A Simplified Taxation System for Maximization of Government Revenue 1. Introduction
The taxation system in Bangladesh is based on the ability to pay theory and hence utilizes the progressive tax system. The revenue administrative body is the National Board of Revenue under the Ministry of Finance. The main responsibility of NBR is to collect domestic revenue for the government. However, revenue collection and management has been a perennial challenge for Bangladesh since its very inception. As a resource constraint nation coupled with limited capacity, we are confronted with persistent pressure to address that challenge. The implementation of an effective revenue system will involve the setting up of new organizational structures, the designing of new procedures and forms, writing of new instructions, arranging for the provision of better management information and statistics, etc. This gives the administration the opportunity to develop new skills and abilities which can subsequently be deployed right across the tax systems. 1.1 Objective
The objective of this report is to propose a simplified taxation system which maximizes government revenue. In order to propose the new system, the current taxation system in Bangladesh and the trend in tax revenue of the previous five years would be analyzed and the hence the weaknesses of the current system would be detected. Based on the analysis, recommendations would be provided to improve the current system. 1.2 Scope
The report analyses the current tax situation of Income Tax, Import Duties and VAT. The revenue trend analysis is limited to the last five years and references from the taxation system and reforms in neighboring countries have been taken in order to suggest the recommendations. 1.3 Methodology
The report is prepared based on information from both primary and secondary resources. Primary information has been collected from an interview with Dr. Md. Sajjad Hossain Bhuiyan, Additional Commissioner of Taxes of the National Board of Revenue (NBR). Secondary sources include the official websites of the NBR as well as published reports, papers and official data.
2. National Board of Revenue: Structure and Functions
National Board of Revenue was constituted under the national Board of Revenue Order, 1972 and is given the highest executive authority under the Internal Resources division (IRD) of the Ministry of Finance. NBR is responsible for formulation and continuous re-appraisal of tax policies and tax laws in Bangladesh. The NBR is empowered to make necessary rules concerning income tax matters but not authorized to give any interpretation of any word used in any section of IT ordinance (judiciary function). It is a body consisting of a chairman, members, officers and other secretaries. The chairman and members are appointed by the Government and work under the direct control of the Ministry of Finance. The NBR may appoint as many Directors-General of Inspection, Commissioners (Appeals), Commissioners, Joint Commissioners of Taxes, Deputy Commissioners of Taxes and such other executives or ministerial officers and staffs as it may think fit. The NBR may also, with approval of the Government, appoint persons having appropriate professional experiences and skills as may be specified in the order issued on this behalf. Any other income tax authorities may also appoint income tax authority subordinate thereto subject to the orders and instructions as the board may issue from time to time. Currently the NBR has 3434 officers of various grades and 10195 supporting staff positions
2.1 Functions of the NBR
The main responsibility of NBR is to mobilize domestic resources through collection of Import Duties and Taxes, VAT and Income Tax for the government. The functions of the NBR outline the following: * It determines the functions of the Director-General of Inspection, the Commissioners (Appeals), the Appellate Joint Commissioner, the Commissioner (LTU), the...
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