The National Board of Revenue. Photo : Collected
After experiencing a downturn in revenue collection, the National Board of Revenue (NBR) is contemplating a reduction in the tax at source for land and flat registration.
According to insider sources at NBR, the organisation is poised to recalibrate the tax at source in this sector due to declining revenue collection. This could potentially lead to a return to the previous tax rates for land and flat registration.
A high-ranking NBR official, speaking on condition of anonymity, said that the cost associated with land registration has surged, while property sales have significantly decreased, negatively impacting revenue collection.
Ironically, the tax at source was initially raised in an attempt to bolster revenue collection.
Consequently, NBR is now exploring the possibility of reducing the tax at source, potentially reverting it to its previous rates.
In the current fiscal year's budget, NBR had doubled the tax at source for land and flat registration. However, this move resulted in decreased interest among buyers due to the increased cost, particularly in Dhaka and its surrounding areas, where land and flat registration decreased by one-third. Consequently, revenue collection from this sector plummeted by approximately one-third as well. This decision to double the tax rate was met with criticism from business leaders and industry analysts.
Kamal Mahmud, Vice President of the Real Estate and Housing Association of Bangladesh (REHAB), expressed concerns, stating, "The registration cost has surged due to the higher withholding tax. As a result, flat registration and property transfers have suffered a sharp decline. When NBR initially made this decision, we voiced our concerns that it would hamper revenue collection, but our opinions were not heeded."
Data from NBR reveals that land and flats are registered in 17 offices in and around the capital. Tax deductions are made at the source during these registrations, and NBR oversees tax collection from these 17 offices.
It was found that in July, only Tk 32 crore was collected in registration tax, a stark contrast to Tk 101 crore collected in July of the previous year. This trend continued into August, with Tk 76 crore collected by August 24, compared to Tk 126 crore in the same month the previous year.
Meanwhile, the target for tax collection at source in the current fiscal year stands at Tk 4,700 crore. However, only Tk 108 crore has been collected till August, accounting for just 2 percent of the target.
Former NBR Chairman Mohammad Abdul Majid commented on the situation, saying, "Raising tax rates does not necessarily lead to higher tax collection. For instance, if a sector's tax rate is 10 percent and yields Tk 100 crore in revenue, doubling the rate to 20 percent won't automatically result in Tk 200 crore in revenue. NBR made this mistake due to a misconception. Tax rates were doubled without adequate research, leading to a decline in revenue collection. Such a sudden 100 percent increase was not the correct approach."
TDM/SD
