INTRODUCTION

Definition of Tax
Taxes are compulsory payment to government without expectation of direct return in benefit to the tax payer.
- P. E. Taylor

A tax is a compulsory contribution imposed by a public authority irrespective of the exact amount of service rendered to the tax payer in return and not imposed as penalty for any legal offense.
- Dalton

Characteristics of Tax
Tax is a payment to the Government by the people. Payment of taxes is non-penal and compulsory. An element of sacrifice is there in the payment of a tax as

they pay the taxes in order to ensure public interest. The aim of tax collection is to finance the government expenditure to ensure public interest and welfare. Tax is not the cost of the benefit conferred by the government on the public. It is one of the prime sources of revenue for the government. Tax is not any fine or penalty. Tax can only be imposed by the government of a country.

Canons of Taxation
Canon of Equality Canon of Certainty

Canon of Economy

Canon of Convenience

According to Adam Smith

Classification of Taxes
Classification on the Basis of number of taxes: Single Tax Multiple Tax Classification on the Basis of impact and incidence of tax: Direct Tax Indirect Tax Classification on the basis of structure of tax rate: Proportional Tax Progressive Tax Regressive Tax Degressive Tax

Classification of Taxes(Contd.)
Classification on the basis of elasticity of tax:

Elastic tax Inelastic tax Classification on the basis of tax base: Income tax Wealth tax Value Added Tax Expenditure tax Classification according to taxing authority: Central tax Local tax

Difference between Direct and Indirect Tax

Direct Tax Cannot be shifted Burden Impact & Incidence Elasticity Indirect Tax Can be shifted

On same person

On different person

Generally elastic
Adverse effect on tax payers willingness to work and save

inelastic

Effect

No direct adverse effect

Characteristics of a good tax system

Tax should be levied on the basis of fundamental principles of

taxation like the principle of least sacrifice, cost and benefit etc. important canons.

The taxes should be so imposed that they should follow the most

Tax system should be balanced containing both direct and indirect

nature of taxes so that it can maximize government revenue.

Efficient tax authority and effective taxation procedure.

Tax system should have positive effect on both production and

distribution without causing any adverse effect upon ability and willingness to work, save and invest.

Role of Tax in the Economic Development of a Country

Optimum allocation of available resources Control Mechanism Raising government revenue

Price stability

Encouraging savings and investment

Accelerating economic growth

Reduction of inequalities in income and wealth

Tax Structure in Bangladesh

Taxes on Income and Profit
Income tax Company Income tax Other than Company

Taxes on Property & Capital Transfer

Estate Duty and Gift Tax Wealth Tax Narcotics Duty Land Revenue Stamp Duty non judicial Registration Customs Duties Excise Duties Value Added Tax (VAT) Supplementary Duty (on luxury items and in addition to VAT) Taxes on Vehicles Electricity Duty Other Taxes and Duties (travel tax, turn over tax, etc.)

Taxes on Goods and Services