Assignment on An Assessment on Holding Tax Collection System: A Case Study on Tongi Pourashava
Md. Lutfur Rahman Lecturer
Sarnav Talukder Roll: 762 10th Batch Session: 2007-2008
Department of Urban and Regional Planning Jahangirnagar University Savar, Dhaka-1342, Bangladesh
Acknowledgement Practical tasks and field works give perfection of any work. Field work is to observe the condition of the reality. Sometimes the theoretical knowledge is proved false in real experience.
The students of Urban and Regional Planning work for the people to make a better living environment and structure. There are many books; journal and other paper give them the knowledge. But the perfect knowledge is the real status of a place and its inhabitants.
This assignment is the part of the Course Public Finance Management Planning (Theory) of fouth year first semester. Its target is to assess the Holding Tax Collection System in Bangladesh. To do this work Tongi Pourashava, Gazipur was selected as the case study. It is suggested and instructed by Md. Lutfur Rahman, Lecturer, Department of Urban and Regional Planning, Jahangirnagar University. Basically, his support, encouragement and availability to discuss ideas and problems have contributed much in completing this study.
Special thanks are gone to Planner Moinul Islam, Urban Planner, Tongi Pourashava for his kind co-operation and direction to collect information and necessary document form the case study area.
Sarnav Talukder April, 2011
10th Batch Session: 2007-2008 Department of Urban and Regional Planning Jahangirnagar University
Table of Contents Chapter: 1 Introduction 1.1 Abstract 1.2 Introduction 1.3 Objectives 1.4 Methodology
Chapter: 2 Municipal Holding Taxation of Bangladesh Review 2.1 Municipal Taxation 2.2 Categories of Municipalities 2.2 Tax Assessment 2.3 The Pourashava Model Tax Schedules, 1985
Chapter: 3 Study Area 3.1 Background 2.2 Tongi Poura Parishad 2.3 Geographic Location 2.4 Area and Population
Chapter: 4 Municipal Holding Taxation Process of the Study Area 4.1 Tax Base 4.2 Tax Administration 4.3 Revenue Sources of Tongi Municipality 4.4 Rate Structure of Tax Sources 4.4.1 Rate Structure of Property Based Revenue Sources 4.4.2 Tax on the Application for the Erection and Re-Erection of Buildings
Chapter: 5 Analysis and Findings 5.1 Theoretical Analysis of Tax Base 5.2 Analysis on Holding Tax Collection 5.3 Finding of Analysis
Chapter: 6 Problems and Prospects 6.1 Problems and Prospects 6.1.1 General Problems 6.1.2 Municipal Tax Administration Problems
Chapter: 7 Recommendation and Conclusion 7.1 Recommendations 7.2 Conclusion
Introduction 1.1 Abstract The holding tax, the street light ing rate, t he water rate and the conservancy rate are t ypically combined and referred to in their entirety as the "holdings tax". The tax base is the â€œannual value" (or rent) of buildings and land, so that the tax can be seen as in attempt to tax the yearly income from the property. The present assignment is int ended to be an indepth inquir y into the causes of underassessment of holding taxes and their probable remedies. It is hoped that the proper assessment of t he holding taxes will increase significantly the revenue of the Municipalities. A Paurashava may, with the previous sanction of the Government, levy, in the prescribed manner, all or any of the taxes, rates, tools and fees. The Government may frame model tax schedules, and where such schedules have been framed, the Paurashava shall be guided by them in levying a tax, toll or fee. The great achievement of Municipal revenue depends on all aspects of Municipal Taxation system. And the holding tax contributes it much. To investigate the general policy of the municipal holding tax collection system in Bangladesh this assignment is prepared. To assess its implementation a study area is selected and it was the Tongi Pourashava, Gazipur. This report is tried to find out the holding tax collection process and to analyze the holding tax collection trend of the study area. It is also tried to find out the problems of municipal holding taxation system and to recommend the possible solution.
Keywords: Assessment, Holding tax, Municipal Taxation, Pourashava Ordinance.
1.2 Introduction According to "The Pourashava Ordinance 1977", Municipal Taxation include all aspects of the tax system - the definition of tax, the rate structure; directions with regard to levy of taxes, liability on account of tax, the administrative practices of the valuation principle, petitions against valuation, assessment etc.; deduction of tax, taxation rule; collection performance and recovery of taxes.
Urban areas in Bangladesh are becoming increasingly important nerve canters of national economy. In Bangladesh, however, besides the pull factor, the rural poverty largely acts as push factor for crowing in the urban areas (Ahmed, 1992). The taxation procedure process is same in Narayangonj, Savar and Tongi Pourashava. Here the report discussed with the municipal holding tax collection process.
1.3 Objectives 1. To review the general policy of the municipal holding tax collection system in Bangladesh. 2. To find out the holding tax collection process of the study area. 3. To analyze the holding tax collection trend in the study area. 4. To find out the problems of municipal holding taxation system and to recommend the possible solution.
1.4 Methodology The term â€œmethodologyâ€? means a set of principle and way by which particular activity have been done. The nature of research methodology widely varies from subject to subject as well as availability of resources. Conceptualization is an important to have a pre-image of an area before study work. First of all it is needed to have some knowledge about the study area. Then it is needed to match it in the field.
This report is completely based on the secondary data. For the theoretical foundation and analysis, the existing literatures were investigated. The existing literature includes published journals, periodicals, newspapers, related magazines, Internet etc. The statistical data is collected from the Tax Department and Accounts Section of Tongi Pourashava. To analyse the collected data, different quantitative and qualitative measures are taken and to do the operation Microsoft Excel software is used.
Municipal Holding Taxation of Bangladesh Review 2.1 Municipal Taxation The evolution of Municipal taxation was brilliantly summarized by Kamal Siddiqui (2005) pointed in his book "Local Government in Bangladesh" which is described below: In 1856, the right of collection of tax by a Municipal authority was first introduced in the country by the Town Police Act of 1856 (Act xx of 1856). (Khan, 2001)
In 1864, holding tax became the chief source of Municipal revenue imposed on the annual value of holdings and the rate might be extended up to seven and half percent of the annual value under the District Municipal Improvement Act of 1864 was passed by the British Council. (Khan, 2001)
In 1932, the responsibilities of the Municipalities and powers of Municipal commissioners were enlarged and clarified about matters of levy or rates and taxes and the utilization of Municipal fund under the British rule in this regard was the Bengal Municipal Act passed by the provincial legislature in 1932. (Khan, 2001)
In 1959 & 1960, the subsequent statutes during the Pakistan Period repealed all existing law relating to urban local bodies under the Basic Democracy Order, 1959 and Municipal Administration Ordinance, 1960. These in neither way curtailed any of the earlier responsibilities nor reduced revenue generation power of the urban bodies. The "Municipal committee Taxation Rule, 1960" was established by the empowerment of fourth schedule under the Municipal Administration Ordinance, 1960. (Ali, 1998)
In 1977, similarly, all responsibilities and powers related to Municipal finance retained under the Pourashava Ordinance, 1977. It superseded earlier Acts of British and Pakistan period. (Ali, 1998)
At present, "The Pourashava Ordinance, 1977" defines the activities of all the Municipalities of the country and all proceedings in tax administration based on the
Municipal Committee Taxation Rule, 1960". The "Municipal Committee Taxation Rule,
1960"includes rate of holding and other taxes, tax assessment, appeal against bsessment, exemption of tax, process of increase/reducing tax, suspend the levy of ry tax, tax collection process etc. This rule provided sufficient power to do so. The -Pourashava Standard Tax Schedule, 2003" was established by the empowerment of Section 56 under the Pourashava Ordinance, 1977 which includes all schedule of rate of movable and immovable property under the Municipal boundary. (Ali, 1998)
2.2 Categories of Municipalities According to The Pourashava Ordinance 1977, Municipalities are divided into three categories. These are as follows1. Class I 2. Class II 3. Class III The classification of Municipality is based on the size of income. The income base of municipality and their classification into classes I, II and III are as below: Table 2.1: Categories of Municipalities in Bangladesh Class
Level of income
2.5 million (Below)
Source: Siddiqui Kamal, 2005
2.2 Tax Assessment Taxes to be assessed on the annual value of buildings lands Subject to the provision of the Ordinance and these rules, the following taxes and rates shall be levied in terms of the percentage of the annual value of buildings and lands: i.
Tax on buildings and land ;
Lighting rate ;
Fire rate ;
Conservancy rate ; and
Rate for the provision of waterworks or supply of water.
Preparation of a valuation list For the purpose of levy of any of the taxes or rates mentioned in the preceding rule 22 the Municipal Committee shall cause to be prepared a valuation list of all buildings within the Municipality. The valuation list shall be prepared by an assessor to be appointed for the purpose by the Municipal Committee with the prior approval of the Controlling Authority. Such assessor may either be a member or a salaried employee of the Municipal Committee or any other suitable person. The assessor, after making such enquires as may be necessary, shall determine the annual value of all buildings and lands within the Municipality in the manner provided in these rules and shall enter such value in a valuation list.
The manner of determining the annual value of buildings and lands shall be as follows : (i) For wholly let-out buildings (a) The annual valuation shall be taken to be the gross annual rental minus two months' rent as maintenance allowance. If the property be mortgaged to Government, House Building Finance Corporation, a recognised Bank or any other institution under registered instrument for securing funds for construction or purchase of the same then the annual interest payable on account of such mortgage-debt shall also be deducted. (b) If the monthly rental of any building appears to be abnormally high or unusually low, the assessing authority while determining annual valuation may have regard to the rent at which buildings and lands of similar description and with similar advantages in the locality may be let-out.
(ii) For wholly occupied buildings The annual value shall be deemed to be probable annual rent at which the buildings and lands of similar description and with similar advantages in the locality may be let out or at 7% of the value of the building on the date of assessment plus ground- rent for the land comprised in the building, whichever is less, minus the following: a. Two months' rent or one-sixth of the annual value as the case may be, as maintenance allowance. b. One-fourth of the annual value after deduction of the amount at item (a) above. c. If the property is to be mortgaged to Government, House Building Finance Corporation, a recognized Bank or any other interest payable on such mortgagedebt. email@example.com
(iii) For partly rented and partly occupied building The annual value of the rented portion shall be calculated in the manner as specified in (i) above and the annual value of the occupied portion as in (ii) above.
Preparation of valuation list A new valuation list shall, unless otherwise ordered by the Controlling Authority, be prepared in the same manner as the original list, one in every five years.
Returns required for ascertaining annual value The assessor, in order to prepare the valuation list, may, whenever he thinks fit, by notice in form A require the owners or occupiers of all buildings and lands to furnisn him within one week in form B with true and correct returns of the rent or annual value thereof and a true and correct description of the buildings containing such particulars as the assessor may direct, and the assessor may enter, inspect and measure any such building at any time between sun-rise and sun-set : Provided that at lest twenty-four hours' previous notice of the intention to enter, inspect and measure any building shall be given to the occupier thereof unless he waives his right to such notice.
Preparation of assessment list The Municipal Committee shall cause to be prepared an assessment list in form C, which shall contain the following particulars and any others which the Municipal Committee may think proper to include: a. The name of the street in which the building is situated; b. The number of the building on the register; c. A description of the building; d. Annual value of the building; e. The name of the owner; f. The amount of tax or rate payable for the year; g. The amount of quarterly installment and h. If the building is exempted from assessment, a note to that effect.
Publication of notice of assessment firstname.lastname@example.org
(1) When the assessment list mentioned in rule 26 has been prepared the Chairman or any official authorised by the Chairman in that behalf shall authenticate the same by putting his signature on each page and then shall cause it to be deposited in the office of the Municipal Committee. And shall give public notice of the place where the list may he inspected. (2) In all cases in which any property is for the first time assessed or the assessment is increased, the Municipal Committee shall also give notice thereof to the owner or occupier of the property if known provided that when a general assessment is made a notice thereof may be given by affixing a copy of the assessment list in the office of the Municipal Committee and at a prominent place in each Union and by announcing the fact publicly by beat of drum.
Application for review (1) Any person who is dissatisfied with the amount assessed upon him or with the valuation or assessment of any building or disputes his occupation of any building or his liability to be assessed, may apply to the Chairman to review the amount of assessment or valuation or to exempt him from the assessment of the tax in form. (2). No such application shall be received after 30 days have elapsed from the date of publication of the notice required under sub-rule (1) of rule 27 or the service of the notice required under sub-rule (2) of that rule.
Hearing and determination of applications by Assessment Review Board 1. (a) Application presented under rule 28 shall be heard and determined by one or more Assessment Review Boards to be constituted by the Pourashava, with prior approval of the Controlling Authority. (b) Each Assessment Review Board shall include one lawyer, one engineer from outside and one Commissioner or salaried employee of the Pourashava. With the prior approval of the Controlling Authority, constitute assessment Assessment Review Boards consisting of three Commissioners including the Chairman and ViceChairman and one Engineer of the Pourashava to be nominated by the Chairman. Provided further that no Commissioner who is a member of the Board shall hear an application for review if such application relates to a property.
2. An Assessments Review Board shall give notice to the applicant of the time and place email@example.com
at which his application will be heard, and after taking such evidence and making such inquiry or local inspection as it may deem necessary in the presence of the applicant or his agent, if any, pass such order as it thinks fit and proper. It the applicant or his agent does not appear on the date so fixed, the Assessment Review Board concerned shall pass the orders ex-parte. 3. No quourm shall be necessary for hearing and the hearing shall be conducted in a summary manner, which shall be competed within a period of 4 months from the date of first hearing. 4. The decision of the majority of the members present shall be the decision of the Assessment Review Board concerned and shall be final. 5. In case of equality of votes the person presiding shall have a second or casting vote. 6. (a) The Assessment Review Board shall sit at least five days in a week during office hours for hearing the application for review. (b) Each member of an Assessment Review Board shall receive Tk. 25.00 per working day as remuneration; Provided that each member of an Assessment Review Board of Dhaka, Narayanganj, Chittagong, Khulan and Rajshahi shall receive Tk. 35 per working day as remuneration. 7. The office of an Assessment review Board shall be situated in the municipal office or in any other suitable place provided by the Administrator/Chairman for the purpose. 8. It shall be the duty of the Administrator/Chairman to produce the relevant and required documents and papers in his power and otherwise render assistance to an Assessment Review Board in the discharge of his duties.
Final list of assessment and its duration Every alteration made in the assessment list in pursuance of orders of [an Assessment Review Board] under sub-rule (2) of rule 29 shall be signed by the Chairman, the ViceChairman or the Secretary of the Municipal Committee. The assessment list thus prepared shall be the final list of assessment and shall remain valid until a fresh list is prepared subject to any alteration or amendment under rule 31.
Amendment and alteration of list (1) The Municipal Committee at a meeting may, at any time, direct alteration or â€˘ amendment of the assessment lista. By entering therein the name of any person or any property which in their opinion firstname.lastname@example.org
ought to have been entered, or any property which has become liable to taxation after the preparation of the final list under rule 30; or b. By substituting therein for the name of the owner of nay building the name of any other person who has succeeded by transfer or otherwise to the ownership of the building; or c. By altering the valuation of or assessment on any building which in their opinion, has been incorrectly valued or assessed; or d. By re-valuing or re-assessing any building which in their opinion, has been incorrectly or alterations; or e. By reducing, upon the application of the owner, the valuation of any building which has been wholly or partly demolished or destroyed or the value of which has been diminished; or f. By correcting any clerical or arithmetical error.
(2) The Municipal Committee shall give at least one month's notice to any person interested in any alteration which they propose to make under clauses (a), (b), ÂŠ or (d) of sub-rule (1) and of the date on which the alteration will be made. (3) The provisions of rules 28 to 32 shall apply mutatis mutandis to any objection made in pursuance of a notice issued under sub-rule (2) and to any application made under clause (e) of sub-urle (1).
Increase of amount of assessment of a building If a Pourashava is satisfied that the rent of .a building or portion thereof has been increased after the publication of the final assessment list to such an extent that, in the opinion of the Pourashava, it justifies the re-valuation of the building, it may, notwithstanding anything contained in these rules and after giving the owner an opportunity of being heard, direct the amendment of the assessment list by increasing the assessment on such building.
Assessment to be questioned only under these rules No objection shall be taken to any assessment or valuation or t1 any alteration or amendment of the assessment list in any other manner in these rules provided. Payment of tax how affected by objections to valuation (1) When an appeal or an application for revew of ar assessment or valuation has been email@example.com
made under rule 8(4) or rule 28, as the case may be, the tax or rate shall, pending the final decision on the appeal or the application, be paid on the previous assessment or valuation. (2) If, when the application for review or appeal has been finally decided and results in previous assessment or valuation being altered: ď‚ˇ
Any sum paid in excess shall be refunded or allowed to be set off against any present or future demand of the Municipal Committee under the Ordinance ; and
Any deficiency shall be deemed to be an arrear of the tax and to be recoverable as such.
Conclusiveness of entries in the list An entry in an assessment list shall be conclusive proof for the purpose of assessing any Municipal tax or rate, of the amount livable in respect of any building during the period to which the list relates.
Power to assess building and lands together where land is on a building lease If, any building belongs to one owner and the land on which it stands as also the adjacent land. If any, usually occupied there with, belongs to another, the Municipal Committee may treat such building and land either as a single building or separately and assess them to tax in a manner most convenient and expedient.
Notice of transfer of title (1) Whenever the title to or over any building and the land on which it stands and also the adjacent land of any person primarily liable for the payment of tax on such property is transferred both the transfer and the transferee shall, within three months of the registration of the deed of transfer, of it be registered, or if be not registered, within months of the actual transfer, give notice in writing of such transfer to the Municipal Committee. (2) Every person primarily liable for the payment of any tax or rate on any building, who transfers his title to or over sucn property without giving notice of such transfer to the Municipal Committee as aforesaid, shall, unless the Municipal Committee, on grounds of hardship arising out of special circumstances otherwise directs, continue to be liable for the payment of the tax or
(3) The Municipal Committee at a meeting may either wholly or partially, exempt from the tax on building any building which is used exclusively for purposes of public charity. (4) Where the annual value of a building held by any one owner within a Municipality does not exceed twenty take, the tax on building shall not be imposed on building.
2.3 The Pourashava Model Tax Schedules, 1985 According to the section 56 of the Pourashava Ordinance, 1977 (XXVI of 1977), the Government is pleased to frame the following Model Tax Schedules for the guidance of the Pourashava, namely 1. Short title and application ď‚ˇ
These Model Tax Schedules may be called the Pourashava Model Tax Schedules, 1985.
(2) These Model Tax Schedules shall apply to all the Pourashava constituted under the Pourashava Ordinance, 1977 (XXVI of 1977).
2. Definition In these Model Tax Schedules, unless there is anything repugnant in the subject or context, "Ordinance" means the Pourashava Ordinance, 1977 (XXVI of 1977). 3. General instructions i.
A Pourashava shall decide for itself which of its different taxes, rates, tolls or fees may be levied by it and such levy shall, in all cases, be subject to the prior sanction of the sanctioning authority and the provisions of the Ordinance and the rules made under there.
In the case of any alteration of the rates of levy once fixed, fresh sanction of the sanctioning authority shall be necessary, but no Pourashava shall levy more than the rates specified hereunder.
The taxes, rates, tolls or fees or alterations thereof shall come into force on such date as the Government shall: specify under the Ordinance.
4. Tax on the annual value of buildings and lands
Subject to the rules made in this behalf, the tax may be levied at a rate not exceeding seven per cent of the annual value of buildings and lands and the amount less than a taka may be rounded off to a taka.
5. Tax on transfer of immovable property.- This tax may be leived at a maximum rate of one per cent of the value of every deed of transfer excepting will and gifts (other than a gift which amounts to Watif-alai-Attlad) to registered religious, charitable, sports or cultural institutions and transfer in discharge of legal debts.
6. Tax on the application for the erection and re-erection of buildings This tax may be levied at a rate not exceeding the rate as specified hereunder(1) For temporary structures - at a flat rate of taka 20.00 per construction. (2) For semi-pucca construction- Taka (a) Up to 1,200 sq. ft. floor area ......................................... 50.00 (b) Above 1,200 sq. ft. and up to 1,500 sq. ft…………….... 75.00 (c) Above 1,500 sq. ft ....................................................... 150.00 (3) For pucca constructions(a) Up to 1,000 sq. ft. floor area ....................................... 150.00 (b) Above 1,000 sq. ft. and up to 1,500 sq. ft ..................... 250.00 (c) Above 1,500 sq. ft. and up to 2,000 sq. ft .................... 350.00 (d) Above 2,000 sq. ft. ..................................................... 450.00
Note (1) There shall be no tax for reconstruction of any building damaged due to natural calamity or for repairs of any mosque, temples, churches, Eidgahs. (2) In Pourashava where Improvement Trust or similar authority exists the tax may be levied by that authority only; and there shall be no double taxation.
2.4 Holding Tax Assessment Procedure of Municipality of Bangladesh Process of Tax Assessment The assessments mainly focus the holding tax assessment. The holding tax is imposed after assessment of individual parcels of land within the Municipal boundary. The tax
assessment is carried out under rules 22 to 43 of the East Pakistan Town Committee (Taxation) Rules, 1960. According to the rules, properties have to be assessed at the annual value at the time of assessment.
The Process of Determining the Annual Value of Property According to the East Pakistan Town Committee (Taxation) Rules, 1960", assessment is prepared in three ways in the study area:
For Wholly Let-Out Buildings The annual value is determined on the annual rental value (twelve months) less two months' rent or one-sixth of the annual rental value as maintenance allowance. If the property is mortgaged to a government recognized
financial institution the annual
payable on the account is deducted from the above annual value.
For Wholly Occupied Buildings The annual value is the gross annual rental value or 7.5% of the value of the construction cost of per square feet of buildings on the date of assessment less two months' rent or onesixth of the annual rental value as maintenance allowance. If the property is mortgaged to a government recognized financial institution the annual payable on the account is deducted from the above annual value. Since the property is wholly occupied by the owner himself, one-fourth of the ten month's rent is deducted again as self interest.
For Partly Rental and Partly Occupied Buildings The annual value for partly rental buildings is determined by the way of "wholly let-out buildings" and the annual value for partly occupied buildings is determined by the way of "wholly occupied buildings".
Period of Assessment General assessment or reassessment or periodical assessment is prepared at an interval of 5 years (Pourashava Taxation Rules, 1960), but the regular assessment or casual assessment is prepared day to day as required due to new construction, demolition of listing buildings or extension of an existing building.
Returns Required For Ascertaining Annual Value firstname.lastname@example.org
The assessor can ask the owner or occupier to submit the returns of the rent, the correct description of the building through issuing a notice in Form A (Appendix A). The owner or the occupier of the building can submit the returns through Form B (Appendix B). The assessor can enter to inspect any building at any time between sunrise and sunset giving a notice to the owner or occupier at least twenty-four hours earlier (Pourashava Taxation Rules, 1960). From the return of the owner or occupier and the inspection of the assessor, the assessor determines the annual value.
Preparation of Assessment List After the individual assessment of the building, the assessor prepares the assessment List From-C (Appendix C) in which the following information or other information as the authority of the municipality thinks fit are recorded: 1. Name of the owner. 2. The name of the street in which the building is situated. 3. Number of the building. 4. Description of the building 5. Annual value of the building. 6. The holding tax to be paid. 7. Installation to be paid quarterly. 8. If the building is exempted from assessment, a note to that effect, etc.
Publication of Notice of Assessment The assessment list is made public after authentication by the chairman or an official athurized by him to invite and inform the owners of the building about their tax through a public announcement. The Municipal authority may inform the owner of a property about their tax through a notice if it has been assessed for the first time or if the assessment is increased.
Petition against Valuation/Assessment Owner/occupier can object to the valuation or assessment by a petition presented to the Municipal authority within one month from the date of publication of notice stating the grounds of objection to the assessment through an application, From-D (Appendix D). Municipality after due consideration of the petition can cancel or modify the assessment or pass such order as it deems fit. Any person aggrieved by an order of the Municipality email@example.com
may appeal to the prescribed authority or controlling authority (Local Government Division, Ministry of LGRD) the decision of which shall be final.
Hearing and Determination of Applications by Assessment Review Board The Assessment Review Board is constituted by a lawyer, an engineer from outside, a ward commissioner from a different ward, one official, and the chairman of the Municipality is the Chairman of the Assessment Review Board. The Assessment Review Board gives a notice mentioning the date, time, place of hearing to the applicant. The board passes its decision in presence of the applicant or his agent; they can modify (increase/reduce) the assessment value or can keep it unaltered as it thinks fit proper and it is completed within four months from the date of first hearing.
Final List of Assessment and Its Duration The Secretary (a higher official of the municipality) files alteration made in the assessment list after the hearing made by the Assessment Review Board. The assessment list prepared remains valid until a fresh list is prepared.
Amendment and Alteration of List The Municipal Committee may direct to amend or to alter the list of assessment if a new building becomes eligible for comes liable to taxation, during the change of ownership, demolition of a building or a part of a building, extension of a building, if any assessment is deemed to be incorrect if there are any clerical or arithmetical error in the list etc.
Process of Exemption of Tax ď‚ˇ
In case of person or class of person Any person who has building but no income source is exempted at the time of
assessment with the help of ward commissioner. ď‚ˇ
In case of property or class of property Any buildings which are broken down at natural disaster or burn out the building
or vacant plot is exempted from imposing the rate at the time of assessment.
Process of Increase and Reduction of Tax If the price of the construction materials increases or Municipality provides better service
than before, the tax rate will be increased. Or, tax rate will be reduced/increased if building is extended/ broken down. Or, if the rent of the building is increased/ reduced, the rate of the tax will increase/reduce.
Process of Suspend or Abolish the Levy of Any Taxes According to the "The East Pakistan Town Committee (Taxation) Rules, 1960", all structures are assessed except places of worship, graveyard and those having annual rental value of Taka 300 or less. Tax will not be imposed on those buildings (single ownership) whose annual value is Taka of 20 or less in the Municipal area. But in the â€œPourashava Standard Tax Schedule 2003â€?, it is mentioned that any place of worship whose part is used as commercial purpose is permissible for imposing tax.
Study Area 3.1 Background Tongi is known as big industrial city in Bangladesh. Tongi was established as a Pourashava in 23 March 1974 and earlier it was a Union Parishad. It upgraded into class in 1985. Now at present Tongi is a special category or first class Pourashava. It is not a District, or a Upazila Headquarter, but its importance cannot be denied. Tongi is a Special type of Pourashava. Tongi is 20 km North of Gulistan, the Capital City of Dhaka. The Pourashava is comprised of 32.36 sq. km, and the core area is approximately 19.41 sq. km. The Biswa Estema Maidan is located in Tongi. Due to industrialization and migration of People at Tongi the importance of Tongi increased tremendously. The overall scenario of Tongi Pourashava is briefly stated here. (Tongi Municipality)
Figure 3.1: Existing Base Map of the Study Area Source: Tongi Pourashava
2.2 Tongi Poura Parishad Tongi is divided into 12 wards. But there are 4 reserved seats for woman. The 4 female councillors are elected by the voters. Mayor of the Municipality and councilors are elected directly by the voters. The Poura Parishad composed of Mayor & 16 elected councilors that total Number is 17. (Tongi Municipality)
2.3 Geographic Location Tongi Pourashava is located to the North of Dhaka Mega city and South of Gazipur district. Tongi Pourashava is adjacent to Dhaka city and it is near to Hazrat Sahajalal (R.) International Airport. There is a Rail station in Tongi Ashulia is a recreational place at Tongi. Tongi is surrounded by Turag & Balu River. The latitude of tongi is 23Âº 53'24" N and the longitude of tongi is 90Âº 24" 21"E. (Tongi Municipality)
2.4 Area and Population Total area of Tongi Pourashava is 32.36 sq. km. Among the total area core area is 19.41 sq. km and fringe area is 12.95 sq. km. There are 29 mouza within the Tongi Pourashava. According to 2001 census total population was 2, 81,928 out on which male population was 1, 68,978 and female population was 1, 16,950. Population growth rate was 3.72%. But according to the local census the present population is approximately 6, 50,000. (Tongi Municipality)
Chapter: 4 Municipal Holding Taxation Process of the Study Area The collection of holding tax contributes in the municipal income. It depends on all aspects of Municipal Taxation system.
4.1 Tax Base The existing state of Tax base of Municipal government of Bangladesh is set cording to "The East Pakistan Municipal Committee (Taxation) Rules, 1960" and 'The Pourashava Ordinance 1977".
4.2 Tax Administration Several register are maintained in the Tongi Municipality for tax administration. These are: Valuation Register. Assessment Register. Demand and Collection Register. Daily Tax collectors Register. Valuation register includes all information collected during reassessments. Assessment register maintains name and addresses of tax payers and information on the amount of the tax payable by each tax payer. Demand and collection register 'maintains up-to-date position of tax payment by individual tax payers. Daily tax collectors register maintains collection made everyday by the cashier. Beside the registers, the tax collection section also maintains some forms and bill books. Tax or receives taxes from individual tax prayers at their premises which are reduced in the tax collector's receipt book. The collectors deposit the amount so collected to the office.
4.3 Revenue Sources of Tongi Municipality In this study, to bring about the consistency with the data available in Budget documents and other secondary sources, the items of revenue sources are broadly divided into three categories. These are: a. Property Based Revenue Sources. b. Activity or Benefit Based Revenue Sources. firstname.lastname@example.org
c. Municipal Own Property Revenue Sources. The definitions of these three sources are mentioned below: a. Property Based Revenue Sources This includes rental value based tax of dwellings, rate for street lighting, water supply and conservancy and immovable property transfer tax. The rental based levies are collected directly from the property owners while I PTT revenue is received by the Municipalities as shared tax with government. The rental value based tax and the three rates for street lighting, water supply and conservancy are collectively and commonly called "Holding Tax".
Holding Pattern Two types of holdings are seen in this Municipality. These are:
ď‚ˇ Government own holdings Residential, Commercial, Industrial, Office-administrative /Organizational, others
ď‚ˇ Private owned holdings Residential, Commercial, Industrial, Office administrative /Organizational and Mixed type holdings
b. Activity or Benefit Based Revenue Sources This include taxes on profession, trades and callings, tax on the application for erection and re-erection of buildings, taxes on advertisement, tax on marriages, adoptions and feasts, amusement and vehicles, fees for tender schedule, certificates forms, other forms and licenses etc.
c. Municipal Own Property Revenue Sources Municipalities own shopping complexes, building, auditorium, land, pond, hats and Bazaars, bus and truck stands, tolls on ferries, bus-stand, sand deposits area (Balu hat) etc. which return substantial revenue as rents and profits.
4.4 Rate Structure of Tax Sources It is investigated that all schedule of rate structure of "Pourashava Standard Tax schedule, 2003" is not properly maintained in Tongi Municipality. These are described as category ways in below:
4.4.1 Rate Structure of Property Based Revenue Sources Property based revenue include holding tax revenue and it is wised on the purchaser price of a property during transfer at a fixed percentage of the ice of the property. The government collects this revenue and disburses the fixed parentage to the Municipalities. According to the "Pourashava Standard Tax schedule 2003", the government has allowed only 2% of Immovable Property transfer Tax to the Municipalities collected from their respective areas. Among holding tax, Property based tax imposed on the property owners based on annual receipt of dwellings and land is historically the most important ownsource revenue of the Municipalities and water supply, conservancy and street lighting provisions are also fixed on the basis of this rental valuation of property. According to the â€œPourashava Standard Tax Schedule 2003" the rates of holding tax are as follows: Table 4.1: Rate of Holding Tax Property tax
7% of the annual value of property
7% of the annual value of property
3% of the annual value of property
10% of the annual value of property
Source: Pourashava Standard Tax Schedule 2003 4.4.2 Tax on the Application for the Erection and Re-Erection of Buildings This tax may be levied at a rate not exceeding the rate as specified hereunder(1) For temporary structures - at a flat rate of taka 20.00 per construction. (2) For semi-pucca construction- Taka (d) Up to 1,200 sq. ft. floor area ............................. 50.00 (e) Above 1,200 sq. ft. and up to 1,500 sq. ft............ 75.00 (f) Above 1,500 sq. ft ........................................... 150.00 (3) For pucca constructions(e) Up to 1,000 sq. ft. floor area ........................... 150.00 (f) Above 1,000 sq. ft. and up to 1,500 sq. ft .......... 250.00 (g) Above 1,500 sq. ft. and up to 2,000 sq. ft ......... 350.00 (h) Above 2,000 sq. ft. ......................................... 450.00 Note: (1) There shall be no tax for reconstruction of any building damaged due to natural calamity or for repairs of any mosque, temples, churches, Eidgahs. (2) In Pourashava where Improvement Trust or similar authority exists the tax may be levied by that authority only; and there shall be no double taxation.
Analysis and Findings The theoretical and statistical analyses of existing features of all aspects of tax system of Tongi Municipality are described below:
5.1 Theoretical Analysis of Tax Base The existing state of tax base of Tongi Pourashava like other Municipalities of Bangladesh is set according to "The East Pakistan Municipal Committee (Taxation) rules, 1960" and "The Pourashava Ordinance 1977". The theoretical analysis of Municipal tax base includes analysis of schedule of items and rate structure on holding tax collection.
5.2 Analysis on Holding Tax Collection Table 5.1: Annual Municipal Tax and Other Revenues Demand and Collection of Tongi Pourashava, Gazipur of Last Seven Years. Economic Year
Total Collection Rate (%)
Source: Tongi Pourashava; Compiled By Authors.
Table 5.2: Year Wise (Last Seven) Total Holding Tax Demand and Collection of Tongi Pourashava, Gazipur Total Municipal Tax
96.39 Up to
Source: Tongi Pourashava; Compiled By Authors.
5.3 Finding of Analysis Tongi Pourashava, Gazipur is successful to collect it municipal Tax and other revenue collection. Its major income source is municipal tax collection. In last seven year this section has given the maximum amount of income of Tongi Pourashava. In the financial year 2006-2007 the collection of total demand is maximum and that 151.93% of the total demand of the other revenue collection. The figure shows the trend.
Last Seven Years Trend of Annual Municipal Tax and Other Revenues Demand and Collection
Total Collection(Lakh Taka)
600 400 200 0
Municipal Others Municipal Others Municipal Others Municipal Others Municipal Others Municipal Others Municipal Others Municipal Others
2003- 2004- 2005- 2006- 2007- 2008- 2009- 20102004 2005 2006 2007 2008 2009 2010 2011 Financial Year and Categories
Figure 5.1: Annual Municipal Tax and Other Revenues Demand and Collection Trend of Tongi Pourashava, Gazipur of Last Seven Years. (Data Source: Tongi Pourashava)
The one of the major sources of municipal tax is the holding tax collection. But the collection does not quite satisfactory according to the year wise evaluation. The collection is less than the total municipal tax demand. The income from the holding tax is rapidly increasing year by year, but the 100% collection is nill in last seven years.
Holding Tax Collection Trends of Last Seven Years 35.00 30.00 25.00 Income (Lakh Taka)
Demand Field (Lakh Taka)
Total Collection (Lakh Taka)
5.00 0.00 20032004
Figure 5.2: Holding Tax Collection Trends of Last Seven Years (Upto-December2010) (Data Source: Tongi Pourashava)
In the economic year 2009-2010 the percentage of holding tax collection is the maximum and it is 96.93% against the demand. But is a matter of satisfaction that the holding tax collection is increasing according to the year wise analysis.
Yearwise Total Collection Rate (% ) Upto December' 2010
2004-2005 2005-2006 2006-2007 2007-2008
Figure 5.3: Year wise Total Collection Rate (%) up to December' 2010 (Data Source: Tongi Pourashava)
But it is a matter of satisfaction that the holding tax collection is increasing according to the year wise analysis. Year Wise Increasing Trend of Total Collection Rate (% ) of Holding Tax
Percentage of Collcetion
80.00 70.58 60.00
Total Collection Rate (%)
52.00 40.00 20.00 0.00 2003-2004 2004-2005 2005-2006 2006-2007 2007-2008 2008-2009 2009-2010 Financial Year
Figure 5.4: Year Wise Increasing Trend of Total Collection Rate (%) of Holding Tax (Data Source: Tongi Pourashava)
Problems and Prospects 6.1 Problems and Prospects Many of the difficulties encountered with municipal holding taxation in Tongi Municipality have resulted from a failure to consider the total tax system which is depicted in â€œThe Pourashava Ordinance 1977".
6.1.1 General Problems Lack of Awareness People do not pay, not because they are reluctant to pay but primarily because of lack of awareness among the tax prayers. So, it will very difficult to collect such tax if the rate of tax is increased.
Officiousness of the Wealthy People The wealthy people deceive the tax by demonstrating their political power and their majesty in the society. They also do not want to increase the tax rate because of their self benefit. In the study area, through the official opinion it is found that powerful and wealthy people make most irregular payment This irregularity will be increased if the tax rate increases that will make a constraint in resource mobilization (Khan, 2001).
6.1.2 Municipal Tax Administration Problems Record Keeping Through the official interview, it was found that tax collection is not difficult from such items but properly maintain the record of such items are difficult.
Assessment of Tax Problems of assessment procedure mainly focus the problems of assessment procedure of Property Based Revenue Sources, specially holding tax assessment procedure. Problems of holding tax assessment procedure are analyzed step by step in this assignment.
Determination of the Annual Value of Property In case of determination of the Annual Value of Property, property has to be accessed at the annual rental value at the time of assessment. In case of owner occupancy of a building when it becomes difficult to assess the rent, a value imputed by the assessor from the rents of similar buildings in the locality. The reason found through the official interview of tax assessor behind this problem is:
Ownership Identification: Ownership identification for imposition of property tax is the major reason for the problem of determining annual rental value. In case of joint ownership, tax imposition may sometimes become a problem. Some of the owners in the income bracket may actually be unable to pay taxes. But in case of income earners the problem arises as to who should pay on other's behalf. Again, there may be absentee land owners. The tenant or agent of a property may not like to pay tax.
Little Initiatives: These are undertaken by the Municipality to solve these problems. As local representatives, the chairman and the ward commissioners are very well known to the people who can easily solve such problems but found not to involve in these and the problem persists.
Incase of Record Keeping During Reassessment: The assessor can not keep complete record when an addition to a building made and rent value is increased.
Irregularity of Assessment: In the study area, appointed assessor and assistant assessor prepare the assessment valuation list both for regular assessment and general assessment/reassessment that is done periodical at an interval of five years. But regular assessment is seldom performed by them. Since property does not become taxable until it is build upon, it is not easy to say who would be liable for tax payments without regular watching new constructions, additions and alterations.
In case of returns required for ascertaining annual value: the assessor seldom go for checking the actual rent after receiving submission paper which include returns of rent, the correct description of the building from owners. The main
reason found through the official interview of tax assessor/approval authority personnel behind t problem is: a. Illegal Involvement between tar payer and assessor b. Pressure on tax assessor c. Unfavorable collection procedure d. Filing of large no. of appeal cases Officials Efficiency in Case of Assessment and Collection Much of the tax revenue depends upon the efficiency of accurate assessment and timely collection. Number of staff in tax collection establishment and their efficiency is crucial for collection of holding tax. But the record keeping system for revaluation of property was not good in the study area. The reason behind this problem is: Insufficient staff and lack of technical knowledge of assessment The study area is not lucky enough to have sufficient staff to complete the assessment process in one go. On the other hand, for this purpose Municipality hire temporary staff without any formal training or experience. Research findings indicate that formal raining in valuation is not provided to staff for undertaking general revaluation, nor at there detailed manuals of guidance on valuation practice. A kind of self asseesment system which is in practice for assessing property valuation are also not poperly prepared nor sufficient information are sought for proper assessment or decking. This practice works against better resource mobilization. Collection Performance of Own Property Based Revenue Sources Now a day although the collection efficiency of this category crosses 100% of current demand, it has lost actual monetary value. Municipality generally lease out their own market, hat-bazaar and their others own properties. Generally own market is leased out to potential shopkeepers on a profitable and quick cost recovery basis. But the lease receipts were lower than that ruled in the private sector. Moreover, they fixed low monthly rentals. Monthly rents examined in shopping complex and stalls that they were much lower than private shopping rental rates. The rates fixed for the Municipal markets were in most cases 50% to 100% lower than the privately own market. Actual cost of construction figures of markets combined with land cost when compared to sale proceeds of stalls, does not show that the Municipality has been making any large gain from market. email@example.com
Recommendation and Conclusion 7.1 Recommendations In this study, recommendations include own source revenue enhancement measures of tax base and tax administration. A sustainable plan for Municipal taxation is tried to drawn as Municipal taxation improvement action plan.
Tax rate should be considered according to services provided and the present market value
Since measures are undertaken about restructuring the rate of property based revenue sources, activity based revenue sources and appropriate lease amount of own property based Revenue sources based on the above two criterion.
Reconstrucstructuring the rate of property based revenue sources
In the study area, the conservancy rate (3%) is not rational with the service. So, this rate should be such that it is sufficient to recover at least the full operation and maintenance cost.
Determining appropriate lease amount of own property based revenue sources
The Tongi Pourashava is undertaking market construction programs should have profitability considerations for such endeavors. The returns should include all cost plus profit.
Assessment and Proposed Reform o Simplified tax assessment procedure-based on mass valuation system o Make the reassessment process a continuous one o Tax assessment personnel must be accountable to preparation the valuation list o Poor class dwelling could be exempted from paying holding tax
On equity consideration, holdings having very poor quality dwelling could be exempted from paying holding tax altogether, and/or a fixed taka amount could be deducted from the assessed amount of holding tax thus making it somewhat progressive ď‚ˇ
Review board should be accountable to determined the revised property valuation
To remove the malpractice of review board, the chairman of tax review board should not be constituted by the chairman of the Municipality; chief executive officer of the Municipality or any other government official, preferably judiciary personnel may be the chairperson of the board (Ahmed, 1992). ď‚ˇ
Make a central valuation board to determine the annual valuation of property
An alternative solution can be proposed to determine the annual valuation of property which is revealed by the LGED, 2002. The possible option with regards to assess of holding taxes on its properties in future is to make a central valuation board. Government properties are meant for administrative functions and they do not generate any revenue. Government properties are meant for administrative functions and they do not generate any revenue. ď‚ˇ
To remove the more undervaluation of property
The following revised assessment procedure will be followed as a step towards simplification by LGED:
1) Properties over thirty years will be valued at their original cost and will not be subject to adjustment for any inflation;
2) Other properties will be valued based on the construction costs of the buildings (excluding land) on the date of complication as adjusted for inflation on the date of valuation (for this purpose the inflation will be limited to not more than 2.5 percent annually from the year of construction);
3) Under both cases the construction costs will be reduced for depreciation based on the life of the asset-for simplicity life of all civil works may be considered as 50 years and depreciation, on a straight-line method adjusted to arrive at the current adjusted capital cost of any holding tax;
4) Probable annual rental value will be assessed as 5 percent of the capital cost
of the Property;
5) Properties concerning judiciary and law and order will not be subject to levy of any holding tax;
6) The annual rental value so determined will be further reduced by one-third for upkeep and maintenance; and
7) Tax will continue to be directly to the Pourashava raising the demand. ď‚ˇ
Collection and Proposed Reform o Billing system should be made easy in terms of both the place and the time, o Payment for private holdings through the commercial banking system should be the best option, o Payment for government holding tax should be centralized.
Computerized database system should be improved
Computerized database system of all records related to taxes and revenue collection should be improved. For this purpose, two types of date base would have to be mepared using data base software like MS Excel, MS Access, SPSS software etc. o Database for tax collection o Database for total Municipal revenue (including govt. grant)
7.2 Conclusion The revenues are in the form of taxes, rates and fees whose amounts are established in their respective Model Tax Schedules. Taxes and Rates (collectively known as the Holding Tax) are applicable to all properties (domestic, commercial, industrial, and institutional) is a major source of municipal revenue and is composed of Land and Buildings Assessment (property tax with a ceiling of 7% on the balance of the annual rental value), Lighting Rate (street lighting, rate set a maximum of 3%) and Conservancy Rate (a rate for provision of solid waste collection and disposal services, also with a ceiling of 4%) in Tongi Pourashava. Holding Tax charged for all properties in areas where each service is provided, irrespective of whether or not the individual property owner avails himself of the service.
Tongi Pourashava is growing gradually in the holding tax collection and the trend(Figure 5.4) is the proof of that. In the economic year 2009-2010 the percentage of holding tax collection is the maximum and it is 96.93% against the demand. But is a matter of satisfaction that the holding tax collection is increasing according to the year wise analysis. As a result the Tongi Pourashava is achieving the top position or nearby in previous year in the rank of best Pourashava in Bangladesh. So it is very positive and honorable site.
So it is very necessary to solve the problems and keep the progress on going. The best solution is the consideration of the public representative to solve these. The public representatives will have to be more dynamic and conscious about the needs of the people and must find out the means to finance the required services and infrastructures. They will work together with the permanent employees in finding out the solutions of their own problems.
Reference Ahmed, N. June 1992, MunicOal Finance in Bangladesh-yln investigation of local /eye/ iir8aVire; PhD Thesis, Economics Department, Jahangimagar University, Savar, Dhaka Ali, M. M. 1998; â€œThe Pourashava Ordinance and Pourashava Election Rulesâ€?; Dhaka, 1998.pp 157-206
Bhatia, H. L. 2010; Public Finance; NewDelhi. 2010 Kamal Siddiqui, 2005; Local Government in Bangladesh, Dhaka Khan, M.M., 2001, "Urban Local Governance in Bangladesh: An Overview" In Islam, N. and Mohabbat, M.k. (eds.) "Urban governance in Bangladesh and Pakistan", Centre for Urban studies, Dhaka, pp 1 Lopa, Fowzia Gulshana Rashid, 2006; Problems And Prospects Of Municipal Taxation: A Study On Savar Municipality;
Undergraduate thesis report submitted to the Department of Urban and Regional Planning, Jahangirnagar University, in partial fulfillment of the requirements for the degree of Bachelor of Urban and Regional Planning; OCTOBER 2006
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