Muhith sceptic about success of proposed wealth tax measure
Wednesday, 13 April 2011
FE Report
Finance Minister AMA Muhith Tuesday expressed his doubt about the successful implementation of the proposed wealth tax as the measure did not bring earlier any significant amount in revenue earlier. He said the tax measure was scrapped twice earlier, after the then government found a negligible amount of tax that came from this source. "I scrapped the wealth tax in 1983 when I found that only Tk 10.5 million came from the measure in that fiscal," the finance minister said. The people who are not getting any benefit of the immovable property purchased by them might not be willing to pay the wealth tax, but the such property owned by way of inheritance can be brought under tax net. "It is true that the situation in the real estate sector should be addressed properly as prices of landed and residential properties are increasing fast. There could be a measure to bring such properties under tax net," the minister said. The issue needs further discussion before taking any final decision, he added. The new law will come into effect from 2012, so there is still one year left for discussion on this issue. The finance minister made the comments at a workshop arranged by the National Board of Revenue (NBR) to exchange opinions on "Challenges and reform programmes for a way out". Economists, policy makers and businessmen expressed their mixed opinions on re-introduction of the proposed wealth tax from 2012 against the prevailing economic scenario. Chairman of the parliamentary standing committee on finance ministry AHM Mostafa Kamal, former finance adviser Dr. Mirza Azizul Islam, Economic Research Group director Sajjad Zohir and Bangladesh Tax Lawyers Association president Golam Sarwar strongly opposed the proposal for re-introduction of the wealth tax. Director general of Bangladesh Institute of Development Studies (BIDS) Dr. M.K Mujeri, executive director of Policy Research Institute (PRI) Ahsan H Mansur and the Federation of Bangladesh Chambers of Commerce and Industry (FBCCI) representative gave their opinions in favour of the proposed tax. The speakers laid more focus on capacity building of the revenue authority for successful implementation of reform programmes. Mostafa Kamal said there is no justification on imposing tax for the second time on the property bought by the taxed money. "There is no necessity to re-visit the measure. The government has many other options to help increase tax collection," he said. Mr Kamal expressed his dissatisfaction at the frequent harsh steps 'insulting businessmen' who contributed to the growth of the national economy. "Businessmen will invest in other countries if such activities continue," he added. Mirza Azizul Islam strongly opposed the re-introduction of wealth tax in the present economic condition. "This is not an opportune moment to impose wealth tax. It will not be logical to divert attention of taxmen to other sectors amid manpower shortage," he said. Multiple taxes will be imposed on taxpayers with the imposition of the proposed tax as there are land and municipality taxes on properties, he added. He said the burden of the proposed wealth taxes will be shifted onto the middle-income groups of people and it will also raise the cost of doing business. On legal and administrative problems of property tax, Dr. Aziz said auditing of tax files of individual taxpayers will be another problem as a separate form for wealth tax returns will be needed. "There will be complexities on determining taxpayers with land or house that is handed over to developers," he said. He also said confusion might be created over the ownership of properties in case of death of the original property owner as it will be transferred through inheritance. On share market, Dr. Islam said there is an absence of institutional information in the report on the share market. "There are problems with the accounts of big shots. I am in doubt about the results of amending the relevant laws." On the other side, Dr. Mujeri stressed the need for introduction of the wealth tax to reduce gap between income and wealth. "It is logical to impose such taxes to ensure social equity. It could be expanded gradually keeping the social changes in mind," he said. Responding to a query of the finance minister on imposing the tax only in the cities, Dr. Mujeri said it would be logical to impose the tax in the metropolitan cities first for their higher inequity. The finance minister focused on capacity building of the revenue board for successful implementation of reform initiatives. Sajjad Zohir, director of ERG, said the revenue board should improve its capacities before taking multiple reform initiatives. "Capital and organisations will be affected with the imposition of a higher amount of taxes," he said. Dr. Zohir said the honest people would be forced to pay higher taxes who would show actual wealth and properties. "The government needs to differentiate tax policy and implementation policies," he said. Dr. Ahsan H Mansur said properties have been transferred through generations without payment of taxes. "I strongly endorse imposition of wealth tax for social causes," he said. FBCCI representative M.S. Siddiqui said introduction of wealth tax will eliminate irregularities in ownership of properties. He also proposed to reduce the scope for spending black money by monitoring immigration records. Another director of the apex chamber, Abdul Huq, said the government should take cautious step on imposition of wealth or any other taxes, considering the stages of capital accumulation and industrial growth. Tax lawyer Golam Sarwar said the wealth tax will not bring any positive impact to revenue collection as the income tax department is running on shortage of manpower. Taxmen can give the effort spending time on tax collection by resolving disputes. At the programme, income tax member Aminur Rahman, VAT and customs administration member Farid Uddin and VAT commissioner Jahangir Alam gave three separate presentations on the reform initiatives of NBR. NBR chairman Dr. Nasiruddin Ahmed presided over the workshop. Noted economist Wahiduddin Mahmud, Rehman Sobhan, editor of the Financial Express Moazzem Hossain and Institute of Chartered Accountants of Bangladesh (ICAB) president Parveen Mahmud also attended the workshop. On the draft VAT law, the finance minister stressed the need for amendment to the proposed punitive measures for tax evaders. He also suggested the NBR to bring flexibility on the rules for the SMEs (small and medium enterprises). Some changes might be there in every year's budget, but the basic laws must remain in place, he said. Responding to an opinion at the workshop on the government's focus only on tax collection, he said: "Change in mentality is needed as we usually focus on tax collection rather than expansion of business." On giving tax benefits for social investment, the finance minister said the government already offered tax benefits for Corporate Social Responsibility (CSR), which is a kind of social investment. Proposals at the workshop included recruitment of more auditors instead of tax inspectors, strengthening capacities of NBR, allocation of sufficient funds for reform, recruitment of tax officials, long-term policy, elimination of fear factor, reduction of existing tax rates and macro-level reform initiatives. Meanwhile, the NBR Tuesday proposed introduction of wealth tax on excess land and house, owned by individuals, in the major cities if value of the immovable properties exceeds Tk 5.0 million. The board plans to exclude part of the property from payment of tax by setting up an exemption ceiling for properties. NBR member Aminur Rahman, who heads the tax policy wing, proposed the measure in a presentation on "Proposed property tax and its justification and characteristics". Dwelling houses will not be subject to pay property tax. People who own more than a plot of land or a house with a value above Tk 5.0 million will come under the purview of wealth tax. Aminur Rahman gave the presentation at an exchange of opinion session with the economists, policy makers and businessmen on property tax. The NBR member said initially companies, trusts and charities can be excluded from the purview of property tax. He also proposed to consider occupiers of properties as the 'deemed owners' to resolve confusions with actual legal owners. The tax member has planned short-term initiatives to implement the law including separate return forms for property tax, specialized units for fixation of current market prices of land. Wealth taxes will not be accepted in universal self-assessment system as property owners are not aware of current market prices. He also proposed to frame a separate law for introduction of property tax.
Finance Minister AMA Muhith Tuesday expressed his doubt about the successful implementation of the proposed wealth tax as the measure did not bring earlier any significant amount in revenue earlier. He said the tax measure was scrapped twice earlier, after the then government found a negligible amount of tax that came from this source. "I scrapped the wealth tax in 1983 when I found that only Tk 10.5 million came from the measure in that fiscal," the finance minister said. The people who are not getting any benefit of the immovable property purchased by them might not be willing to pay the wealth tax, but the such property owned by way of inheritance can be brought under tax net. "It is true that the situation in the real estate sector should be addressed properly as prices of landed and residential properties are increasing fast. There could be a measure to bring such properties under tax net," the minister said. The issue needs further discussion before taking any final decision, he added. The new law will come into effect from 2012, so there is still one year left for discussion on this issue. The finance minister made the comments at a workshop arranged by the National Board of Revenue (NBR) to exchange opinions on "Challenges and reform programmes for a way out". Economists, policy makers and businessmen expressed their mixed opinions on re-introduction of the proposed wealth tax from 2012 against the prevailing economic scenario. Chairman of the parliamentary standing committee on finance ministry AHM Mostafa Kamal, former finance adviser Dr. Mirza Azizul Islam, Economic Research Group director Sajjad Zohir and Bangladesh Tax Lawyers Association president Golam Sarwar strongly opposed the proposal for re-introduction of the wealth tax. Director general of Bangladesh Institute of Development Studies (BIDS) Dr. M.K Mujeri, executive director of Policy Research Institute (PRI) Ahsan H Mansur and the Federation of Bangladesh Chambers of Commerce and Industry (FBCCI) representative gave their opinions in favour of the proposed tax. The speakers laid more focus on capacity building of the revenue authority for successful implementation of reform programmes. Mostafa Kamal said there is no justification on imposing tax for the second time on the property bought by the taxed money. "There is no necessity to re-visit the measure. The government has many other options to help increase tax collection," he said. Mr Kamal expressed his dissatisfaction at the frequent harsh steps 'insulting businessmen' who contributed to the growth of the national economy. "Businessmen will invest in other countries if such activities continue," he added. Mirza Azizul Islam strongly opposed the re-introduction of wealth tax in the present economic condition. "This is not an opportune moment to impose wealth tax. It will not be logical to divert attention of taxmen to other sectors amid manpower shortage," he said. Multiple taxes will be imposed on taxpayers with the imposition of the proposed tax as there are land and municipality taxes on properties, he added. He said the burden of the proposed wealth taxes will be shifted onto the middle-income groups of people and it will also raise the cost of doing business. On legal and administrative problems of property tax, Dr. Aziz said auditing of tax files of individual taxpayers will be another problem as a separate form for wealth tax returns will be needed. "There will be complexities on determining taxpayers with land or house that is handed over to developers," he said. He also said confusion might be created over the ownership of properties in case of death of the original property owner as it will be transferred through inheritance. On share market, Dr. Islam said there is an absence of institutional information in the report on the share market. "There are problems with the accounts of big shots. I am in doubt about the results of amending the relevant laws." On the other side, Dr. Mujeri stressed the need for introduction of the wealth tax to reduce gap between income and wealth. "It is logical to impose such taxes to ensure social equity. It could be expanded gradually keeping the social changes in mind," he said. Responding to a query of the finance minister on imposing the tax only in the cities, Dr. Mujeri said it would be logical to impose the tax in the metropolitan cities first for their higher inequity. The finance minister focused on capacity building of the revenue board for successful implementation of reform initiatives. Sajjad Zohir, director of ERG, said the revenue board should improve its capacities before taking multiple reform initiatives. "Capital and organisations will be affected with the imposition of a higher amount of taxes," he said. Dr. Zohir said the honest people would be forced to pay higher taxes who would show actual wealth and properties. "The government needs to differentiate tax policy and implementation policies," he said. Dr. Ahsan H Mansur said properties have been transferred through generations without payment of taxes. "I strongly endorse imposition of wealth tax for social causes," he said. FBCCI representative M.S. Siddiqui said introduction of wealth tax will eliminate irregularities in ownership of properties. He also proposed to reduce the scope for spending black money by monitoring immigration records. Another director of the apex chamber, Abdul Huq, said the government should take cautious step on imposition of wealth or any other taxes, considering the stages of capital accumulation and industrial growth. Tax lawyer Golam Sarwar said the wealth tax will not bring any positive impact to revenue collection as the income tax department is running on shortage of manpower. Taxmen can give the effort spending time on tax collection by resolving disputes. At the programme, income tax member Aminur Rahman, VAT and customs administration member Farid Uddin and VAT commissioner Jahangir Alam gave three separate presentations on the reform initiatives of NBR. NBR chairman Dr. Nasiruddin Ahmed presided over the workshop. Noted economist Wahiduddin Mahmud, Rehman Sobhan, editor of the Financial Express Moazzem Hossain and Institute of Chartered Accountants of Bangladesh (ICAB) president Parveen Mahmud also attended the workshop. On the draft VAT law, the finance minister stressed the need for amendment to the proposed punitive measures for tax evaders. He also suggested the NBR to bring flexibility on the rules for the SMEs (small and medium enterprises). Some changes might be there in every year's budget, but the basic laws must remain in place, he said. Responding to an opinion at the workshop on the government's focus only on tax collection, he said: "Change in mentality is needed as we usually focus on tax collection rather than expansion of business." On giving tax benefits for social investment, the finance minister said the government already offered tax benefits for Corporate Social Responsibility (CSR), which is a kind of social investment. Proposals at the workshop included recruitment of more auditors instead of tax inspectors, strengthening capacities of NBR, allocation of sufficient funds for reform, recruitment of tax officials, long-term policy, elimination of fear factor, reduction of existing tax rates and macro-level reform initiatives. Meanwhile, the NBR Tuesday proposed introduction of wealth tax on excess land and house, owned by individuals, in the major cities if value of the immovable properties exceeds Tk 5.0 million. The board plans to exclude part of the property from payment of tax by setting up an exemption ceiling for properties. NBR member Aminur Rahman, who heads the tax policy wing, proposed the measure in a presentation on "Proposed property tax and its justification and characteristics". Dwelling houses will not be subject to pay property tax. People who own more than a plot of land or a house with a value above Tk 5.0 million will come under the purview of wealth tax. Aminur Rahman gave the presentation at an exchange of opinion session with the economists, policy makers and businessmen on property tax. The NBR member said initially companies, trusts and charities can be excluded from the purview of property tax. He also proposed to consider occupiers of properties as the 'deemed owners' to resolve confusions with actual legal owners. The tax member has planned short-term initiatives to implement the law including separate return forms for property tax, specialized units for fixation of current market prices of land. Wealth taxes will not be accepted in universal self-assessment system as property owners are not aware of current market prices. He also proposed to frame a separate law for introduction of property tax.