“TAX EVASION & AVOIDANCE -
A REAL PROBLEM FOR BANGLADESH”
Tax evasion and avoidance are both phenomena that are probably as old as taxation itself. Wherever and whenever authorities decide to levy taxes, individuals and firms try to avoid paying them. Though this problem has always been present, it becomes more pressing in the course of globalization as this process extends the range of opportunities to dodge taxation while simultaneously reducing the risk of being detected. Developing and emerging countries like Bangladesh are particularly vulnerable to tax evasion and avoidance activities of individual taxpayers and corporations. While tax revenues in OECD-countries ...view middle of the document...
The main objectives of tax are mentioned below:
· Tax is a major source of revenue for the government. In Bangladesh tax revenue accounts for more than 80 percent of the total government revenue.
· One of the main objectives of taxation is to reduce inequalities in income and wealth.
· In order to ensure the economic growth, the tax system must be so designed as to raise the rates of savings and investments.
· The government not only raises revenue through taxation but it also imposes restriction on the use of certain goods and services.
· In order to protect the local industries from the uneven competition government may provide tax incentives for poor local industries.
· The tax revenue can be used by the government to ensure the economic development of a country.
· Export of products and import activities can be directed in favor of industries through tax policy.
· One of the important objectives of tax is to lead the economy to full employment stage.
· Taxation is an important tool to control inflation, push money to the economy, and develop certain sectors of economy.
So, it can be said that the purpose of tax is not only the collection of revenue, but also to ensure the economic development and social welfare of the country.
What is tax evasion & tax avoidance?
Definition of Tax Evasion:
Tax evasion may be defined either as the understatement or concealment of taxable object or as the failure to pay tax in time either by the assessee or his agent. So it is illegal. In case of tax evasion, tax liability is reduced or tax is not paid at all.
Tax evasion means illegally hiding income or concealing the particulars of income or concealing particular source of income or manipulating account so as to inflate expenditure and other outgoings with a view to illegally reduce the burden of taxation. Hence ,tax evasion is illegal.
Definition of Tax Avoidance:
Tax avoidance is the minimization of tax liability by the tax-payer or his agent by efficient tax planning. It is possible by fully complying with the tax laws and meeting tax liabilities. Thus tax avoidance takes the advantages of the loopholes in the existing fiscal laws. The avoider is just smart taxpayer who exploits loopholes in the tax laws (and related laws) to reduce tax liability.
Effects of Tax Evasion and Avoidance in Economic Development:
Tax Evasion and Avoidance has a great impact in economic development. The effects of tax evasion and tax avoidance in economic development are as follows:
· Tax revenue is used to build the infrastructure, to invest in social security programs, in various poverty elevation programs. But due to tax evasion and tax avoidance above the development activities are hampered.
· Tax evasion and tax avoidance hamper the social welfare. It obliges the government to borrow loan that affects the economic development.
· Economic growth is co-related with budget. It is natural that higher government`s income support to do large budget...