Realtors have urged the government to allow legalising undisclosed money whitening facility with indemnity against their investments in the country’s housing sector.
The sector received the opportunity of legalising undisclosed money, but the facility remains mostly untilised because of not having indemnity, they argued.
The realtors requested the National Board of Revenue (NBR) to amend the existing provisions of income tax ordinance 1984 to provide the investors with legal indemnity for benefiting the real estate sector.
Real Estate and Housing Association of Bangladesh (REHAB) made the call at a pre-budget meeting with the NBR in the city Wednesday. NBR Chairman Md Nojibur Rahman chaired the meeting.
“Many term it black money, but it should be called undisclosed money. The facility given to the sector is not being utilised as the authorities can raise questions over the source of income,” said REHAB first vice president Liakat Ali Bhuiyan.
If undeclared money is allowed to be invested without any question, the investors can be brought to the tax net in future, he added.
The sector urged the NBR to allow investors to invest their undisclosed amount of money in the housing sector— flat, plot, commercial building and markets—for the next 5 to 10 years without raising any question over their source of income, according to the proposal.
Undisclosed money stands for the money, wealth or property that individuals and organisations have not included in their tax returns. However, economists termed it black money that refers to money or wealth accumulated through unlawful or criminal activities.
Money is being illegally flown to other countries using legal channels like second home scheme of many countries, REHAB proposal said.
“If the government allows investment of undisclosed money in the housing sector without any conditions, it will help stop capital flight and boost the sector,” it argued.
According to the existing law, black money can be whitened in the housing sector, but that does not guarantee the investors indemnity.
According to a 2011 study endorsed by the Finance Ministry, black money accounted for 62.75% of the total GDP in 2009 while it accounted for only 7% of the GDP in 1973.
NBR statistics shows that only Tk9,683 crore had been whitened in between 1971 to 2009. According to the Global Financial Integrity Report 2013, more than Tk2,098 crore was whitened in Bangladesh during 2009-2013, which fetched only Tk279 crore in taxes.
Tax cut demanded for used flat registration
The realtors also requested the government to reduce tax and registration fees of used flats from 14% to 3.5% to boost sales in the secondary market.
Currently, there is a 14% tax on registration of any apartment, no matter whether it is new or a used one. The price of used apartments can come down significantly if the government approves the proposal, they said.
The sector also called upon the NBR to fix gain tax at 2% from the existing 4%, stamp duty at 1.5% from current 3%, registration fee at 1% from 2%, local government tax at 1% from 2%, and value-added tax in registration of plots and flats at 1.5% from 3%.
It has also demanded reduction of income tax on transfer of per square metre residential land, buildings and apartments to Tk500, Tk450 and Tk300 respectively from Tk1,600, Tk1,500 and Tk600 and per square metre commercial lands, buildings and apartments to Tk1,000, Tk800 and Tk500 under areas divided in three different categories.
The association also called upon the government to allow duty-free import of fire safety machinery including fire alarms, fire extinguisher, fire pump, fire hose etc for at least next five years to ensure securities in the buildings.
It has also demanded five years tax holiday for metropolitan areas and 10 years for municipality areas to encourage decentralised urbanisation.
