The contribution of income tax is playing a pivotal role in the economic development of Bangladesh Development of Bangladesh has taken various measures to modernize the tax system. “Tax is an expense which is payable by an individual on the basic of his or her level of income” In general tax is imposed earning capacity. In 1984 an industrial enterprise established prescribed within prescribed time limit in the prescribed area shall be exempted from tax for certain period.
The main objective of this scheme is to ensure economic development of Bangladesh. On the other hand Investment allowance is given on the investment new machineries. Depreciation allowance is allowed on the new machine it rise used in various industries at a specified rate. Tax incentives are allowed on income and profit of cottage industries to encourage investment in cottage industries which can contribute to the economic significantly. It also encourages savings.
The investment also encourage saving providing tax credit facilities certain types of investment and expenditures such as DPS, Insurance premium, provident fund. Sometimes tax also contributes to social welfare. Such as some fund. Tax also encourages the foreign investors like tax holiday remittance technical assistance etc. A significant number of Bangladesh people work abroad and encourage them remittance through the banking channel has been declared tax exempted.
We find that major constraints on Bangladesh’s economic growth include: low levels of human capital; poor infrastructure; market failures in specific sectors; low levels of trade, Corruption and cumbersome regulation. Of these, designing appropriate policy responses to raise human capital, curb corruption, or alleviate sector specific market failures will require much further research. In conclusion, it can be said that income tax plays a significant role in the economic development of Bangladesh. Above mentioned strategies encourage not only foreign investors but also local investors.