Direct to Indirect tax ratio

Direct Tax: In a general sense, a direct tax is one imposed upon an individual person
(juristic or natural) or property (i.e. real and personal property, livestock, crops, wages, etc.) as
distinct from a tax imposed upon a transaction. In this sense, indirect taxes such as a sales tax or
a value added tax (VAT) are imposed only if and when a taxable transaction occurs. People have
the freedom to engage in or refrain from such transactions; whereas a direct tax (in the general
sense) is imposed upon a person, typically in an unconditional manner, such as a poll-tax or headtax, which is imposed on the basis of the person's very life or existence, or a property tax which is
imposed upon the owner by virtue of ownership, rather than commercial use. Some commentators
have argued that "a direct tax is one that cannot be shifted by the taxpayer to someone else,
whereas an indirect tax can be."[1]
Indirect Tax: An indirect tax (such as sales tax, a specific tax, value added tax (VAT), or goods and
services tax (GST)) is a tax collected by an intermediary (such as a retail store) from the person
who bears the ultimate economic burden of the tax (such as the consumer). The intermediary later
files a tax return and forwards the tax proceeds to government with the return. In this sense, the term
indirect tax is contrasted with a direct tax which is collected directly by government from the persons
(legal or natural) on which it is imposed. Some commentators have argued that "a direct tax is one
that cannot be shifted by the taxpayer to someone else, whereas an indirect tax can be."

Arguments against indirect tax: If indirect taxes are too high this creates an incentive to avoid taxes
through boot-legging e.g. the booze cruises to France where duty on alcohol and cigarettes is
much lower. Many indirect taxes make the distribution of income more unequal because indirect
taxes are more regressive than direct taxes Higher indirect taxes affect households on lower
incomes who are least able to save. Many people are unaware of how much they are paying in
indirect taxes they may be taxed by stealth this goes against one of the basic principles of a tax
system that taxes should be transparent

Ratio comparison:
In India at the peak in 1988, the government collected nearly a tenth of GDP as indirect taxes. The
ratio declined to 5.6 per cent in FY13. Conversely, the recent deceleration in economic growth has
been accompanied by an increase in indirect taxes and decline in the share of direct taxes in the
governments total tax kitty .

In Bangladesh an analysis of the revenue from the existing taxes shows that the indirect taxes
pre-dominate the revenue yield of the country. Nearly 63% of the tax revenue are from indirect
taxes which is clear from the following table,

Fiscal Year
% of DT to
revenue
% of IT to
revenue

200809

200910

201011

201112

201213

201314

27.85

30.51

31.11

32.21

33.12

37.12

72.15

69.49

68.89

67.79

66.88

62.88

%of DT and IT to revenue

80
70
60
50
40
30
20
10
0
2008-09

2009-10
Fiscal Year

2010-11

2011-12

% of DT to revenue

2012-13
% of IT to revenue

2013-14

Individual Tax System

India:

Whose income exceeds the maximum amount, which is not chargeable to the income tax, is an
assessee, and shall be chargeable to the income tax at the rate or rates prescribed under the finance act for
the relevant assessment year, shall be determined on basis of his residential status.Income tax is a tax
payable, at enacted by the Union Budget (Finance Act) for every Assessment Year, on the Total Income
earned in the Previous Year by every Person.The chargeability is based on nature of income, i.e., whether
it is revenue or capital. The rates of taxation of income are-:Income Tax Rates/Slabs Rate (%) (applicable
for assessment year 2015-16)
Net
income
range Net income range Net income range
(Individual resident (Age (For
resident (For super senior
below 60 Yrs.) or any senior citizen1)
citizen2)
NRI / HUF / AOP / BOI /
AJP)

Net income range Income Tax

(For
any rates
other personexclud
ing companies and
co-operative
societies)

Up to 250,000

Up to 300,000

Up to 500,000

Up to 250,000

NIL

250,001500,000

300,001
500,000

250,001
500,000

10%

500,0011,000,000

500,001
1,000,000

500,001
1,000,000

500,001
1,000,000

20%

Above 1,000,000

Above
1,000,000

Above
1,000,000

Above
1,000,000

30%

Srilanka:

Tax Slabs for Individual Tax Payers on Taxable Income

Taxable income bracket

Total tax on
income
below
bracket

Tax rate on income

in bracket

From LKR

To LKR

LKR

Percent

5,00,000

5,00,001

10,00,000

20,000

10,00,001

15,00,000

60,000

12

15,00,001

20,00,000

1,20,000

16

20,00,001

30,00,000

2,00,000

20

30,00,001

Over

4,00,000

24

Bangladesh:

For individuals other than female taxpayers, senior taxpayers of 65 years and above,
retarded taxpayers and gazetted war-wounded freedom fighter, income tax payable for the

Amount

Rate

First 2,20,000/-

Nil

Next 3,00,000/-

10%

Next 4,00,000/-

15%

Next 5,00,000/-

20%

Next 30,00,000/-

25%

Rest Amount

30%

Indias income tax consists 3 slabs, Sri Lanka 6 slabs and Bangladesh 5
slabs. Compare to Bandladesh and India srilankas tax burden is lower
because the follow 6 tire system and also their maximum tax rate is
24%.

Corporate tax: Corporate tax rate of India, Sri Lanka and Bangladesh are
as follows,

Country

200607

200708

200809

200910

201011

201112

201213

201314

201415

India

33.7

34

34

34

34

32.4

32.5

34

34

Sri Lanka

32.5

35

35

35

35

28

28

28

28

Bangladesh

30

30

30

27.5

27.5

27.5

27.5

27.5

27.5

Corporate tax rate

Fiscal year
2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15
37

35

33

India

Sri Lanka
31

29

27

25

Bangladesh