12:00 AM, June 10, 2014 / LAST MODIFIED: 01:53 AM, March 08, 2015

Proposed mechanism will prove futile

Proposed mechanism will prove futile

Syed Mansur Hashim

AT the end of 2012, the National Board of Revenue (NBR) had launched a survey to calculate the number of homeowners and landlords in metropolitan cities. This was undertaken to see how many people owned shops, markets and buildings that are rented out commercially or on residential basis. The figure came to about 300,000. By NBR's estimation, a large portion of these people are currently outside the tax regime and the government is being deprived of its share of tax revenue. According to a report published in the Financial Express on May 10, the NBR chairman hinted that there may be a disclosure about this in the next budget. That has happened.
The finance minister has proposed in the latest budget that the Income Tax Law be amended to end tax evasion by house owners. According to what has been proposed, if household rent exceeds Tk. 25,000 per month, it will have to be paid through banking channels. And although the NBR is confident that this will go a long way in allowing the authority to track how much money is being charged by house owners, things are seldom that simple. One simply cannot overlook the fact that most house owners will now opt for making a deed worth Tk. 25,000, that will be paid through the bank and the balance amount will be paid in cash. This will most certainly become the norm. The other fact is that a lot of high value property is not registered in the actual owners' names. And transactions for such property will now probably become mostly cash.
We certainly hope the government has a backup plan to serve public interest in reducing the galloping house rent scenario. According to one study, 80% of Dhaka city's 15million residents live in rented houses. As stated in a Daily Star report on August 23, 2013, the law is clear about tenants' rights. There must be an agreement between owner and tenant and owners are allowed to take only a month's advance. Not only that, “owners can be fined for taking more than one month's advance.” As per law, owners cannot raise house rent before two years and tenants can sue owners for violating the law. Lastly, owners cannot evict tenants during proceedings. That is what the law says.
The reality says something else altogether. The Consumer Association of Bangladesh carried out a study on the rate of increase in house rent over a 22-year period. The findings are quite astonishing. Over the period, house rent has risen by an average of 15% per annum. It is not the law that is at fault, rather the implementation of the law has been sadly missing. The average tenant has had to pick up the tab over the years, whilst owners have reaped the benefits. Though the House Rent Control Act, 1991 has provisions to allow aggrieved tenants to seek redress in the court of rent controllers, the bulk of tenants are unaware of their legal rights. Then again, many tenants stay away from going through the process out of fear that they will be evicted by owners and so, in most cases, a financial compromise is reached which invariably goes against tenants.
With inertia on the part of tenants, it is hardly a wonder that everything under the sun goes. Regardless of what is stated in the agreement, rent is increased as and when it suits the owner. The phenomenon transcends all strata of society, be it the working or middle class. And going by what has been published in this newspaper, “between January and May 2011, only 102 cases were filed in the courts of two rent controllers covering Mirpur, Mohammadpur, Dhanmondi, Hazaribagh, New Market, Tejgaon, Gulshan, Uttara and Cantonment. The number was 131 in 2010.” It is interesting to see that rent in the city takes a hike, like clockwork, with the announcement of a new wage board or pay scale. And while many an owner decries his or her helplessness with the argument that the rent s/he receives is the sole means of an income, the law does not allow for arbitrary fixation of rent.
Getting back to the subject in hand, the government has made amendments to the income tax law in an effort to rein in some of the malpractices. It is difficult to be optimistic that such measures will have the desired impact. What would certainly work better is if the department in charge of rent control were to be better staffed and empowered to take on errant owners. It would not only bring much needed reprieve to the bulk of city residents, but provide the government with much-needed tax revenue, which at present it is being deprived of.

The writer is Assistant Editor, The Daily Star.


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