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The document discusses various topics related to taxation in Bangladesh, including which sectors the government should focus on, whether corporate tax rates are too high, and reasons why companies may try to evade taxes. Regarding which sectors to focus on, the author says the government needs to focus on both corporate and individual taxation. On corporate tax rates, the author says there is no clear evidence rates are too high and many factors influence private investment. Reasons for tax evasion include complex tax systems, roles of intermediaries, and weaknesses in tax administration and enforcement. Simplifying the tax system and strengthening administration are recommended to address evasion.
The document discusses various topics related to taxation in Bangladesh, including which sectors the government should focus on, whether corporate tax rates are too high, and reasons why companies may try to evade taxes. Regarding which sectors to focus on, the author says the government needs to focus on both corporate and individual taxation. On corporate tax rates, the author says there is no clear evidence rates are too high and many factors influence private investment. Reasons for tax evasion include complex tax systems, roles of intermediaries, and weaknesses in tax administration and enforcement. Simplifying the tax system and strengthening administration are recommended to address evasion.
The document discusses various topics related to taxation in Bangladesh, including which sectors the government should focus on, whether corporate tax rates are too high, and reasons why companies may try to evade taxes. Regarding which sectors to focus on, the author says the government needs to focus on both corporate and individual taxation. On corporate tax rates, the author says there is no clear evidence rates are too high and many factors influence private investment. Reasons for tax evasion include complex tax systems, roles of intermediaries, and weaknesses in tax administration and enforcement. Simplifying the tax system and strengthening administration are recommended to address evasion.
Chief Rating Ofcer, Credit Rating Agency of Bangladesh Ltd 1. In context of Bangladesh, on which sector the government needs to focus more - corporate taxation or individual taxation !o "ou thin# Bangladesh needs to harmoni$e corporate income tax with individual income tax First of all, I am not a ta e!ert" #o$e%er, as a &nancial !rofessional I $ould li'e to address your (uestions on Ta to!ics" Taes matter" )eo!le tal' a*out them, com!lain a*out them, and try to dodge them $hen they can" Businesses also react to taes, *oth in ho$ they organi+e their acti%ities and, !erha!s, in $here they carry them out" #o$ !eo!le and *usinesses react in turn a,ects the le%el and structure of taation" The *ig (uestion in front of us to resol%e is ho$ $e could *est design and de%elo! ta !olicies to achie%e our !olicy o*jecti%es, gi%en the com!le economic and !olitical en%ironments $e face" -o single ta structure can !ossi*ly meet the re(uirements of e%ery country" The *est system for any country should *e determined ta'ing into account its economic structure, its ca!acity to administer taes, its !u*lic ser%ice needs, and many other factors" -onetheless, one $ay to get an idea of $hat matters in ta !olicy is to loo' at $hat taes eist around the $orld" The main !ur!ose of taation is to generate sufcient re%enue to &nance !u*lic sector acti%ities in a non.in/ationary $ay" A country0s choice on ho$ to structure its ta system de!ends u!on many factors, such as the le%el of de%elo!ment, the need and desire for increased !u*lic ser%ices, and the ca!acity to le%y taes e,ecti%ely" Ta !olicy choices also de!end on a country0s !reference as to such !u*lic !olicy goals as attaining a desired distri*ution of income and $ealth and increasing the rate of national economic gro$th" 1o far my understanding, all the go%ernment in the !ast committed to im!lementing ta reform in an incremental $ay to achie%e the o*jecti%es of2 sim!licity, e(uity, and *roadening of the *ase3 im!ro%ed com!liance3 gro$th and com!etiti%eness" But most im!ortantly, the challenges they face is to meet the re%enue demands of the Budget $hile maintaining macro.economic and social sta*ility" -o one li'es taes" )eo!le do not li'e to !ay them" 4o%ernments do not li'e to im!ose them" But taes are necessary *oth to &nance desired !u*lic s!ending in a non.in/ationary $ay and also to ensure that the *urden of !aying for such s!ending is fairly distri*uted" 5hile necessary, taes im!ose real costs on society" 4ood ta !olicy see's to minimi+e those costs" Ta !olicy is not just a*out economics" Ta !olicy also re/ects !olitical factors, including concerns a*out fairness" Taes in/uence the *efore.ta distri*ution of income *y changing economic incenti%es" They also in/uence the after.ta distri*ution of income through, for eam!le, !rogressi%e income taation" Regardless of $hat a !articular country may want to do $ith its ta system, or $hat it should do $ith res!ect to taation from one !ers!ecti%e or another, it is al$ays constrained *y $hat it can do" Ta !olicy choices are in/uenced *y a country0s economic structure and its administrati%e ca!acity" These factors reduce the ta !olicy o!tions a%aila*le" 6fciency, e(uity and administrati%e feasi*ility are 'ey criteria in designing and e%aluating ta systems" -o$ come to your (uestion, in contet of Bangladesh, in my %ie$, go%ernment needs to focus on *oth . cor!orate taation and indi%idual taation, *ecause they are not mutually eclusi%e area" O*%iously, there is a sco!e to harmoni+e cor!orate income ta $ith indi%idual income ta" %. !o "ou thin# that the corporate tax rate in Bangladesh is high and is detrimental to the growth of the private sector Many em!irical study results suggest that !ri%ate in%estment is determined in the short.run *y !u*lic in%estment, in/ation, real interest rate, o!enness, real echange rate and a regime of constitutional rule, $hile real out!ut, in/ation, eternal de*t, real interest rate, o!enness and real echange rate signi&cantly in/uenced !ri%ate in%estment res!onse in the long.run" 6m!irical e%idence in most studies indicates that !ri%ate sector.led gro$th has a stronger !ositi%e im!act on gro$th than !u*lic in%estment" 5ithout any study, it is hardly !ossi*le to comment that cor!orate ta rate in Bangladesh is high or lo$" There is no dou*t that gro$th in real out!ut or aggregate demand conditions is the engine of !ri%ate sector in%estment gro$th in Bangladesh" Im!ro%ing the !roducti%ity of sectors such as agriculture and manufacturing *y !ro%iding more efcient and ad%anced technologies 7ICT8 as in!ut su*sidies could go a long $ay to increase !ri%ate in%estment le%els and gro$th in out!ut" The signi&cant !ositi%e im!act of !u*lic in%estment on !ri%ate in%estment in the short. run indicates an im!ortant com!lementary role !layed *y the go%ernment in *oosting !ri%ate sector initiati%es" As a matter of !olicy, it is essential for the go%ernment to continue to earmar' and !rioritise !u*lic !rojects, !articularly in%estment in infrastructure and human ca!ital, $hich ha%e the !otential to com!lement and further *oost !ri%ate sector in%estment !erformance" Further, go%ernment should ensure efcient deli%ery of ser%ices and increased !roducti%ity of !u*lic in%estment" The idea that taes a,ect economic gro$th has *ecome !olitically contentious and the su*ject of much de*ate in the !ress and among ad%ocacy grou!s" That is in !art *ecause there are com!eting theories a*out $hat dri%es economic gro$th" 1ome su*scri*e to 9eynesian, demand.side factors, others -eo.classical, su!!ly.side factors, $hile yet others su*scri*e to some miture of the t$o or something entirely uni(ue" The facts, historical and geogra!hical %ariation in 'ey !arameters for eam!le, should shed light on the de*ate" #o$e%er, the economy is sufciently com!le that %irtually any theory can &nd some su!!ort in the data" 1o $hat does the academic literature say a*out the em!irical relationshi! *et$een taes and economic gro$th: 5hile there are a %ariety of methods and data sources, the results consistently !oint to signi&cant negati%e e,ects of taes on economic gro$th e%en after controlling for %arious other factors such as go%ernment s!ending, *usiness cycle conditions, and monetary !olicy" Fe$ results su!!ort the -eo.classical %ie$ that income and $ealth must &rst *e !roduced and then consumed, meaning that taes on the factors of !roduction, i"e", ca!ital and la*or, are !articularly disru!ti%e of $ealth creation" Cor!orate and shareholder taes reduce the incenti%e to in%est and to *uild ca!ital" Less in%estment means fe$er !roducti%e $or'ers and corres!ondingly lo$er $ages" Taes on income and $ages reduce the incenti%e to $or'" )rogressi%e income taes, $here higher income is taed at higher rates, reduce the returns to education, since high incomes are associated $ith high le%els of education, and so reduce the incenti%e to *uild human ca!ital" )rogressi%e taation also reduces in%estment, ris' ta'ing, and entre!reneurial acti%ity since a dis!ro!ortionately large share of these acti%ities is done *y high income earners" In any case, the lesson from the studies conducted is that long.term economic gro$th is to a signi&cant degree a function of ta !olicy" Our current economic doldrums are the result of many factors, *ut ha%ing the high cor!orate rate in the industriali+ed $orld does not hel!" -or does the !ros!ect of higher taes on shareholders and $or'ers" If $e intend to s!ur in%estment, $e should lo$er taes on the earnings of ca!ital" If $e intend to increase em!loyment, $e should lo$er taes on $or'ers and the *usinesses that hire them" &. Wh" do man" companies tr" evading pa"ment of corporate taxes What can 'e done to address this There are %arious reasons for ta e%asion and ta a%oidance" In order to de%elo! methods and instruments for &ghting ta e%asion and a%oidance, it is %ery much im!ortant to esta*lish a *road understanding of the di,erent reasons underlying these !ro*lems" These reasons can *e di%ided in t$o categories" The &rst category com!rises factors that negati%ely a,ect ta!ayers; com!liance $ith ta legislation" These factors can *e su*sumed either contri*uting to a lo$ $illingness to !ay taes 7lo$ ta morale8 or to high costs to com!ly $ith ta la$s" The second category contains reasons for the lo$ a*ility of ta administration and &scal courts to enforce ta lia*ilities" These factors can *e summari+ed as resulting from insufciencies in the administration and collection of taes as $ell as $ea' ca!acity in auditing and monitoring ta !ayments $hich limit the !ossi*ility to detect and !rosecute %iolators" 1im!li&ed Income Ta system2 The !resent income ta system is too com!licated to understand" Chartered accountants, ta la$yers and related !rofessionals often allegedly are a*using this com!leity" Their du*ious roles as middle man hel! underre!orting many income ta cases" )eo!le are li'ely to go for self assessments are discouraged *y the difcult system" The !ro*lem is more acute in a !oor economy li'e ours $ith high illiteracy and !oor record 'ee!ing and accounting ha*its" The demands !laced on administration. %ery !oorly sta,ed $ith !oor !ay and inade(uate logistics su!!ort ha%e !ro*a*ly resulted in greater dishonest !ractices than $ould ha%e *een the case other$ise" #o$e%er, the current &scal !olicy has !ro!osed to introduce e.ta &ling, e.ta calculator on -BR $e* etc" A!!ro!riate design of a !enalty rate structure also a!!ears to *e anti.e%asi%e and anti. a%oidance" At !resent, the !ro%ision of !enalty in the statute *oo's is one sided" The ta !ayers only to *e !enali+ed for an act of omission or default *ut there is no corres!onding !ro%ision to !enali+e dishonest, inefcient or unjust ta ofcials" (. What measures can )B* ta#e to arrest transfer pricing in order to increase corporate taxes <ey recently, The -ational Board of Re%enue -BR8 issued the much.tal'ed. a*out Transfer )ricing 7T)8 rules to hel! chec' ta a%oidance *y multinational com!anies 7M-Cs8"The T) rule $as issued *y the -BR under a !ro%ision incor!orated in the Finance Act =>?= to hel! !lug the conduits of unauthori+ed out/o$ of money" The -BR issued the rule along $ith a !rescri*ed form for the multinationals to furnish details of their international transactions $ith the ta returns" A T) cell $ould handle ta &les of the ta!ayers in%ol%ed in international transactions" T) cell ofcials $ill determine the !rice and send a re!ort to the circle ofce to com!lete assessment on the *asis of decision *y the T) ofcial concerned" According to the T) rule, the M-Cs@ international transactions $ill *e Amonitored and assessed carefullyA *y an e!ert grou! of tamen" The Be!uty Commissioner of Taes 7BCT8 may im!ose a !enalty e(ui%alent to a maimum ?"> !er cent of the %alue of each international transaction in case of failure to 'ee!, maintain or furnish information, documents or records to him or com!ly $ith the notice" The BCT can im!ose a !enalty u! to T' >"C million for failure in furnishing re!ort *y chartered accountants 7CA8" Transfer !ricing is a !ro&t allocation method used to attri*ute a multinational cor!oration@s net !ro&t 7or loss8 *efore ta to countries $here it does *usiness" Transfer !ricing results in the setting of !rices among di%isions $ithin an enter!rise" In !rinci!le a transfer !rice should match either $hat the seller $ould charge an inde!endent, arm@s length customer, or $hat the *uyer $ould !ay an inde!endent, arm@s length su!!lier" 5hile unrealistic transfer !rices do not a,ect the o%erall enter!rise directly, they *ecome a concern $hen they are misused to lo$er !ro&ts in a di%ision of an enter!rise that is located in a country that le%ies high taes and raise !ro&ts in a country that is a ta ha%en that le%ies no or lo$ taes" Transfer !ricing is the major tool for cor!orate ta a%oidance" +. What,s "our opinion on government,s decision to give 1-. tax re'ate to companies that were consistent in declaring dividends in last three "ears This ty!e of !ro%ision is an incenti%e for dee!ening the ca!ital mar'et, no dou*t of it" Bi%idend could *e in the form of cash or *onus" In general, $hen a com!any declare cash di%idend, it is assumed that rein%estment o!!ortunity is less attracti%e com!ared to !ay di%idend in cash" In case of cash di%idend, enter!rise %alue goes do$n, if other things remain constant" On the contrary, if rein%estment o!!ortunity is more attracti%e then the &rm !refers to declare *onus di%idend, so there is no cash out there*y enter!rise %alue may go u!" Again, declaration of *onus share may reduce the future 6)1 due to increase of outstanding share" 1o it is a com!le decision and strategy for a &rm to decide on Bi%idend 1trategy $hich not only de!ends on ta regime" /. Along with present tax advantage for listing, what additional measures can )B* ta#e to motivate companies for listing 5hy cor!orate $ill go for listing" In general, cor!orate go for listing to e!and its *usiness acti%ities as $ell as achie%e o!timal ca!ital structure and access to &nance" In an en%ironment, $here e%ery*ody !ays ta at actual, !referential ta treatment 7ta eem!tion, reduced ta rate8 may gi%e a huge incenti%e for the cor!orate to go for listing" But in reality, tendency of cor!orate house is to a%oid and e%ade taes" A!!ro!riate design of a !enalty rate structure needs to *e anti. e%asi%e and anti.a%oidance" The rate of !enalty should *e !rogressi%ely higher $ith the amount of ta e%aded and must also re/ect the current mar'et conditions" From the cor!orate ta!ayer0s !oint of %ie$, $hich are the incenti%es $hich are most im!ortant and $hich need to *e touched u!on in order to dee!en the ta *ase: The ans$er is there are se%eral" If you loo' at our incenti%e structure, $hich I assume !ro&t.oriented incenti%es" If $e could shift from !ro&t.lin'ed incenti%es to in%estment.lin'ed in%estments" 1o, that $ill *roaden the *ase (uite a *it, the *ase on the minimum alternate ta 7MAT8 may include gross assets" Also $e could loo' at the $ay ta is a%oided" 1o, $ithout really im!inging u!on good ta!ayers, $e ha%e to identify those areas $here $e need to eamine ta a%oidance %ery carefully" It should not *ecome a re%enue raising method *ut it should *e a method to minimi+e ta a%oidance *ut that also has to *e gi%en attention to" From my understanding, I may $rong, ta ad%antage does not !lay signi&cance role in determining *y the cor!orate to go for listing" Rather trans!arency, disclosure, com!liance !lays %ery im!ortant detrimental factors for listing" If $e could e!and cor!orate net $hether listed or non listed, and minimi+e ta a%oidance, cor!orate $ill automatically get incenti%e to go for listing" 0. !o "ou agree with this "ear,s decision to reduce tax of non- listed companies from &0.+. to &+. while tax rate for listed entities remaining the same at %0.+. I $ill not comment on any &gure" 5hy: Because the a*o%e !ercentages are not merely a !ercent, rather it in%ol%es su*stantial *ac'ground estimation and changes in the !ercentages im!act on the $hole *udgetary system of the country" 5ithout analy+ing *udgetary allocation, there is no !oint of agree or disagree" #o$e%er, I could say, still there are incenti%es for ca!ital mar'et !layers" 1. !o "ou support tax exemption facilit" for 23* activities What t"pes of 23* expenses do "ou thin# should get 'ene4t of tax exemptions It is a million dollar (uestion" There are strong argument and dis.argument for and against ta eem!tion facility for C1R acti%ities" Cor!orate 1ocial Res!onsi*ility 7C1R8 acti%ities in Bangladesh are not through a statutory !ro%ision" 5hile many cor!orate houses ha%e *een traditionally engaged in doing C1R acti%ities %oluntarily, *ut it is of my o!inion that the C1R !ro%isions should *e !ut formal to set out clear frame$or' and !rocesses to ensure strict com!liance, *efore !ro!osing ta eem!tion on C1R acti%ities" Com!anies Act need to *e !rescri*ed acti%ities to$ards $hich C1R e!enditure should *e incurred, including eradicating etreme hunger and !o%erty, !romoting education, ensuring en%ironmental sustaina*ility, social *usiness !rojects, reducing child mortality and im!ro%ing maternal health, etc" Being a !rofessional, the &rst thing that comes to fore is $hat is the im!act of C1R contri*utions from a ta deducti*ility !oint of %ie$" The dilemma is if any e!enditure on C1R is considered *y the taman as not e!ended $holly or eclusi%ely for the !ur!oses of the *usiness, on the *ac'dro! that the C1R rules ecludes Dacti%ities underta'en in !ursuance of the normal course of *usiness of the com!anyE, $ill this contri*ution *e considered as !ermissi*le C1R s!ending" 5hile $elcoming the mo%e in s!iritFno one $ants to *e seen to *e o!enly critici+ing anything to do $ith C1RFe!erts ha%e already !ointed out the !ro*lems that could arise from de&ning $hat C1R acti%ities are and aren0t" It could also im!act the go%ernment0s ta re%enue" The !otential dent to the go%ernment0s ta re%enue could therefore *e high, if the go%ernment does grant income ta eem!tions to C1R s!ending" 5. !o "ou thin# audit companies are ethical and competent enough to ensure fair auditing Auditors !lays gate 'ee!er role in any &nancial and ca!ital mar'et" There is a mi o!inion *et$een !oor and standard regarding the (uality of audit" Gou cannot generali+e ethical and com!etence of auditors in a single scale" It is hardly !ossi*le to de%elo! a %i*rant and healthy ca!ital mar'et as $ell as e,ecti%e ta collection system $ithout international *est !ractice audit" 4o%ernment, Regulators, Audit Firms and 1ta'eholders are $or'ing on the issue %ery seriously, and I am o!timistic that in near future (uality of &nancial re!orting $ill *e signi&cantly enhanced" In the era of glo*ali+ation, $e don0t ha%e any alternate o!tion" 1-. What are the 6aws in )B*,s tax collection polic" What can 'e done to improve those From my !oint of %ie$, $e need to dee!en the country0s ta *ase, $hether there is sco!e to *ring do$n headline ta rates and focus on e!anding and dee!ening the ta *ase" The num*er of ta!ayers has gone u! o%er the last ?H years" -o$, -BR are at another threshold $here it $ould say there is !ossi*ility to increase the num*er of ta!ayers Iconsidera*lyJ" The focus has to *e on *ringing in ne$ ta!ayers, rather than !utting hea%ier *urden on !ayers $ho are already contri*uting (uite a lot" #o$ do you do that: 5e need to orient the ta administration more to$ards customers, $hich is the idea that has *een ado!ted *y many moderni+ing ta administrations" 1o, $e ha%e to ha%e customer focus in the ta administration, to *egin $ith" 1im!li&ed Income Ta system2 The !resent income ta system is too com!licated to understand" Chartered accountants, ta la$yers and related !rofessionals often allegedly are a*using this com!leity" Their du*ious roles as middle man hel! underre!orting many income ta cases" )eo!le are li'ely to go for self assessments are discouraged *y the difcult system" The !ro*lem is more acute in a !oor economy li'e ours $ith high illiteracy and !oor record 'ee!ing and accounting ha*its" The demands !laced on administration. %ery !oorly sta,ed $ith !oor !ay and inade(uate logistics su!!ort ha%e !ro*a*ly resulted in greater dishonest !ractices than $ould ha%e *een the case other$ise" #o$e%er, the current &scal !olicy has !ro!osed to introduce e.ta &ling, e.ta calculator on -BR $e* etc" A!!ro!riate design of a !enalty rate structure also a!!ears to *e anti.e%asi%e and anti. a%oidance" At !resent, the !ro%ision of !enalty in the statute *oo's is one sided" The ta !ayers only to *e !enali+ed for an act of omission or default *ut there is no corres!onding !ro%ision to !enali+e dishonest, inefcient or unjust ta ofcials"
Corporate Governance- Corporate Governance: Meaning, Historical Perspective, Theoretical basis of CG, CG Mechanism, CG System, Good CG,Land mark in the emergence of CG: CG Committees, World Bank on CG, OECD Principle, Sarbanes, Oxley act-2002