Old holding data deprive Dhaka city corporations of huge taxes

Highlights 

• Dhaka north's last survey was in 2007, Dhaka south in 2016
• Dhaka north has 3.40 lakh holding numbers, Dhaka south 2.52 lakh    
• City authorities collect a total of 12% tax on annual house rent
• Experts say updated data will multiply tax collection several times 

The two city corporations in Dhaka are being deprived of a large amount of taxes from building owners due to an absence of an updated survey. They are still collecting taxes at a rate fixed years ago.

Local government experts and tax officials say that if the number of holdings is determined by a combined survey and proper tax imposed as per size and location of the buildings, revenue will be more than double the current amount.

According to sources, the last survey of Dhaka City Corporation (DCC) was conducted in 1989.

Since the DCC was bifurcated, the Dhaka North City Corporation has been collecting taxes on the basis of a survey carried out in 2007. On the other hand, the Dhaka South City Corporation conducted an inconclusive survey in 2016.

According to people concerned, although the size of most of the buildings built before 1989 has multiplied several times, taxes are being paid on the basis of previous assessments. Moreover, the previous surveys did not include a number of buildings at the time.

Dr Tofail Ahmed, a former professor at Chattogram University and local government expert, told The Business Standard, "If the authorities have all the holding information and collect taxes at an updated rate, the amount will be several times higher."

He added, "If the process is smooth, it will reduce house rent. The common people will benefit. The building owners have exercised pressure to stop assessment activities at different times to keep the taxes low."

The tax rate is different for residential, commercial and industrial buildings under both the city corporations. However, this rate is currently several times lower compared to the rent charged by the landlords from tenants. 

According to sources, the Dhaka North City Corporation has around 3.40 lakh and the Dhaka South City Corporation has 2.52 lakh holding numbers. However, there are many buildings that are not included in the city corporations' assessment and do not pay any tax.

The two city corporations in Dhaka collect 12% tax on the annual rent of a house, including 7% holding tax, 2% cleaning tax and 3% lighting tax.

In 2020-21 FY, the Dhaka North City Corporation earned about Tk350 crore in taxes while the Dhaka South City Corporation earned about Tk255 crore. The amount is very low compared to the six lakh registered holding numbers under the two city corporations.

However, in the budget of 2021-22 FY, the Dhaka North City Corporation has set itself a target of collecting Tk500 crore. For its part, the Dhaka South City Corporation means to collect Tk375 crore from taxes.

The lowest tax is levied in the Nandipara area of the Dhaka South City Corporation. The rent in this area is Tk8 per square metre. In Motijheel Commercial Area, it fixed the highest rent at Tk40 per square metre.

The Dhaka South City Corporation fixed the maximum rent at Tk30 per square metre in residential areas, Tk45 per square metre in commercial areas and Tk35 per square metre in industrial areas. However, the owners of the buildings charge several times more than this rate from tenants.

Under the Dhaka North City Corporation, the rent for residential buildings is fixed between Tk6 to Tk30 per square metre. The maximum rate for commercial buildings is Tk35 per square metre. The highest rent is fixed in the Gulshan area.

However, the building rent is higher in the Dhaka North City Corporation than the Dhaka South City Corporation. Taxes are being paid at the rate fixed in 2007.

MdSanwar Hossain, revenue officer of Dhaka North City Corporation, said, "No survey has been conducted in Dhaka north after 2007. Taxes are still being collected at the rate fixed at the time. If the rate is determined by conducting a new survey, the amount of tax will increase a lot."

According to officials, if the owners live in their buildings, their annual tax would decrease by 40%. However, if a building is constructed by taking a bank loan, in that case, there are discounts on the amount of loan and interest. 

Despite having all these discounts, building owners are charging their tenants much more than the rent fixed by the authorities. 

Shahjahan Ali, revenue officer of Dhaka South City Corporation, said, "A new survey is being conducted in the new wards of Dhaka South City Corporation, but a combined assessment is necessary. However, our officials sometimes face resistance when they try to readjust taxes based on the extension of old buildings. They can successfully do that only when there is a mobile court drive in an area."

Dr Tofail Ahmed believes that if the authorities put pressure on building owners to pay taxes after conducting a new assessment, both the city corporations and tenants will benefit.