Holding tax varies from city to city

Residents of different city corporations face disparity in holding tax rates which sharply differ from one city to another, according to officials and residents.

Six types of holding tax are collected from 11 city corporations.

The rate of holding tax in two city corporations of Dhaka is only 12 per cent while it is 17 per cent in Chittagong and 27 per cent in Rajshahi.

As per tax rule, the annual holding tax is fixed on the basis of house rent. As there is no effective house rent control act, most of the city corporations fix holding tax on their estimate of probable house rent.

According to different city corporations, the holding tax for a residential house of 1,000 square feet in Dhaka is between Tk 6,000-7680, the amount for same size of a house is Tk 20,900 in Narayanganj, Tk 10,400 in Khulna and 11,040 in Rangpur.

The main source of income of the city corporations is holding tax. As per eleven City Corporation Municipal Taxation Rules, 1986 and Ideal Tax Schedule, 2016, the corporations collect holding tax.

According to the schedule, the city corporations can collect holding tax up to 30 per cent.

Seven per cent holding tax can be taken for the building, 7 per cent for waste removal, 5 per cent for street lights, 3 per cent for water supply and 8 per cent for health. As WASA (Water And Sewerage Authority) supplies water, most of the city corporations do not collect tax for water.

According to the tax rule, the rent of two months of a house is deducted from total annual rent of that house for its renovation. And the tax is estimated on the basis of the remaining 10 months' rent. If a person lives in his own house, another 40 per cent is deducted.

The disparity of holding is because the city corporations are at liberty to fix holding tax.

Local government expert Tofail Ahmed said the rate of holding tax is not mentioned in the City Corporation Taxation Rules, 1986. But after 30 years, as per Ideal Tax Schedule, it is mentioned that up to 30 per cent holding tax can be collected. As a result, there has been a gap of up to 15 per cent in payment of holding tax from one city corporation to another.

According to latest assessment of Rajshahi City Corporation, Tk 1,200 is fixed as rent for a house of 1,000 square feet. But the rent is Tk 3,000 for a commercial establishment for 1,000 square feet.

Speaking to Prothom Alo, resident of Ahmadnagar of Rajshahi town Rezaul Karim said the rate of holding tax is double in Rajshahi in comparison to Dhaka. How is it logical to fix holding tax so high in Rajshahi where it is hard to find tenants, he asked.

Chief tax official of Rajshahi City Corporation Md Manjurul Alam said the income of RCC is low in comparison to others. About 15-20 years ago, the holding tax was 25 per cent. After making Ideal Tax Schedule, the city corporation fixed it at 27 per cent.

Chief revenue officer of Dhaka North City Corporation (DNCC) Rabindrasri Barua told Prothom Alo that the holding tax of two Dhaka City Corporations is fixed 12 per cent long ago. Although more tax can be collected as per law, the tax is not raised considering the residents.

Additional secretary of local government ministry Mahbub Hossain said the value of assets of same area may differ from one City Corporation to another. As a result, the city corporations are given freedom so that they can fix holding tax pragmatically.

In Chittagong City Corporation (CCC), some 17 per cent holding tax is collected on the basis of annual assessment. Earlier, the city corporation fixed the holding tax on the basis of per square feet of establishment. After reassessment in the last year, the city corporation started collecting holding tax on the basis of house rent.

However, the rent the Chittagong City Corporation has fixed has not been in the light of contract between owners and tenants. The CCC provided forms to the house owners, seeking information of area of house and rent. Later, the CCC authority fixes holding tax on basis of its assumption and information provided by the house owners.

Chittagong city residents have been observing programmes protesting the higher holding tax. CCC Tax Payers' Protection Council general secretary Muhammad Amiruddin said fixing holding tax on the basis of house rent is illogical and unethical. As there is no law, he said, the officials have fixed holding tax on their whims.

Local government expert Tofail Ahmed said the holding tax rate for all city corporations should be fixed, rather than simply fixing a highest ceiling.

Until a house rent control law is formulated, a committee under the ministry has to be constituted to fix holding tax on the basis of area based in the city corporations.

*This report, originally published in Prothom Alo print edition, has been rewritten in English by Rabiul Islam.