Government's revenue authority ponders introducing property tax -- on a limited scale to start with -- in the upcoming fiscal year to hook wealthy individuals onto wider-cast tax net.
The planned property-taxation system is likely to replace the existing wealth surcharge, which has proven ineffective in capturing taxes on inherited and underreported assets.
A senior official of the National Board of Revenue (NBR) says the proposal is currently under active review by a dedicated committee.
"Initially, the tax may not apply to a taxpayer's primary residence. It could also exempt a second property if it is rented out and serves as the individual's sole source of income," the official told The Financial Express.
He further notes that the income-tax wing of the revenue board may not need to establish a separate valuation department as the tax could be imposed based on prevailing market value.
The NBR has already started drafting a "Wealth Tax Act," which is expected to be placed in parliament during the upcoming budget session.
The primary objective of the initiative is to mobilise revenue from high-net-worth individuals, particularly those residing in upscale areas such as Gulshan, Banani, Dhanmondi, and Baridhara in the capital, as well as Khulshi and Agrabad in Chattogram, and other elite zones in divisional cities.
Under the existing income-tax framework, individuals are required to pay a surcharge if their total assets -- both movable and immovable, including houses, vehicles, flats, plots, and land -- exceed Tk 40 million.
The surcharge also applies if a person owns multiple vehicles or residential property exceeding 8,000 square feet.
Importantly, the surcharge is calculated on the amount of tax payable, not on total assets. For instance, an individual with assets worth Tk 50 million, who pays Tk 100,000 in income tax annually, would pay an additional 10-percent surcharge, equivalent to Tk 10,000.
According to available data, the NBR collected Tk 2.96 billion in surcharge revenue up to February of the current fiscal year.
In FY2022-23, some 50,053 taxpayers paid Tk 6.95 billion in surcharge. In FY2021-22, a total of 14,854 taxpayers contributed Tk 6.26 billion while in FY2020-21, some 14,919 taxpayers paid Tk 5.99 billion.
Officials expect total surcharge collection to exceed Tk 10 billion in the current fiscal year.
Many wealthy individuals -- particularly in high-society urban areas -- remain outside the tax net due to widespread undervaluation of property in official deeds.
A national taskforce, headed by economist Dr Zaidi Sattar, has suggested that property taxation could raise total tax revenue by 3.0 to 5.0 per cent by FY2035, equivalent to roughly 1.0 per cent of Bangladesh's GDP or gross domestic product.
"Achieving this requires a comprehensive overhaul of existing instruments, valuation systems, and administrative practices," the taskforce report reads.
Currently, property transactions are subject to multiple taxes and fees, including a 1.5-percent stamp duty, 1.0-percent registration fee, 2.0-percent municipal or land-development tax, advance income tax (AIT) ranging from 1.0 to 8.0 per cent, and capital- gains tax on sellers.
"Together, these charges exceed 10 per cent of the declared deed value, creating strong incentives for undervaluation and the accumulation of undisclosed wealth," the expert report notes.
A key anomaly, the taskforce has observed, is the absence of taxation on property transfers through gifts, inheritance, or trusts -- major channels of intergenerational wealth transfers.
To address lacuna, the taskforce recommends introducing a Property Transfer Tax (PTT) of 1.0 per cent on gifts and bequests, to be applied at the time of mutation.
Another major bottleneck is the gap between official (mouza) value and actual market prices.
The committee has recommended developing a centralised Property Database (PDB) that integrates market-based capital value and rental income estimates. It also suggests conducting periodic (e.g. every five years) surveys and linking property- ownership data with e-TIN records for cross-verification.
"The current wealth surcharge suffers from both conceptual and administrative weaknesses, as it is based on income tax payable rather than actual wealth, and is constrained by limited valuation capacity," the report adds.
Revenue officials say wealth taxes are widely practiced in developed economies, where they contribute significantly to revenue -- around 2.0 per cent of GDP on average.
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