Draft Version Please dont quote.Tax Planning in Business: Bangladesh PerspectiveSwapan Kumar Bala, FCMAAssociate ProfessorDepartment of Accounting & Information SystemsUniversity of Dhaka, DhakaAbstract:This paper highlights the tax planning issues in the context of business environment in Bangladesh. Given the complexity and the tax law ambiguity prevailing in Bangladesh, this paper encompasses the traditional tax planning devices along with a brief overview of the Scholes-Wolfson paradigm of tax planning strategies. The fiscal plans are referred to the related tax law provisions (mentioned in the appendices in a very organized manner), which are expected to be very useful for the existing and potential businessmen.Keywords:Tax compliance, Tax minimization Effective tax planning, Tax strategy, Tax incentives.1Draft Version Please dont quote.Tax Planning in Business: Bangladesh PerspectiveSwapan Kumar Bala, FCMAAssociate ProfessorDepartment of Accounting & Information SystemsUniversity of Dhaka, DhakaIntroductionThe term tax planning in business consists of three main words: tax, planning, and business. Tax is “a contribution exacted by the state” Chambers English Dictionary (1992). “The term taxes is confined to compulsory, unrequited payments to general government” (OECD, 1988: 37; vide Wilkinson, 1992: 2). Planning is “the process of determining in advance the factors necessary to achieve a set of goals; designing an effective means of achieving some future goals (ends)” Kohlers Dictionary for Accountants (Cooper and Ijiri, 1984: 383). Business means “the carrying on of trade or commerce, involving the use of capital and having, as a major objective, income derived from sales of goods or services” Kohlers Dictionary for Accountants (Cooper and Ijiri, 1984: 78). According to section 2(14) of the Income Tax Ordinance (ITO), 1984, “business” includes any trade, commerce or manufacture, or any adventure or concern in the nature of trade, commerce or manufacture.1 Thus,tax planning in business means dealing with the tax matters of a business entity with a view to maximizing the after-tax rate of return on investments after ensuring voluntary tax compliance. For this purpose, each business entity has to 1.ensure that it keeps proper records;2.deduct tax at source where it is necessary;3.pay advance tax in time, if applicable;4.file returns in time;5.comply with notices received from the tax authorities; and6.be aware of legal remedies where it does not have its rights under the law recognized.Tax function activities of a business entity are those activities which are concerned with fiscal issues. These functions are of two types: (1) tax compliance activities, and (2) tax planning activities. Tax compliance activities are those activities which include the functions or obligations according to the provisions of various fiscal statutes. Tax planning activities means dealing with the tax matters of a taxpayer with a view to maximizing the after-tax rate of return on investments after ensuring voluntary tax compliance.FORMS OF BUSINESS VS. TAX PAYING ENTITYA business entity may be of three types: sole-proprietorship, partnership firm and company. “Sole- proprietorship” has not been defined by the Income Tax Ordinance.Under section 2(32) of the ITO, “firm” has the same meaning as assigned to it in the Partnership Act,1932 (IX of 1932). Under section 4 of the Partnership Act, 1932, “Partnership” is the relation between persons who have agreed to share the profits of a business carried on by all or any of them acting for all. Persons who have entered into partnership with one another are called individually “partners” and collectively “a firm”, and the name under which their business is carried on is called the “firm name”.1 Section, sub-section, rule, sub-rule, clause or proviso mentioned elsewhere in this paper without referring to any enactment shall be referred to the Income Tax Ordinance, 1984 (Ordinance No. XXXVI of 1984) and the Income Tax Rules, 1984 No. S.R.O. 39/L/85 dated 1485, vide sec. 185(4) of the Income Tax Ordinance, 1984.2Draft Version Please dont quote.Under section 2(20) of the ITO, “company” means a company as defined in the Companies Act, 1913 (VII of 1913) or Companies Act, 1994 (Act No. 18 of 1994)* and includes (a)a body corporate established or constituted by or under any law for the time being in force;(b)any nationalised banking or other financial institution, insurance body and industrial or business enterprise;(bb)an association or combination of persons, called by whatever name, if any of such persons is a company as defined in the Companies Act, 1913 or Companies Act, 1994;(bbb)anyas