ABSTRACT

This paper examines how changes to the individual income tax affect long-
term economic development. The structure and financing of a tax change are
critical to achieving economic growth.

From the definition of tax we know that, Tax is the revenue collected by the
government from persons and organizations under different taxing acts. In
other words it is a liability imposed upon the assessee who may be the
individuals, group of individuals and other legal entities. According to Justice
Holmes, the price paid to the govt. for living in a civilized society is the tax.
According to Taylor, taxes are compulsory payments to govt. without
expectation direct benefit to the tax payer. That is it is not a price paid by the
tax-payer for any definite service rendered or a commodity supplied by the
govt.

To know about the role of tax in economic development at first we have to

know what economic development is.

Economic development is the increase in the standard of living in a nation's

population with sustained growth from a simple, low-income economy to a
modern, high-income economy. Also, if the local quality of life could be
improved, economic development would be enhanced. Its scope includes the
process and policies by which a nation improves the economic, political, and
social well-being of its people.

Tax policy can affect the pace of economic development and the way the
rewards of that development are distributed. Taxation plays a prominent role
in the economic development of a country. Every objective of tax focuses on
economic development of a country. Like -

Collection of revenue-to improve the performance of different sectors of the

country govt. needs revenue. It cannot perform its administrative and
development activities without collection of revenue. It is the main objective
of tax. The 70 to 80 percent of revenue is collected by tax in Bangladesh
nowadays. So tax plays an important role in development of a society.
 CHAPTER: 1 INTRODUCTION

1.1 PRELUDE:

Tax is contribution exacted by the government. It is a non-penal but

compulsory and unrequited transfer of resources from the private to the
public sector, levied on the basis of predetermined criteria.
In a country like Bangladesh it is a major source of revenue for the
government. In Bangladesh the tax revenue for the government accounts for
nearly 80 percent of the total government revenue.

Income Tax is a tax on the income of a person. It is a direct tax and important
for various reasons such as a good source of revenue, a tool for minimizing
inequality and the like. In fact, among different type of taxes that a state
levies on its inhabitants for smooth sailing, income tax holds a potent
position.

In the fiscal year 2014-15 the revenue from income tax was Tk. 55,088 crore
which was 39.16 percent of the total tax revenue. As per budget of the fiscal
year 2015-16 income tax revenue target account for Tk. 71,977 crore which
is 39.49 percent of total tax revenue. So the first and foremost aim of income
is to raise public revenue to meet the over increasing public expenditure.

It is also mentionable that in the revenue budget of FY- 2014-15 the Tax- GDP
ratio was 9.29 and the same was 10.62 in the following year. The classical
economic were in view that the only objective of taxation was to raise
government revenue. But with the changes in circumstances and ideologies,
the aim of taxes has also been changed. These days apart from the object of
raising the public revenue, taxes is levied to affect consumption, production
and distribution with a view to ensuring the social welfare through the
economic development of a country. It is of no question that income tax is
one of the most important sources of revenue for the government and being
used as an effective tool to reduce incompliance of income and to strengthen
the overall economic structure of Bangladesh.