistani Military Junta. Since 1947 till date our population has increased from some 50 million to 130 million. In the mean time it has faced several famines, floods and cyclones, not to mention other kinds of losses. The economic situation has worsened day by day. Political independence failed to lead this country to the desired goal of economic independence. Throughout these long years extending more than half a century, Bangladesh has definitely made some serious mistakes that have resulted in its fiscal failure. However this paper is not intended to be a matter of criticism of the past failures, but rather a suggestion is being presented here through which Bangladesh might find a way to engage its vast population in productive employment. Figure 1 shows that even ten years ago, almost half of the country had a population density of between 1500 to 2000 people per square mile. With an annual growth rate of approximately 2% and therefore producing an additional 2.7 million people per year, Bangladesh now has a population of about 130 million. The per-capita income is somewhat like US$ 350 per year. Compared

* Bengal Telecommunications and Electric Corp. Pvt. Ltd. (BETELCO) 19 Kakrail Road, Dhaka - 1000, Bangladesh. © 2002 BETELCO. All Rights Reserved.

Figure 1: A 1991 population density map of Bangladesh

Proceedings of the AABEA Biennial Convention, October 12th, 2002, Washington DC, USA One way is to get a sizable part...
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