Property tax on the cards

The government is going to introduce property tax next year, the National Board of Revenue (NBR) announced yesterday adding that the move will help reduce the rich-poor gap.
Any person having more than one house or a flat in metropolitan areas will have to pay the property tax. NBR already collected information about who owns how many houses and flats in Dhaka Metropolitan City.
Additional tax will also be imposed on lands in the metropolitan areas, but the ceiling for tax free land ownership has not been determined yet, said an NBR high official adding that the property tax will be two to three percent of the value of a taxable property.
There will be no property tax on agricultural land, said NBR Chairman Nasiruddin Ahmed at a media briefing yesterday in his office.
In a bid to increase its revenue earning the government is moving to introduce new income tax and value added tax (VAT) laws.
In the drafts of the new laws NBR proposed imposition of various new taxes including the property tax.
The chairman of the board said the new tax will help build a more equitable society.
Economists, however, expressed mixed reaction to the proposal. They said the government initiative to collect more revenue is good, but it has to ensure that tax payers are getting proper services from the state.
In the draft laws, property tax on valuables like jewellery and expensive watches were also proposed, but the NBR chairman said in the final draft, valuables other than houses, flats, and lands will be exempted.
A structure for imposing the new tax will be prepared later.
NBR Member Basir Uddin Ahmed said, "We have already collected information from different sources about ownerships of houses in Dhaka. Later, tax will be imposed on the basis of the collected data."
Replying to a question as to whether imposition of the property tax will hamper investment, the NBR member said it will encourage investors to invest in productive sectors instead of purchasing many houses or flats.
At the briefing NBR Commissioner Barrister Jahangir Hossain, and First Secretary Apurba Kanti presented different aspects of the two proposed laws.
"The new income tax law will come into effect from July next year," the NBR chairman said.
He also said they already started discussions with lawmakers about the proposed laws. The draft laws are posted on the NBR website to solicit people's opinions.
He said the laws will be enacted in a participatory way on the basis of opinions from the people of all sections of the society.
Research Director of the Bangladesh Institute of Development Studies (BIDS) Zaid Bakht told The Daily Star, "The government will have to ponder whether imposition of the property tax will give impetus to the growth of the underground economy, due to people's tendency to avoid taxes. Generally, I think, it may not bode well for the economy."
He also said the government's move to increase revenue collection is good, but it has to make sure that the basic services such as water, electricity and gas are ensured for the public. If these cannot be ensured, it may be an unpopular move, he added.
Head of Research of the Centre for Policy Dialogue Fahmida Khatun said, "Tax has to be collected from areas untouched by our revenue collection system. Seen from this angle imposition of property tax is a positive move."
She said in Bangladesh, ownership of property is concentrated. As a result imposition of such a tax is justified, but the taxation should be progressive, meaning commensurate to income, and value of a property.
She also said whether the government is properly providing services to the public with the revenue it collects, is an old debate. But even then the people have to pay taxes for whatever services the government is providing, she added.
She said on one hand the state has to improve its services to the people, and on the other hand citizens must contribute to the growth of government's revenue earning, so it may improve the services.