Govt policy on land prices and relevant issues
Sunday, 8 June 2008
In a country with one of the lowest land-man ratio, it is quite natural for its people to consider land more precious than gold. The prices of gold which has been on the rise in recent years might start declining anytime. But the land prices in Bangladesh that have been rising at an astronomical rate, mainly in major cities and towns, is unlikely to come down unless the economy gets itself gripped by a severe depression. Because of its high value and low availability, land has been a major source of disputes, irregularities or corruption and tax evasion in this country. Thousands of cases over land-ownership disputes are awaiting disposal in courts. Some of those are even several decades old. Many tend to think that the government can hardly be of any help in settling such disputes. But the fact remains that a cumbersome land recording and registration system that this country inherited from the colonial rulers and widespread corruption at all levels of the land administration have helped proliferation of litigation over land for decades after decades.
The issue of land prices came under national focus when the incumbent caretaker administration took special measures to stop tax evasion during the immediate past taxation year. The transfer of land was found to be one of the major sources of tax evasion and accumulation of undisclosed money. And none but the government is partly responsible for these unwanted developments. For reasons best known to it, the government kept the land prices at the same level for years after years, creating scope for duty and tax evasion by the buyers of land when the actual prices of land in many urban areas, particularly in Dhaka, have increased manifold. The sellers, who are also benefited by the sale-deeds at lower-than-actual prices of land, have, in most cases, not objected to such land transfer. For, the sale deeds struck on the basis of lower land prices do not otherwise directly affect their interests. But if not for the buyers, the sellers were in real difficulty, for no fault of their own, to show the actual amount of money received from such transfers of landed property, particularly the inherited one, in their tax returns last year. Many taxpayers formalised such legal yet undisclosed funds by paying penal tax in addition to the normal one.
The government following wider discussion on the issue in the media and at other levels has asked the agencies concerned to devise appropriate steps to stop tax and stamp-duty evasion and predicament involved in land transfers. In line with this directive, the land ministry, according to a report published in the FE last Saturday, has decided to revise the prices of land, area-wise, every year to help narrow the gap between the official price and the market price of the same. Since such revision would add to the costs of buyers, the government, reportedly, is considering some reductions in land transfer fees, stamp-duty and tax. But it does need to immediately implement a pending decision relating to the waiver of 5.0 per cent tax deducted at source from the value of land sale deed.
However, all these measures to boost government revenue through hiking land prices would carry the risk of being unproductive unless and until the government streamlines the land registration procedures and takes decisive actions against corrupt officials in the land registration offices. Hopefully, some proposals to streamline land registration procedures now under scrutiny by the Regulatory Reforms Commission would help remove shortcomings in land registration and reduce the cost of registration which is the highest in South Asia, 14.5 per cent and 18.5 per cent respectively for urban and rural land. The government, according to the FE report, has decided to cut the costs substantially to 5.0 and 8.0 per cent respectively. Such reductions in registration costs are unlikely to affect the revenue flow if the government hikes land prices gradually to bring the same closer to that prevailing in the market.
The issue of land prices came under national focus when the incumbent caretaker administration took special measures to stop tax evasion during the immediate past taxation year. The transfer of land was found to be one of the major sources of tax evasion and accumulation of undisclosed money. And none but the government is partly responsible for these unwanted developments. For reasons best known to it, the government kept the land prices at the same level for years after years, creating scope for duty and tax evasion by the buyers of land when the actual prices of land in many urban areas, particularly in Dhaka, have increased manifold. The sellers, who are also benefited by the sale-deeds at lower-than-actual prices of land, have, in most cases, not objected to such land transfer. For, the sale deeds struck on the basis of lower land prices do not otherwise directly affect their interests. But if not for the buyers, the sellers were in real difficulty, for no fault of their own, to show the actual amount of money received from such transfers of landed property, particularly the inherited one, in their tax returns last year. Many taxpayers formalised such legal yet undisclosed funds by paying penal tax in addition to the normal one.
The government following wider discussion on the issue in the media and at other levels has asked the agencies concerned to devise appropriate steps to stop tax and stamp-duty evasion and predicament involved in land transfers. In line with this directive, the land ministry, according to a report published in the FE last Saturday, has decided to revise the prices of land, area-wise, every year to help narrow the gap between the official price and the market price of the same. Since such revision would add to the costs of buyers, the government, reportedly, is considering some reductions in land transfer fees, stamp-duty and tax. But it does need to immediately implement a pending decision relating to the waiver of 5.0 per cent tax deducted at source from the value of land sale deed.
However, all these measures to boost government revenue through hiking land prices would carry the risk of being unproductive unless and until the government streamlines the land registration procedures and takes decisive actions against corrupt officials in the land registration offices. Hopefully, some proposals to streamline land registration procedures now under scrutiny by the Regulatory Reforms Commission would help remove shortcomings in land registration and reduce the cost of registration which is the highest in South Asia, 14.5 per cent and 18.5 per cent respectively for urban and rural land. The government, according to the FE report, has decided to cut the costs substantially to 5.0 and 8.0 per cent respectively. Such reductions in registration costs are unlikely to affect the revenue flow if the government hikes land prices gradually to bring the same closer to that prevailing in the market.