The government is likely to hike land development taxes given the increasing land price and the expenditures in the land sector.
The land ministry, to this end, has taken an initiative for a 100% to 200% hike in land tax. A draft proposal was sent to the divisional commissioners who were supposed to give their opinion by March 15 but until Tuesday they have not sent any reply.
The last increase in the land development tax came into effect in 1995.
Land Ministry’s Senior Secretary Mohammad Safiul Alam on Thursday said: “The move to increase the land tax has been taken but it will take some more time as the government is taking people’s reaction into account.”
“The step was taken last year. A sub-committee of the ministry led by Ibrahim Khan prepared a draft proposal for the tax increase,” Land Ministry’s Additional Secretary Ibrahim Hossain Khan said on Wednesday.
The ministry, however, did not finalise the draft taking into consideration the national election. After the government resumed the office, the initiative was revived. Probably the draft will be placed before the inter-ministerial meeting soon, he said.
Ibrahim said the ministry would discuss the matter with the stakeholders to seek their suggestion once it receives the opinions of divisional commissioners. The decision will be finalised with the consent of the government high-ups.
When asked about the proposal, the additional secretary said: “The proposal should not be disclosed before it is placed at the formal meeting of the ministry.”
But he said the tax hike would be much more than the existing figure as the present rate is too poor.
According to the ministry, country’s present tax structure consists of both direct– such as income tax, gift tax, land development tax, non-judicial stamp, registration and immovable property taxes and indirect taxes –such as customs duty, excise duty, motor vehicle tax, narcotics and liquor duties, VAT, SD, foreign travel tax, electricity duty and advertisement tax.
The direct tax accounts for only about 27.9%of the total tax. The tax-structure is heavily dependent on indirect taxes which are usually of regressive nature.
Of the direct taxes, around 87.5%come from income tax and 9.8%from non-judicial stamps while only 2.6% come from land revenue, gift tax and other direct taxes.
Before the independence of Bangladesh, the total revenue demand of the government for agricultural land was Tk6.47 per acre, Tk3.75 as land revenue and Tk2.72 as other taxes like development and relief tax, and local rates.
In 1972, the government exempted all owners of rural areas having land up to 25 bighas (8.33 acres) from paying land revenue by a presidential order. It will remain as it is according to the order.
The revenue from landholders having from over 25 bighas to 10 acres will be increased to TK1per decimal from TK0.50. But the owners having agriculture land of above 10 acres will have to pay Tk2per decimal.
Owners of Dhaka, Chittagong, Khulna, Narayanganj and Gazipur area have to pay more as land development tax. In those areas owners of industrial plot have to pay Tk300 in place of the existing TK125 and TK60 in place of Tk22 for a decimal residential plot.
But in Keraniganj, Savar, Dhamrai municipalities, RupganjSadar under Narayanganj, Siatkunda and Rangunia under Chittagong district the new tax will be TK250 from that of Tk125 for industrial plot and TK50 from that of Tk22for residential plot per decimal.
As per the proposal, the owners of district headquarters municipality areas have to pay TK22 for industrial plot and TK7for residential plot per decimal while it is TK17 and TK6for the municipalities out of district headquarters.
It is only TK15 and TK5 for the areas that are not declared as municipalities.
In 1976 the Land Development Tax Ordinance was issued by which land revenue and other taxes were merged together knows as land development tax.
In 1972-73 the land revenue was only Tk2.5 crore (1.5% of the total tax) and since then it has continued to increase over the years. The collection of land development tax is now around Tk500 crore (0.8% of the total tax) while government expenditure in the land sector is around TK625 crore.
The government wants to reduce the deficit in revenue collection from the sector, the ministry sources said.