The government misses out on a huge amount of revenue by keeping property almost untaxed, an economist said yesterday.
“It is a large gap in the tax system. There is virtually no tax on wealth or capital gain although the government can get thousands of crores of taka in revenue by imposing tax on property,” said Ahsan H Mansur, executive director of Policy Research Institute (PRI).
He said the absence of any form of tax on land or apartment is social injustice: people who get rich by holding on their assets and watching their value go up do not have to pay any taxes, but those who earn money by working hard have to.
In view of that, he called for imposition of tax on property. It will also push down real estate prices, as people will then build houses on them.
Mansur, who previously worked at the International Monetary Fund, said property taxes are not imposed because politicians and professionals hold these assets and it would go against their interests, he said. “They are powerful and influential—they do not want property tax to happen.”
His comments came at a seminar, 'Unveiling tax, tackling poverty: Some policy considerations', organised by Actionaid Bangladesh at the CIRDAP auditorium.
Iftekharuzzaman, executive director of Transparency International Bangladesh, advocated for an increase in direct tax collection and reducing the huge dependence on indirect taxes such as VAT and duties.
He also criticised the scope to legalise black money, as it is illegal as per the constitution. It is also unfair as businesspeople and high-income individuals mainly use the facility.
“On the other hand, the taxpayers, who pay tax on their honestly earned money, always remain vulnerable. But those who make money illegally and evade, runs a decent life. This is the tax system in our country.”
Citing NBR data, he said large taxpayers and companies evade Tk 20,000-25,000 crore in taxes a year. Some 137 firms out of 158 under the Large Taxpayer Unit have allegedly evaded Tk 10,000-12,000 in VAT and duties.
Iftekharuzzaman also blamed lawmakers for selling the cars after importing them through the duty-free route. “It is a major source of tax dodging.”
Wealthy people dodge tax at national level and send them off to rich countries, enriching their banking system along the way, he said, while citing a study that found $6 trillion were siphoned off from developing countries to the markets of developed countries between 2001 and 2010.
“The most attractive destinations for stolen money are Switzerland, United States, United Kingdom, Luxembourg, Singapore, Hong Kong and our neighbouring India. Evaded tax is the main source of money in their financial market.”
Now, $30 trillion of siphoned off money remain as deposits in the financial markets of developed countries, he said.
“Global tax injustice also has to be stopped. Supply will stop if you block demand.”
M Hafizuddin Khan, former adviser to the caretaker government, chaired the discussion where ActionAid Bangladesh Country Director Farah Kabir, Centre for Policy Dialogue Research Fellow Towfiqul Islam Khan also spoke.