Fiscal Policy : It is the main part of economic policy and fiscal policy's first word fiscal is taken from

french word Fisc it means treasure of Government. So we can define fiscal policy as the revenue and expenditure policy of Government of Bangladesh .It is prime duty of Government to make fiscal policy. By making this policy, Government collects money from his different resources and utilize it in different expenditure. Thus fiscal policy is related to development policy. All welfare projects are completed under this policy. . Objectives of Fiscal Policy : There are following objectives of fiscal policy :1. Development of Country: For development of Country, every country has to make fiscal policy. With this policy , all work work is done Government. planning and proper use of fund for development functions . If Government. does not make fiscal policy, then it may happen that revenue may be misused without targeted expenditure of Government. 2. Employment :Getting the full employment is also objective of fiscal policy . Government. can take many action for increase employment. Government can fix certain amount which can be utilized for creation of new employment for unemployed peoples . 3. Inequality :Bangladesh is a developing country . we can see the difference one basis of earning . 10% of people are earning more than Tk. 100000 per day and some other are earning less than Tk . 300 per day. By making a good fiscal policy government can reduce this difference . If government makes it as his target . 4. Fixation of Government. Responsibility :It is the duty of Government. to effective use of resources and by making of fiscal policy different minister's accountability can be checked . We found that in old time fiscal policy was made and treasury officer and even prime minister are also responsible for any shortage of Government .fund .

Techniques of Fiscal Policy 1. Taxation Policy Taxation policy is relating to new amendments in direct tax and indirect tax . Government. of Bangladesh passes finance bill every year . In this policy Government. determines the rate of taxes. Government. can increase or decrease these tax rates and amend previous rules of taxation . Government.'s earning's main source is taxation. But more tax on public will adverse effect on the development of economy. If Government. will increase taxes, more burden will be on the public and it will reduce production and purchasing power of public . If Government. will decrease taxes, then public's purchasing power will increase and it will increase the inflation. Government. analyzes both the situation and will make his taxation policy more progressive .

2. Government. Expenditure Policy There are large number of public expenditure like opening of Government schools , colleges and universities , making of bridges , roads and new railway tracks . In all above projects Government has paid large amount for purchasing and paying wages and salaries all these expenditure are paid after making Government. expenditure policy . Government. can increase or decrease the amount of public expenditure by changing Government. budget. So Government expenditure is technique of fiscal policy by using this , Government use his fund first on very necessary sector and other will be done after this . 3. Deficit Financing Policy

If Government.'s expenditures are more than his revenue then Government. should have to collect this amount . This amount is deficit and it can be fulfilled by issuing new currency by central bank of country. But, it will reduce the purchasing power of currency. More new currency will increase inflation and after inflation value of currency will decrease. So, deficit financing is very serious issue in the front of Government. Government should use it , if there is no other source of Government earning . 4. Public Debt Policy

If Government thinks that deficit financing is not sufficient for fulfilling the public expenditure or if Government does not use deficit financing , then Government can take loan from world bank , or take loan from public by issuing Government securities and bonds . But it will also increase the cost of debt in the form of interest which Government. has to pay on the amount of loan . So Government has to make solid budget for this and after this amount is fixed which is taken as debt. This policy can also use as the technique of fiscal policy for increase the treasure of Government.

Historical Impact of Fiscal policy in Bangladesh :

Fiscal policy in Bangladesh basically comprises activities, which the country carries out to obtain and use resources to provide services while ensuring optimum efficiency of the economic units. The policy influences the behavior of economic forces through public finance. Major objectives of the fiscal policy of Bangladesh are to ensure macroeconomic stability of the country, promote economic growth, and develop a mechanism for equitable distribution of income. The main tools to achieve these objectives are variation in public revenue, variation in public expenditure, and management of public debt. These are reflected in the budgetary operations of the government, prepared and implemented on year-on-year basis. In the initial years of independence, the government of Bangladesh had to spend a large amount of its resources in reconstruction and rehabilitation work. It had negative public savings and limited private investment. Despite large inflows of foreign aid the increasingly large financing gap became the main concern of the government. The situation was further aggravated by frequent internal and external shocks. Under the circumstances, government fiscal policies during 1970s and 1980s were largely oriented at rehabilitating the war-torn economy as well as stabilizing it from various shocks. This had gradually lead to weak fiscal structure and poor fiscal management. The tax structure was such that any increase in taxes due to built-in consequences of economic growth was virtually not possible. This was because of the fact that despite a moderate growth of the economy, income distribution was skewed, and had been pushing more and more people below the poverty line each year. As such, the proportion of population with taxable surplus went down overtime. More than 80% of the total tax revenue came from indirect taxes, amongst which taxes on imports contributed about 60%. Since most imports were in the government sector and basic need-oriented, it was hardly possible to increase import duty. Despite higher production costs, prices of most public goods could not be rationalized due to socio-economic reasons. As such, these were kept lower, which resulted in inadequate cost recovery. Current expenditure had always been underestimated in the country, while current surplus as well as foreign loans and grants were overestimated. Therefore, the overall fiscal deficit experienced a large variability all the time. The whole scenario may be described as such that the fiscal policies of the past could not be used as an adequate

tool for 'fine-tuning' the economy towards achieving macro-economic stability and higher economic growth. Regular deficit financing, normally undertaken through borrowings from abroad, from Bangladesh Bank, and from scheduled banks, has become a basic feature of the fiscal policy of the country. Opportunity of borrowing from the public by the government for financing budget deficit is very limited in the country as savings capability of the people is very low. Therefore, the opportunity of non-inflationary financing of budget deficit does not exist here. Availability of foreign borrowing depends on the international liquidity situation and the prevailing circumstances in the international capital market, which is always uncertain and volatile for a country like Bangladesh. The commercial banks, because of their potential for central bank refinancing, are also not effective sources of non-inflationary finance. Given the circumstances, whatever is the size of the fiscal deficit in any particular year, a part of it cannot be financed by external borrowing and, therefore, must be financed out of central bank borrowing. As a result, the essential element of fiscal deficit in Bangladesh has become such that once a deficit is incurred, government borrowing from the Bangladesh Bank became inevitable. In the early 1990s, the government of Bangladesh undertook some comprehensive steps towards the improvement of the country's fiscal front. The major objective of the government fiscal policy was to restrict the growth of current expenditure to a level below the growth of the nominal GDP, thereby making more resources available to support Annual Development Program (ADP) undertaken in each year. In line with the Enhanced Structural Adjustment Facility (ESAF) of the IMF, a number of reforms were initiated, the most important of which was the introduction of Value Added Tax (VAT) in July 1991. VAT was introduced at a uniform rate of 15% at the manufacturing-cum-import level. Together with protection-neutral supplementary duties, this system largely replaced the earlier structure of differentiated sales tax on import and excise duties on domestic goods. In case of personal income tax, the major reforms involved the inclusion of entertainment allowances in the personal income tax base, deduction of investment in approved assets from the tax base, and an introduction of a withholding tax on dividend with limitation of special expenditure within a reasonable limit. Steps were taken to reduce interest rates on government savings instruments and subsidies for food and jute. A good number of public sector enterprises were denationalized through sales to the private sector. These reform measures resulted in a remarkable improvement in the fiscal situation of Bangladesh after 1990. The growth of current expenditures was contained below the rate of GDP growth. Tax reform led to an increase in government revenues from much below 10% of GDP in fiscal year 1989-90 to 11% in fiscal year 1991-92. This trend continued and revenue collections reached more than 12% of GDP by the FY 1994-95. This trend is continuing, although with minor fluctuations. Moreover, this was accompanied by changes in the tax structure of the country, reflected in the decline of

the shares of customs duties and increase in the share of income and profit taxes in the total tax revenues in the subsequent period. As a result, the shortage of local funds that had constrained in the project implementation capacity of the country and had shrunk the country's absorptive capacity for project aid for a long period was largely removed. The improvement of the government's fiscal performance was reflected in the budgetary outcome of the country. The overall budget deficit was 8.4% of GDP during the 1980s and came down to 5.9% in 1991-92 and thus provided a breathing ground for the government. Up to 1997-98, the budget deficit could be successfully contained to less than 6%, helping to stabilize the economy to a great extent. But this could not be maintained in the following year due to the devastating and prolonged floods that occurred in the first half of 1998-99. There was a considerable slippage in the expenditure programme of the government due to floods while revenue collection lagged far behind the target. As a result, the overall budget deficit shot up to 7.8% in the FY 1998-99. Although the government took some steps, the overall deficit remained slightly above 6% in 1999-2000. Up to 1989-90,foreign aid had financed the lion's share of fiscal deficit of Bangladesh. Since then there has been a considerable shift in the sources of funds for financing budget deficit. Domestic sources could provide only 15% of the total deficit during 198990. In contrast, in FY 1999-2000, the comparative figures for domestic and foreign sources in funding the budget deficit were 47% and 53% respectively. However, an absolute decline in the flow of external funds on concessionary terms is also partly attributable to this. Increased dependence on local funds has largely reduced the uncertainties of the implementation of the budgetary programme. But this has also increased the risk of additional burden of higher interest costs from domestic borrowing. Efforts to generate increased domestic resources are generally based on various tax reforms as well as reforms in the financial sector. On the expenditure side, the government has given increased emphasis on human resource development and poverty alleviation programmes. Top priority has been given to improve the quality and coverage of the education system as well as health and family planning services, and social safety net pogrammes to serve vulnerable group. This is demonstrated in the increased budgetary allocation in these heads in recent years.

Limitation of Fiscal Policy 1. After issuing new notes for payment of Government of expenses , inflation of Bangladesh is increasing rapidly and in this inflation , prices of necessary goods are increasing very fastly. Living of poor person has become difficult. So, these sign shows the failure of Bangladesh fiscal policy. 2. Government. fiscal policy has failed to reduce the black money . Even large amount of past minister is in the form of black money which is deposited in

Swiss Bank. 3. After taking loan from world bank under the fiscal policy's debt technique , Government. has to obey the rules and regulations of world bank and IMF . These rules are more harmful for developing small domestic business of India. These organisation are inter related with WTO and they want to stop Indian domestic Industry. 4. After expending large amount for generating new employment under fiscal policy , rate of unemployment is increasing fastly and big lines on Government. employment exchange can be seen generally in working days . Database of employment exchanges are full from educated unemployed candidates.

Fiscal policy is the use of government spending and taxation to influence the economy. When the government decides on the goods and services it purchases, the transfer payments it distributes, or the taxes it collects, it is engaging in fiscal policy. The primary economic impact of any change in the government budget is felt by particular groupsa tax cut for families with children, for example, raises their disposable income. Discussions of fiscal policy, however, generally focus on the effect of changes in the government budget on the overall economy. Although changes in taxes or spending that are revenue neutral may be construed as fiscal policyand may affect the aggregate level of output by changing the incentives that firms or individuals facethe term fiscal policy is usually used to describe the effect on the aggregate economy of the overall levels of spending and taxation, and more particularly, the gap between them. Fiscal policy is said to be tight or contractionary when revenue is higher than spending (i.e., the government budget is in surplus) and loose or expansionary when spending is higher than revenue (i.e., the budget is in deficit). Often, the focus is not on the level of the deficit, but on the change in the deficit. Thus, a reduction of the deficit from $200 billion to $100 billion is said to be contractionary fiscal policy, even though the budget is still in deficit.

Taxation one of the major sources of public revenue to meet a country's revenue and development expenditures with a view to accomplishing some economic and social objectives, such as redistribution of income, price stabilisation and discouraging harmful consumption. It supplements other sources of public finance such as issuance of currency notes and coins, charging for public goods and services and borrowings. The term 'tax' has been derived from the French word taxe and etymologically, the Latin word taxare is related to the term 'tax', which means 'to charge'. Tax is 'a contribution exacted by the state'. It is a nonpenal but compulsory and unrequited transfer of resources from the private to the public sector, levied on the basis of predetermined criteria. According to Article 152(1) of the Constitution of Bangladesh, taxation includes the imposition of any tax, rate, duty or impost, whether general, local or special, and tax shall be construed accordingly. Rate is a local tax imposed by local government on its residents or the property owners of the locality, a duty is a tax levied on a commodity, and an impost is a tax imposed for an entry into a country. Under the provision of article 83 of the Constitution, "no tax shall be levied or collected except by or under the authority of an Act of Parliament". The imposition, regulation, alteration, remission or repeal of any tax is dealt with by the 'Money Bill', but except in case of reduction or abolition of any tax, the 'Money Bill' cannot be introduced in the Parliament without the President's recommendation. Bangladesh inherited a system of taxation from its past British and Pakistani rulers. The system, however, developed on the basis of generally accepted canons and there had been efforts towards rationalising the tax administration for optimising revenue collection, reducing tax evasion and preventing revenue leakage through system loss. To develop manpower for efficient tax administration, the government runs two training academies - BCS (Tax) Academy at DHAKA for direct tax training and Customs, Excise and Value Added Tax Training Academy at CHITTAGONG for indirect tax training. The NATIONAL BOARD OF REVENUE (NBR) is the apex tax authority of Bangladesh and it collects around 93% of total taxes or 76% of total public revenues. The NBR portion of total taxes includes CUSTOMS DUTY, VALUE ADDED TAX (VAT), supplementary duty (SD), EXCISE DUTY, income tax, foreign travel tax, electricity duty, wealth tax (collected as a surcharge of income tax since fiscal year 1999-2000), turnover tax (TT), air ticket

tax, advertisement tax, gift tax and miscellaneous insignificant taxes. Other taxes (amounting to around 7% of total taxes or 5% of total revenues) are often referred to as 'non-NBR portion' of tax revenue. These taxes include narcotics duty (collected by the Department of Narcotics Control, Ministry of Home Affairs), land revenue (administered by the Ministry of Land and collected at local Tahsil offices numbered on average, one in every two Union Parishads), non-judicial stamp (collected under the Ministry of Finance), registration fee (collected by the Registration Directorate of the Ministry of Law, Justice and Parliamentary Affairs) and motor vehicle tax (collected under the Ministry of Communication). Bangladesh is unable to raise enough resources in taxes. The tax-GDP ratio was only 3.4% in 1972-73 and it remained below 9% until the introduction of VAT in the country in 1991. The ratio was 9.8% in 1992-93 and although it was more than 9% in the successive years, it never reached 10%. The revised budgets of 1999-2000 and 200001 estimated the ratio at 8.6%. The budgeted expenditure of 2001-02 was Tk 447.65 billion against projected total revenues of Tk 272.39 billion ie, the overall deficit was Tk 175.26 billion. The revenue receipts included tax revenue of Tk 220.23 billion (13% higher than that in the preceding year) and non-tax revenue of Tk 52.16 billion (11% higher than that in the preceding year). The tax revenues covered only 40% of total expenditures. The tax structure in the country consists of both direct (income tax, gift tax, land development tax, non-judicial stamp, registration, immovable property tax, etc) and indirect (customs duty, excise duty, motor vehicle tax, narcotics and liquor duty, VAT, SD, foreign travel tax, TT, electricity duty, advertisement tax, etc) taxes. Since direct taxes represent only about 19% of total taxes, tax-structure is heavily dependent on indirect taxes, which are usually of regressive nature. Of the direct taxes, around 69% come from income tax, 19% from non-judicial stamp, 5.7% from land revenue, 5.6% from registration and balance from gift tax and other direct taxes. Indirect taxes (representing 81% of total taxes), on the other hand, are mainly import-dependent. Around 67% of indirect taxes are collected at import stage by customs authorities as customs duty (38.0% of indirect tax or 30.7% of total tax), VAT (24.3% of indirect tax or 19.6% of total tax), and SD (4.7% of indirect tax or 3.8% of total tax). Balance of indirect taxes (representing around 26.64% of total taxes) include taxes collected on domestic production, consumption or transactions such as VAT (11.4%), SD (11.6%), excise duty (1.5%), foreign travel tax (0.7%), electricity duty (0.6%), motor vehicle tax (0.7%), narcotics duty (0.2%), TT (0.03%), air ticket tax (0.01%) and advertisement tax (0.001%). Public revenue also comes from non-tax receipts such as surplus of sector corporations, financial institutions, railways, postal department, telegraph and telephone, judicial stamp, etc, and these non-tax revenues represent around 19% of total revenues. The tax related to land or the produce thereof has been recognised in the subcontinent since antiquity. In the Vedic period (2000 to 1500 BC), initially the king's power was not well established and taxation seems to have been occasional and voluntary. The term bali, originally used to devote voluntary offerings made to gods for securing their

favour, came to be applied later to the presents and taxes offered to the king, more or less voluntarily. In the later Vedic period, the nature of taxation changed and the king was described as the 'eater of his subjects', and this phrase might have had its origin in a custom by which the king and his retinue were fed by the people's contributions. Kautiliya's Arthasastra (circa 321-300 BC) recorded that the Samaharta(CollectorGeneral) collected revenue from seven broad places - fortified city, the country part, mines, irrigation works, forests, herds, and trade routes. Some taxes on land were related to the country part known as svatva (revenue collected from the produce of crown lands), bhaga (one-sixth share of produce from personal land), bali (King's receipts as gifted or asked), kar (periodical tax paid to King in relation to fruits and trees), etc. The ancient land taxation was not significantly changed during the Muslim rule in India (1200-1757), except that the rate of revenue was raised to one-third and sometimes to one-half of the gross produce. During the British rule (1757-1947), the British adopted the traditional Indian land tax for financing administration. They established ZAMINDARs, or 'tax farmers' to collect the revenue from the individual tenants. The taxes were based, in general, on the produce of the land, and were often oppressive, reaching in some areas a levy of over half the net produce. The tax rates in Bengal were fixed in nominal terms at ten-elevenths of net rental receipts for zamindars at the time of the PERMANENT SETTLEMENT Act of 1793. The zamindari system was abolished in 1952. The present land revenue system of Bangladesh has its base in the EAST BENGAL STATE ACQUISITION AND TENANCY ACT 1950 which established a direct contract between the taxpayer and the government. Before the independence of Bangladesh, the total revenue demand of the government for agricultural land was Tk 6.47 per acre: Tk 3.75 as land revenue and Tk 2.72 as other taxes (development and relief tax, and local rates). In 1972, the government exempted all owners having land up to 25bighas (8.33 acres) from paying land revenue by a Presidential Order. The revenue demand from landholders above 25 bighas was kept as before (ie, Tk 6.47 per acre), but owners having land up to 25 bighas were subject to only other tax of Tk 2.72 per acre. In 1976, the Land Development Tax Ordinance was passed by which land revenue and other taxes were merged together to be called 'land development tax' (LDT). Immediately after the independence, land revenue fell sharply because of a liberal attitude of the tax collection machinery and reduction in tax-base. In 1972-73, the land revenue was only Tk 25 million (1.5% of total tax) and it increased continuously in nominal terms over the years. In 1997-98, land revenue collection was Tk 1.614 billion (1.1% of total tax) and it was targeted at Tk 2.33 billion (1.1% of total tax) in the budget of 2001-02. The most important tax on the value of transferred property is the non-judicial stamp tax (levied under the Stamp Act 1899), which has been in existence since January 1899. Current rates of non-judicial stamp duty are provided in the First Schedule of the Finance Act 1998, ranging from Tk 4 to Tk 10,000 in case of absolute rate, or from 0.07% to 1.5% of the value of consideration in case of ad valorem rate. The judicial stamp tax is being levied under the Court Fees Act 1870, although the levy of court fees originated in the introduction of the Bengal Regulation No. 38 of 1795.

The present customs system was introduced by enacting the Sea Customs Act 1878. The Land Customs Act was promulgated in 1924 to enable the central government to enforce control on the movement of goods and passengers by the land routes. The Customs Act 1969 was enacted to consolidate and amend the law relating to customs duties and provide for allied matters and this Act was made effective in independent Bangladesh since January 1970. Excise duty is currently imposed in Bangladesh under the Excise and Salt Act 1944 introduced to levy and collect duties of excise on domestically manufactured goods and also to salt. Before introducing VAT since July 1991, the excise constituted the second largest source of revenue for the government (about 22% of total revenue), but out of 99 excisable items, 74 were shifted under VAT in 1991-92. The goods and services subject to excise duty are listed with the tax rates in the First Schedule of the Excise and Salt Act 1944, which now include BIDI, cloth and cloth goods, and bank services. Narcotics duty continued to be collected from all kinds of produced alcohol at rates specified in the Second Schedule of the Narcotics Control Act 1990 and alcohol products are not subject to excise duty or VAT. The first sales tax was introduced in the former Central Provinces of India in 1938. In Bengal, sales tax was adopted in 1941. In 1948, sales tax was transferred as a central tax under the General Sales Tax Act of 1948. The Sales Tax Act 1951 came into force on 1 July 1951 by repealing the Pakistan General Sales Tax Act of 1948. Until 1982, sales tax was being collected under the 1951 Act, which was replaced by the Sales Tax Ordinance 1982. The VAT law was promulgated by repealing the Business Turnover Tax Ordinance 1982 and the Sales Tax Ordinance 1982 with effect from 1 July 1991 by imposing three types of taxes, viz, VAT, SD and TT. Now VAT is being imposed at 15% on 'value added' at import and all production and distribution stages of taxable goods and services and collected from VAT-registered persons having annual turnover of Tk 2 million or more. In case of annual turnover of less than Tk 2 million, TT is imposed at 4% on gross turnover. Goods and services, which are luxurious, non-essential and socially undesirable, are subject to SD at rates ranging from 2.5% to 350%. Exports are subject to imposition of VAT at zero-rate, ie, VAT paid at pre-export stages are refunded to the exporters. The VAT authority has also been collecting another tax called 'infrastructure development surcharge' at the rate of 2.5% since 1997-98 on the value of goods produced in Bangladesh as specified by the government in this regard. Income tax was first introduced in the subcontinent by the British in 1860 to make up the revenue deficit caused by the SEPOY REVOLT, 1857. After independence of Bangladesh, income tax was made effective under the Income Tax Act 1922 passed on the basis of the recommendations of the All-India Income Tax Committee appointed in 1921. Currently, income tax has been imposed under the Income Tax Ordinance 1984 (ITO) promulgated on the basis of recommendations of the Final Report of the Taxation Enquiry Commission submitted in April 1979. Income taxpayers (assessees) are classified as individuals, partnership firms, Hindu undivided families (HUF), associations of persons (AOP), companies (publicly traded and private), local authorities, and other

artificial juridical persons. Tax rates and scope of taxable income differ on the basis of residential status of an assessee (resident or non-resident). Taxpayers can submit tax return under 'self-assessment' or 'normal' scheme. In the classified income tax return, an assessee has to show his/her total taxable income under 9 heads of domestic income and 1 head of foreign income. Individuals having limited income from salary, wages and/or self-employment can use a one-page tax return to be submitted only under 'self-assessment' scheme, where only 3 heads of income are to be shown - 2 heads for domestic 'salary' income (gross and taxable) and other head for all other domestic/foreign incomes. Tax-base for income taxation is 'annual total income' computed with consideration of a number of 'exclusions' provided in Part-A, Sixth Schedule of the ITO. From fiscal or assessment year (AY) 2000-01, there is a filing threshold of annual total income of Tk 100,000 applicable for individuals (including non-resident Bangladeshis), partnership firms, HUF, AOP and assessees other than companies and local authorities. In case an identity of this group has a total annual income less than this level, he is not required to submit tax return but if someone's income is higher, he is to pay a minimum tax of Tk 1,000. A progressive slab taxation is applicable for these income taxpayers. Since AY 2000-01, the income tax rate for Tk 50,000 above the threshold level is 10%, for next Tk 150,000 it is 18% and for any further income 25%. However, a tax credit at 15% is allowed on specified investments/donations, total of which cannot exceed Tk 200,000 or Tk 225,000 (where the investment exceeding Tk 200,000 is made in the acquisition of primary shares of companies listed with stock exchanges), but in no case 20% of total income. Besides, every individual assessee having annual total income exceeding Tk 300,000 has to furnish a wealth statement along with the tax return. And if the net wealth (excluding value of one residential house and retirement benefits) is between Tk 1 million and 3 million, a surcharge of 10% of income tax is to be additionally paid. For net wealth exceeding Tk 3 million, the rate of surcharge is 15%. Surcharge of income tax has been introduced by repealing the Wealth-tax Act 1963 in 1999. There is no filing threshold for other taxpayers. For publicly traded company (ie, listed with stock exchanges), tax rate for dividend income is 15% and for other income 35%. For company not publicly traded, tax rate for dividend income is the same (15%), but for other income, the rate is 40%. In case of individual non-resident assessees (other than non-resident Bangladeshi), total income is subject to a tax rate of 25%. Income tax is often a withholding tax and there are a good number of transaction-points where tax is deducted or collected at source by the persons paying the income or bill. However, industrial undertaking, tourist industry or physical infrastructure facility (including 'expansion unit' thereof) are allowed 'tax holiday' for 5 to 7 years (5 years for Dhaka, Sylhet and Chittagong divisions, except the three districts of CHITTAGONG HILL TRACTS, and 7 years for other regions), subject to fulfillment of certain conditions. Alternatively, they can be allowed 'accelerated depreciation'. Subject to fulfillment of the stipulated conditions, newly established private hospitals can be allowed a tax holiday of

5 years. In general, half of the export income is non-assessable and thus not included in the tax-base. But industries established in theEXPORT PROCESSING ZONE enjoy special tax treatments such as tax holiday of 10 years for pioneering industries, and treating 50% of export income non-assessable even after the expiry of tax holiday. Tax holiday up to June 2005 is also being enjoyed by fishery, poultry, pelleted poultry feed production, seed production, marketing of locally produced seed, livestock farm, dairy farm, frog farm, horticulture, plantation of mulberry tree, cocoon farm, mushroom farm and floriculture. Tax holiday has been provided since 1959-60 (except for 1972-73 and 1973-74) with a view to encouraging industrialisation in the country. Gift-tax has been collected by the income tax authority since 1963 except for 1985-86 to 1989-90. Under the Gift-tax Act 1990, it is now payable by the donor and applicable only for gifts of domestic property donated except to spouse, blood-related family members and dependent relatives, government recognised educational, religious, charitable, disaster-management or medical establishments, local authorities and some other prescribed persons. In the line of income tax, a progressive slab taxation is also applicable for taxable gifts. The gift-tax rate for first Tk 5 lakh of taxable gift is 5%, for next Tk 10 lakh is 10%, for next Tk 20 lakh is 15% and for any further taxable gift 20%. Foreign travel tax has been introduced since 1980-81. For foreign travel by air, the tax is collected through air tickets. The tax rates for each Bangladeshi national in this case are: Tk 1,800 for travel to any country of the continents of North America, South America, Europe, Africa, Australia and New Zealand and any country of the Far East; Tk 600 for SAARC (South Asian Association of Regional Cooperation) countries; and Tk 1,300 for any other countries. The tax rate for each Bangladeshi national in case of foreign travel by land is Tk 250 and by sea Tk 600. Besides there is a tax at the rate of Tk 50 per ticket on all airline tickets other than air line ticket for international flights. The distribution of tax burden in the country is uneven due to high dependence of indirect taxes. The agriculture sector pays much less tax due to predominance of the small farmers and the landless and also due to additional income tax incentives to this sector such as tax-holiday to farm-owners and allowance of extra non-assessable income of Tk 40,000 to farmers having exclusive agricultural income. The effective tax rate is more progressive in the urban sector than in the rural sector because of the character of the dominant tax in each sector - a proportional land tax in agriculture and a progressive income tax in the urban sector. The per capita tax burden increased over time - from only Tk 23 in 1972-73 to around Tk 1,000 in 1995-96, and to little over Tk 1,400 in 2000-01. Local level resource mobilisation in Bangladesh has been very poor. There are two sources of resources for local governments: (a) collection of taxes and non-tax revenues such as various fees and tolls, income from hats, bazaars, sairat mahalsand ponds, etc and (b) grants from the central government. Local governments depend heavily on the central government grants. Except Municipalities and City Corporations, they rely on very few sources of raising revenue. The main source of raising revenue by Zilla Parishads (District Councils) is the 'immovable property transfer tax (IPPT).

Since 1986-87, the rate of IPPT applicable on the value of consideration is 1% for areas falling within a Municipality or a City Corporation and 0.5% for other areas. Union Parishads (Councils) mainly collect chowkidari (village militia) tax, which barely covers wages and salaries of staff. Municipalities (Paurashavas) and City Corporations have varied sources of revenue - taxes on the annual value of lands and buildings (commonly known as municipal tax), lighting rate, octroi (tax on import of goods for consumption, use or sale in the municipality; abolished in 1982), tax on professions, trades and callings, tax on advertisement, tax on vehicles other than motor vehicles and boats, tax on cinemas, dramatic and theatrical shows, etc. More than three-fourths of their income come from own sources. Tax collections are, however, affected by tax defaults and evasions.