Revenue Regime of Bangladesh

The current fiscal regime of Bangladesh consists of direct and indirect taxation. It is governed by the National Board of Revenue (NBR). Revenue is also generated from non-NBR sectors and under the laws and acts of related ministries. The NBR taxes include Customs Duty, Value Added Tax (VAT), Supplementary Duty (SD), Personal Income Taxes (PIT) and Corporate Income Taxes (CIT). Personal and Corporate Income Tax, the single largest source of direct tax, is governed by the Income Tax Ordinance, 1984 (XXXVI of 1984). The income tax laws consist of the following statutes (apart from the main statute):

  • Income Tax Ordinance 1984 – the parent statute;

  • Income Tax Rules 1984;

  • S.R.O. (Statutory Rules and Order)/Gazette Notification;

  • Income Tax Circular;

  • General or Special Order;

  • Explanation/Office Memorandum;

  • Verdicts of Appellate Tribunal for equivalent fact;

  • Verdicts of the High Court Division on question of law; and

  • Verdicts of the Appellate Division on judgment of the High Court Division.

Besides fiscal income from direct sources (e.g. income tax) Bangladesh generates a substantial share of its revenue from indirect sources through import and excise duties (customs duties). Customs duties are normally payable on the following goods: a) imported and exported goods; b) goods brought from any foreign country to any customs station and without payment of duties there, transhipped or thence carried to and imported at any other customs station; and c) goods brought in from one customs station to another. The main legislation relating to customs and excise duties are:

  • The Central Excises and Salt Act, 1944;

  • The Central Excises and Salt Rules, 1944

  • The Protective Duties Act, 1950;

  • The Customs Act, 1969;

  • The Customs Tariff Act, 1969/2000;

The customs duties were the biggest contributors to the tax revenue until the late 1980s. That is when their decline started, due to reduced rates and levies to comply with the demands of global and globalized trade and the fiscal policies of market liberalization, and also for shifting of economy from trading to local manufacturing. It then became necessary to think of other options for revenue generation. Given the context, in 1986 the World Bank suggested to introduce VAT in Bangladesh. With the aim of greater revenue generation for the government and stimulating economic growth, the VAT Bill 1991 was proposed in the National Parliament on 1st June 1991 and a month later the Bill was passed and made into the VAT Act 1991. The VAT Act 1991 contains over 70 laws, later the Value Added Tax and Supplementary Duty Act, 2012 that guide a business in VAT related issues, from registration to penalties on non-compliance. It also dictates the structure of the VAT authority and the power it may exert on businesses regarding the three taxes within the realm of the Act as the situation demands.

Written on January 8, 2020