On job assistance to municipality on tax encasement

Third Urban Governance and Infrastructure (sector) Improvement Project (UGIIP-III), LGED, Dhaka

Report on ‘On-job-Technical Assistance’ to Faridpur Municipality for holding tax re-assessment

Visited Municipal: Faridpur Visiting period: From: 9.30 am. 26 Sept 2018 To: 01.00pm. 27 Sept 2018

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Visit purpose: On-job-technical assistance to Faridpur Municipal for holding tax re-assessment Visited by : 2.1 Md. Zahurul Islam, Municipal Taxation and 2.2 Md. Alfaj Uddin, Regional CoordinatorFinancial Specialist, GICD-2, UGIIP-III, LGED Municipal Finance, GICD-2, UGIIP-III, HQ, Dhaka Fardipur Region

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3.1 3.2 3.3

Activities performed: Attended TLCC meeting of Faridpur Pourashava Attended training program under GAP Discussed with Mayor, CEO, Secretary, and Members of the Standing committee on Taxation, Tax assessors, tax collector and other officials of PS. 3.4 Provided on-job training /supports to PS Officials for carrying out re-assessment pre-activities of the current year.

3.5 Follow up and support for conducting internal audit of account FY2017-18 by Standing Committee on Accounts and Audit.

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Visit outcomes/results: UGIIP-III is helping PS Officials to increase the PS revenue in various ways, including making better use of existing properties /assets, mobilizing revenues from tax and non-tax items, and build capacity of the PS through providing training and on-job-supports. This visit was planned to support PS Officials to carry out preactivities of re-assessment which will be effective from FY 2019-20. Following are the major visit outcomes/results:

4.1 Attended TLCC meeting of Faridpur Municipal

The 41th TLCC meeting was held on 26 September 2018 at the conference room of Faridpur PS. All the members actively took part in the discussion session of the meeting. Major issues that were discussed in the meeting include, construction & maintenance of roads, cleaning of drains and sewerage, progress of Page 1 of 9 GAP & PRAP implementation, GRC resolved issues; and prioritizing implementable schemes of WCs, etc.

4.2 Attended training program under GAP

Under GAP budget , a two-day long ‘training on primary health care educations for the health workers and teacheres ‘ working in the poor areas of PS was held at conference room of the Faridpur Pourashava on 25th and 27th September 2018. At 2nd day of the training, participants provided very positive feedback as they found it very effective and helpful to develop their own capacity. Total 28 females were participated in the training and all were given BP machine and other first aid accessaries in support of their field works.

4.3 Collection and review of information regarding holding tax over the last years 4.3.1 Status of last tax re-assessments Total imposed tax Records of last re-assessments Year Assessed Assessed Growth in rate 27% holdings Amount Holding (No.) (BDT) Numbers Property 7% 2019-20 On going Conservancy 7% 2014-15 15695 8,02,01,113 11% Street light 3% 2009-10 14164 2,45,32,935 8% Water rate 10% 2004-05 13155 1,25,22,085

Growth in Assessed Amount 227% 96%

Remarks: Demand through re- assessment from 2004-05 to 2014-15 was highly increasing trends.

4.3.2

Demand and collection of holding tax Share of HT to own source revenue in FY 2017-18

Total revenue in FY2017-18 Holding tax (HT) Non-holding tax Total own source revenue

BDT. 9,12,56,617 BDT. 13,63,34,957 BDT. 22,75,91,574

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Nonholding tax, 59.90%

Holding tax,40.10%

Holding tax demands over the last 3 year

Holding tax collection over the last 3 years

912.57

864.78

Collection (BDT in lack)

demand (BDT in lack)

1,041.34

650.50

2015-16

2016-17

2017-18

693.56 564.83

2015-16

2016-17

2017-18

Collection efficiency (%)

Collection efficiency of holding tax over last 3 years

87.63

86.83

80.20

2015-16

2016-17

2017-18

4.4 Review/follow up of the on-going activities for holding tax re-assessment effective from 2019-20FY For the purpose to review and follow up the ongoing activities of holding tax re-assessment, a checklist as below was used for reporting purpose: Sl. No.

Are the following activities under taken in sequential order?

Present status Yes No

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Re-assessment work started at least one year before ‘due year’

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Municipal has approved the Re-assessment Proposal

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(a) Announcements in more than one local newspapers regarding Reassessment have been made. (b) Miking for 3-4 days have been done requesting public to assist and co-operate in Re-assessment Required no. of Teams consisting of Asstt Tax, Assessor, Asstt Tax Collector and others from different section of Pourashava have been formed to collect information.

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Mayor notified all Councilors to assist and cooperate the Teams

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Mayor’s letter to all GoB Departmental Heads, Autonomous bodies requesting cooperation & assistance for physically inspecting and verifying the buildings.

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PS response/ Remarks

It will be started from 1st Oct 2018 Not yet , but under process in this month meeting Not agreed due to local political contexts.

Under process This matter was discussed with Mayor and CEO, they agreed on it.

Mayor discussed this with council meeting Only notice to be served

Sl. No. 7.

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Are the following activities under taken in sequential order?

Present status Yes No

PS response/ Remarks

(a) Tax Assessor has sent notices to all building/holding owners and to all Departmental Heads (in case of Govt. building) through form GA& GHA (dig M I dig N). (b) They have been asked to submit the filled in forms within 7 (seven) days Holding owners may not submit form (M I N). Each Team will visit assigned ward/area and will take measurement of all buildings/houses including their latest/existing description. They will collect information on real or possible rent of the premises and will take owner’s signature on such information sheet.

(A) Based on information collected, Tax Assessor according to filled in descriptions of Form N will determine annual valuation (a) based on building rent

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Agreed. Will be done

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Agreed. Will be done

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Agreed. Will be done

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Agreed. Will be done

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(b) based on building value (B) After fixation of Annual valuation, Holding Tax will be assessed and written into concerned register, each page will be signed by Mayor for approval Based on the information of the register and according to Form Uma (O), Tax Assessor will prepare ward basis list of tax fixation where Mayor or his representative will sign on each page of the list. (a) The tax fixation list is to be placed in a safe place of Pourashava (b) Miking for 3-4 days for inviting holding owners to see the Tax fixation list/information. (c) Notice will be published in local newspaper to inform about this.

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Only for private holdings Only for Govt. holdings Agreed. Will be done

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Agreed. Will be done

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Agreed. Will be done Agreed. Will be done

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(d) There is no need to write individual letters to holding owners informing the new fixation of holding tax. (e) In case of only 1st Assessment and tax fixation on any property, Pourashava will serve notice to the owner/person in possession through Form CHA (P) (a) Any aggrieved Holding owner on newly prepared list may apply within 30 days to the Mayor for re-consideration (b) Mayor will refer such application to Tax Assessment and collection Committee for settlement. (c) Such applications hearing must be completed within 4 (four) months from first hearing date.

Finalization of assessment lists and registers Entry of tax-data in software

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Not agreed due to local political contexts.

Agreed.

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Agreed

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Agreed

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Agreed

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Not sure

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Agreed Agreed

4.5 Review present administrative capacity of holding tax assessment, identify capacity gaps 4.5.1 Staff structure in assessment section Positions Tax Assessor Assistant Tax Assessor MLSS Total

Sectioned 1 4 1 6

Existing 1 1 1 3

Vacant 3 3

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Capacity Gap / Remarks Assessment section is under staffed to cover field works for re-assessment. They need extra manpower for field works during reassessment.

4.5.2 Present practice of annual valuation of holding Types of holdings Use of holding

Calculation of annual valuation Provision as per Act Existing practice Private holding Rental use Annual rental value Annual rental value Owner’s use Annual rental value Annual rental value Govt. semi-govt. and other Rental use Annual rental value Annual value of building holdings Owner’s use Annual value of building Annual value of building Observations: Calculation of annual valuation of partly rental and owner’s occupied holding are not same. In discussion with tax officials, they were not found well understanding about this. Even application of bank interest both commercial and non-commercial building has different rules. Therefore, it was needed to discuss with PS officials in details.

4.5.3

Shared/ reviewed the methods of calculation of annual valuation of a holding through on-job-training In a short arrangement, a session was held at the PS in participation of the officials of taxation. In the session following two methods were briefed first as theoretically as per respective rules1: Annual rental value (ARV) method Annual value (AV) of building The general formula for calculating holding tax The annual value is the gross annual rental or 7.5% of the under ARV method is as follows: value of the buildings on the date of assessment less two For wholly let out premises: months rent or one-sixth of the annual value as =Monthly rent x 10- Interest payment on loans for maintenance allowance. construction / purchase of said properties which is mortgaged to authorized institutions .Here only 10 If the property is partially or wholly occupied by the months of total rent is calculated as two month’s owner him/her self then one-forth (1/4) of the annual rent in a year is taken to be allowance maintenance value of the same ( owner’s occupied portion) is deducted charge for the property thus netted out gross 12 from the above annual value. monthly rent.

For wholly owner occupied premises: Again, if the property is mortgaged to government There is an additional deduction (if calculated on the recognized financial institutions the annual interest above basis of gross yearly rent) of a quarter of the payable on the account is deducted from the above rent above ( i.e. 10 x ¼ = 2.5 months rent) . Thus for annual value. In this case, building due used by nonowner occupied property the valuation before commercial purpose, full amount of payable interest is deduction of admissible interest payment is taken to deducted. Only 1/4th of the annual payable interest is be 7.5 months of rental amount. deducted, if it is used for commercial purpose.

After academic session, an illustration basis practical session was held. A peer to peer learning atmosphere was existed there. A picture is given below as evidence.

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KorAday O Nirdharon Poddhoti Bidhimala 2013 Page 5 of 9

4.5.4

Shared the standard steps/ process of tax assessment through on-the-job training PS tax assessor is mainly responsible for the re-assessment process. Assessors are required to follow some rules and guidelines as prescribed by the law in assessing tax. In a discussion with tax assessors and other officials, it was main agenda that ‘how assessor will complete the re-assessment work?’’. During visit, in a discussion held with the PS officials, the following step-by-step tasks were shared with them which to be required to complete the assessment work professionally.

Take permisison from Council Meeting for re-assessment

Issue notice (from GA) to holding owners by giving form GHA

Submission of fill-up form GHA b y holding owners

Inspection of the tax assessor to justify it

Determiniation of annual valuation of holding by form UMA

Preparation of assesment list (taxable amount)

Publication of assessment list/notification of tax (Form CA)

Receive application for tax review (from CHA)

Review of appeal by Standing Committee

Finalizaion of valuation / assessment

Entry in register and biling softwar

How Assessor will complete the re-assessment work? He should prepare a work plan in detailed.

Therefore, Tax Assessor was taking a brief from GICD Consultant on the diagram above displaying ‘step by step processes of re-assessment work ‘using different prescribed forms.

It was helped him to prepare a detailed work plan.

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4.6 Create an enabling environment in carrying out proper re-assessment for FY2019-20 It is commonly felt that re-assessment is fear of adversely affect the popularity of the elected representatives.

The elected representatives seem to believe that regular re-assessment would certainly increase risk their chance of re-election. For proper management of re-assessment, involvement of Mayor, and CEO, Councilors of PS are crucially essential therefore, consultants met and discussed with all them for creating a favorable environment to carry out reassessment. They all have given commitment for necessary support and cooperation to tax assessment section.

Strong and sustained commitment of both public representatives and high officials of PS is most essential for proper tax management , therefore a meeting held with Mayor, CEO, and Secretary jointly at the office of Mayor, and discussed about the different pre-conditions of a proper re –assessment.

4.7 On-job-support to prepare a detailed work plan (FY 2018-19) for re-assessment of FY 2019-20: Professional tax assessment practice requires a variety of duties and responsibilities. Law will impose some duties, professional will demand others. During PS visit, tax officials were given hand holding supports to prepare a draft work plan for completing the re-assessment activities within June 2019. Below attachment is the ultimate and desired output of the visit:

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4.8 Follow up and support for conducting internal audit of account FY2017-18 by Standing Committee on Accounts and Audit.

Accounts Officer informed that Accounts and Audit Standing Committee has been working for internal audit as per requirements of UGIAP. The findings of the audit will be complied in form of report which is to be submitted to PMU by this quarter end.

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PS agreed actions/non-agreed actions 5.1 PS agreed actions: 

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5.2 PS non-agreed actions

PS will engage some additional staffs from other sections for field survey and notification of form GA and GHA within very short times.

Re-assessment will take place at PS council meeting in this month for approval.

Travel allowance will be given for staffs for field works.

PS will try to improve the re-assessed demand at least 1.5 times more.

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As PS was not able to start the reassessment activities at least one year before ‘due year’, therefore whole activities are not possible to carry out in a sequential order as planned.

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Re-assessment of private holdings in extended areas will be delayed for some times due to local political circumstances. .

Comments/recommendations Following two were the core recommendations to PS that: Bring and record all holdings under coverage of re-assessment, and, All existing holdings whose assessment value was grossly inadequate to be re-assessed properly.

Signature of the Consultant : Designation : Municipal Taxation and Financial Specialist Date: 01.10.2018

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Signature of the Consultant: Regional Coordinator-Municipal Finance Date: 01.10.2018