Visit report to Gopalganj Pourashava providing on job-training for Holding tax re-assessment

Third Urban Governance and Infrastructure (sector) Improvement Project (UGIIP-III), LGED Pourashava Visit Report

Visited Pourashava: Gopalganj Visiting period: 9.00 am. 24 Sept. 2018 to 01.00 pm. 25 Sept 2018 1. Visit purpose:

Follow-up and on-job-supports to Gopalganj Pourashava for holding tax re-assessment

2. Visited by : • •

Md. Zahurul Islam, Municipal Taxation and Financial Specialist, GICD-2, UGIIP-III, LGED; and Md. Alfaj Uddin, Regional Coordinator-Municipal Finance, GICD-2, UGIIP-III, LGED

3. Activities performed: 3.1 Discussed with Panel Mayor1, Secretary, Admin Officer, and Members of the STC on taxation, tax assessors, tax collector and other officials in PS. 3.2 Provided on-job training /supports to PS Officials for carrying out re-assessment pre-activities of current year.

3.3 Follow up and support for conducting internal audit of account FY2017-18 by STC on Accounts and Audit.

4. Visit outcomes/results: UGIIP-III has been 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 outcome/results:

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 rate 23%

Records of last re-assessments Assessed Growth in Growth in Amount (BDT) Holding Assessed Numbers (%) Amount (%) Property 7% 2019-20 On going Conservancy 7% 2014-15 6,962 1,47,27,280 6.29% 45.28% Street light 3% 2009-10 6,550 1,01,36,969 51.80% 75.99% Water rate 6% 2004-05 4,315 57,60,000 Remarks: Demand through re- assessment from 2004-05 to 2014-15 was highly increasing trends.

Year

Assessed holdings (No.)

4.3.2 Demand and collection of holding tax Total revenue in FY2017-18 Holding tax (HT) Non-holding tax Total own source revenue

Share of HT to own source revenue in FY 2017-18 Holding tax 18%

BDT. 1,69,95,717 BDT. 7,79,46,553 BDT. 9,49,42,270

Nonholding tax 82% 1

During visit, Mayor was at Dhaka for official work.

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Holding tax demands over the last 3 year

Holding tax collection over the last 3 years

169.96

188.87

183.23

2015-16

2016-17

HT Collection (BDT in lac)

HT demand (BDT in lac)

195.54

2017-18

152.16 142.73

2015-16

2016-17

2017-18

Collection efficiency of holding tax over last 3 years

Collection efficiency (%)

92.75 75.57

77.81

2015-16

2016-17

2017-18

4.4. Review/follow up of the on-going activities for holding tax re-assessment of FY2019-20 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

PS response/ Remarks

1.

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

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2.

Poura Parishad has approved the Re-assessment Proposal

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3.

(a) Announcements in more than one local newspapers regarding Re-assessment 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 Asst Tax, Assessor, Asst.

Tax Collector and others from different section of Pourashava have been formed to collect information.

Mayor notified all Councilors to assist and cooperate the Teams

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It will be started from 1st Oct 2018 Not yet , but under process in this month meeting Agreed

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Under process

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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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This matter was discussed with Secretary. He agreed on it.

Agreed. Will be notice to Councilors Only notice through forms GA& GHA to be served

4.

5.

6.

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Sl. No.

7.

8.

9.

10.

11.

12.

13.

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Are the following activities under taken in sequential order ?

Present status Yes No

(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 (M I 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 (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. (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

PS response/ Remarks

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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

√ √ √

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

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Agreed. Will be done

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Subject to approval of Mayor

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Agreed.

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Agreed

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Agreed

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Agreed

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Will be tried

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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

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Vacant 3 3

Capacity Gap / Remarks Assessment section is under staffed to cover field work 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.

4.6 On-the-job training/supports 4.6.1 Shared/ reviewed the methods of calculation of annual valuation of a holding 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 rules2: Annual rental value (ARV) method The general formula for calculating holding tax under ARV method is as follows: For wholly let out premises: =Monthly rent x 10- Interest payment on loans for construction / purchase of said properties which is mortgaged to authorized institutions .Here only 10 months of total rent is calculated as two month’s rent in a year is taken to be allowance maintenance charge for the property thus netted out gross 12 monthly rent.

Annual value (AV) of building The annual value is the gross annual rental or 7.5% of the value of the buildings on the date of assessment less two months’ rent or one-sixth of the annual value as maintenance allowance.

For wholly owner occupied premises: There is an additional deduction (if calculated on the above basis of gross yearly rent) of a quarter of the rent above ( i.e. 10 x ¼ = 2.5 months rent) . Thus for owner occupied property the valuation before deduction of admissible interest payment is taken to be 7.5 months of rental amount.

Again, if the property is mortgaged to government recognized financial institutions the annual interest payable on the account is deducted from the above annual value. In this case, building due used by noncommercial purpose, full amount of payable interest is deducted. Only 1/4th of the annual payable interest is deducted, if it is used for commercial purpose.

If the property is partially or wholly occupied by the owner him/her self then one-forth (1/4) of the annual value of the same ( owner’s occupied portion) is deducted from the above annual value.

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

Calculation of annual valuation of holdings both rental and owner‘s usage were briefed by GICD Consultant.

2Kor

A feedback by Tax Assessor about his understanding on valuation of private and govt. holdings

Aday O Nirdharon Poddhoti Bidhimala 2013 Page 4 of 8

4.6.2 Shared/reviewed the standard steps/ process of tax re-assessment 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 reassessment

Issue notice (form 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 PS will complete the re-assessment work in a Pourashava? Firstly, They need to prepare a work plan following different steps to complete the work. Therefore, Tax Assessor of Pourashava was taking a brief from GICD Consultant Mr. Alfaj Uddin, Regional Coordinator (Municipal Finance).

Picture in the left, he showed and briefed ‘step by step processes of re-assessment work using different prescribed forms.

Using forms, step by step processes of re-assessment were briefed

by GICD Consultant to PS Secretary, Admin Officer ,and others 4.6.3 Create an enabling environment in carrying out proper re-assessment for FY2019-20 For proper management of re-assessment, involvement of the Mayor, Secretary, and Councilors of the Pourashava are very important for conduction of an effective assessment. Therefore, the consultants met and discussed 1st with Officials of PS, and then jointly with STC members and Officials of the PS for creating a favorable environment to carry out reassessment. They all have given commitment for necessary support and cooperation to tax assessment section.

Meeting with Panel Mayor, STC members and Officials on 2nd day of the visit in the office room of Secretary

Meeting with PS Officials on 1st day of the visit at Conference hall of PS Page 5 of 8

4.6.4. 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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4.7. Follow up and support for conducting internal audit of account FY2017-18 by Standing Committee on Accounts & Audit.

Accounts Officer informed that Accounts and Audit Standing Committee (STC) 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.

A discussion held with Accounts Officer in his desk on the progress of internal audit report to be prepared by STC concerned

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5.

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

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.

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

It is not possible them to fully stop the excess reduction through STC appeal review, unless a rules of formation of STC on taxation is amended/changed by a Ministry Circular.

6. 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: 08.10.2018

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Signature of the Consultant: Regional Coordinator-Municipal Finance Date: 08.10.2018