Framework for a Strategy of UP Revenue/Resource Mobilisation ...

Local Governance Support Project-
Learning and Innovation Component (LGSP-LIC)
Local Government Division
Ministry of Local Government, Rural Development and Co-operatives
Government of People’s Republic of Bangladesh (GoB)
Framework for a
Strategy of UP Revenue/Resource
Mobilisation Piloting
by
Professor Musleh Uddin Ahmed, Ph D
Consultant, UP Revenue/Resource Mobilisation Piloting
Copyright © 2010 by Local Government Division
January 2010
LGSP-LIC is implemented with support from
Disclaimer: Views expressed in this report are those of author/s and do not necessarily reflect the views of Local
Government Division (LGD), Ministry of Local Government Rural Development and Cooperatives, Government of
Bangladesh, any other ministry of GoB and UN agencies including UNDP and Local Governance Cluster of UNDP
Bangladesh.
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SL Content Page
I Introduction and Background to the Assignment 1
II The Institutional Context 2
III Legal Status of UP Revenue Mobilization 4
UP Revenue Context IV of UP Present Revenue Context of Bangladesh 5
a Sources of Revenue Income 5
b System of Tax Assessment 6
c Revenue Collection and its Performance 10
V Improving Tax Assessment System, Administration and Collection
Procedure
a. Holding Tax Assessment by Improved method of Mass-Appraisal
System
b Improving Revenue Ad ministration and Collection Procedure 14
VI Rationale and Challenges of UP Revenue Strategy 17
VII Purpose and Objective of the Strategy 18
VIII Sampling of Ups for Piloting 19
IX Piloting Areas and Activities of Enhancing UP Revenue/ Resource
Mobilization
Table – 1 Holding Tax Assessment Piloting: Mass Appraisal System 12
Table - 2 Indicative Framework of UP Revenue Factors Piloting 25
Annex- 1 Action Plan for UP Revenue Mobilization Piloting 29
Annex –2 Holding Tax Assessment Register 33
Annex- 3 Collections and Arrears Record 34
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ABBREVIATIONS AND ACRONYMS
ADP Annual Development Programme
ARV Annual Rental Value
CC City Corporation
CIDA Canadian Agency for International Development
Dafadar Village Police Head
DANIDA Danish International Development Assistance
DDLG Deputy Director of Local Government
DF District Facilitator
DP Departmental Partners
EC European Commission
GOB Government of Bangladesh
IACD Integrated Approach for Community Development
IEC Information, Education and Communication
KaBiKha Kajer Binimoya Khaidya (Food For Works)
IRC International UP revenue Centre- The Netherlands
LCG Local Consultative Group
LGD Local Government Division
LGI Local Government Institutions
MLGRDC Ministry of Local Government, Rural Development and Cooperatives
LGSP-LIC Local Governance Support Project –Learning and Innovation Component
MDG Millennium Development Goal
MoF Ministry of Finance
NSAPR National Strategy for Accelerated Poverty Reduction
NGO Non Government Organization
NGOAB NGO Affairs Bureau
PO Partner Organizations
PRSP Poverty Reduction Strategic Paper
PWD Public Works Department
SLGDFP Sirajganj Local Governance Development Fund Project
SSC Scheme Supervision Committee
TOT Training of Trainers
UCO Upazila Cooperative Officer
UFT Union Facilitation Team
UNCDF United Nations Capital Development Fund
UNDP United Nations Development Programme
UNO Upazila Nirbahi Officer
UP Union Parishad
UZP Upa Zila Parishad
VAT Value Added Tax
VGF Vulnerable Group Feeding
WB World Bank
WDC Ward Development Committee
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I. Introduction and Background to the Assignment
Bangladesh has a long history of local government and the post–independence constitution provides
for the creation of local government bodies at every administrative level. Article 59 and article 60
has given the main foundation of the role, structure and functions of local government. But in
reality, the only representative local government institution that has had a continuous existence
since the 1880s is the Union Parishad (UP), which has its limitations and resource constraints.
Bangladesh is governed by a parliamentary system of government. The country is administratively
divided into six divisions, and each division is divided into zilas (districts), totalling 64 in all. The
zilas are divided into 483 Upazilas (sub-districts), the lowest unit of administration. These Upazilas
are further divided into 4,498 unions which are not administrative unit but functioning as grass root
level local government unit where local UP revenue is entrusted to elected bodies.
A strong local government is indispensable for ensuring sustainable development, achieving the
targets of poverty alleviation, attaining the targets of millennium development goals (MDG) by
2015, and developing democratic institutions in the country. Inadequate resource allocation to local
government, lack of capacity of proper tax assessment and resource mobilization, and poor
mechanism for citizen engagement lead to ineffective local government systems in most of
developing countries like Bangladesh. UNDP is strongly committed to promote effective
decentralization and a strong local government system in Bangladesh as a contribution to achieving
the MDGs.
As a part of initiative for strengthening local government system in Bangladesh, Sirajganj Local
Governance Development Fund Project (SLGDFP) was designed by UNDP and UNCDF and
implemented by the Local Government Division (LGD) of the Ministry of Local Government,
Rural Development and Cooperatives (MLGRDC) during the period of 2001-2007. This project has
demonstrated the positive impact of developed block grant funding on infrastructure and service
delivery at the local level, as well as performance improvement of Union Parishads (UP) in areas
such as planning, finance, resource mobilization and management. This project has significant
impact in involving community in UP affairs, as well. After successful completion of SLGDFP, the
government has started Local Governance Support Project (LGSP) in 2006 with financial support
from UNDP, UNCDF, World Bank, EC and DANIDA. UNDP and UNCDF are supporting one
components of LGSP, which is Learning and Innovation Component (LIC). This LIC of the LGSP
aims to promote poverty reduction and Millennium Development Goals (MDG) achievement
through building the basic service delivery capacities of Union Parishads. LGSP-LIC will field test
in more realistic conditions the successful innovations already pioneered in the Sirajganj project and
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feed these “second generation” innovations into the national LGSP. The Learning and Innovation
Component (LIC) is being implemented in six different pilot districts, Barguna, Feni, Habiganj,
Narshingdi, Satkhira and Sirajganj, one from each of the six administrative divisions of the country.
388 unions under these districts will be covered progressively over the five year duration of the
project. The total budget of the project is US$ 18.118 millions and funded by UNDP, UNCDF, EC
and DANIDA.
During 2007-08, LGSP-LIC commissioned a study and some analytical work on UP own-source
revenues was conducted. 1 This was aimed at gaining a better understanding of local government
taxation and revenue collection procedures, processes, constraints, and the scope for increasing such
own-source revenues. The study identified the rationale for piloting improvements in UP own-
source revenue collection. Firstly, the fiscal resources generated by UP own-source revenues are
almost entirely discretionary in nature – UPs can use their tax and other revenues to finance
anything for which they have a legally-prescribed mandate. This provides UPs with the opportunity
to fund expenditures which are otherwise excluded by block grants (e.g. additional part-time staff,
maintenance costs, etc.). Secondly, a key indicator of the extent to which UPs are seen by local
citizens to be providing appropriate public goods and services is (to a very large extent) how far
they are able to mobilise own-source revenues. Paying taxes is largely a function of voluntary
compliance on the part of tax-payers – and that will usually reflect public satisfaction with UP
performance.
II. The Institutional Context
The Government’s commitment to improving local UP revenue is set forth in the National Strategy
for Accelerated Poverty Reduction (NSAPR, Bangladesh’s PRSP). Indeed, the NSAPR identifies
local UP revenue as one of eight priorities in the medium term strategic agenda for Bangladesh. It
recognizes the need for simultaneously pursuing the agendas of political and functional
decentralization, putting the emphasis on partnership between local government bodies and other
local actors, and, projecting the importance of newer agendas of decentralized service-delivery and
promotion of local economies. The focus is not only on local governments as project implementing
bodies but on local UP revenue as a political and institutional process which can contribute to the
required scaling up of the rate of poverty reduction through more effective resource mobilization
and enhanced development choices available at local level and better inclusion of all social groups
in these choices. The NSAPR also recognizes the importance of linking union parishads to critical
1 See Nick Devas (July 2007): Local Revenue Sources for Union Parishads: Report of a Study; and Nick Devas
(September 2008): Enhancing Revenue Sources for Union Parishads
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new functional arenas such as micro-infrastructure, early child development, consolidated
implementation of safety net programmes, and local economy promotion. With regard to the
financing of UPs, the NSAPR envisions potential in consolidating a performance-linked second
resource channel (outside of ADP) for union parishads. Such a resource channel has already been
initiated and substantial increase in resource allocation can be planned for with due lesson-learning
from the experience so far. Importance of local government has been also recognised by National
Rural development Policy and Poverty Reduction Strategy Paper I (PRSP). Similarly, the second
PRSP underlines the roles and importance of local government to intervene the some important
areas of multi-dimensional nature of poverty.
The present government has taken some initiatives for a greater participation in local governance
and wider involvement of local government representatives. The government has passed the Local
Government (City Corporation) Act, 2009 in parliament on October 15, 2009. The Local
Government (Paurashava) Ordinance (1998) was revised in 2008 and has created further scope for
more power and authority to the Pourashava bodies as well as changed the designation of Chairman
and Ward Commissioners as Mayor and Councillors. The Present Political Government passed the
Local Government (Pourashava) Act, 2009 in the parliament. The Upazila Parishad (UZP) has been
re-established after around 19 long years. The Upazila Parishad election was held under Upazila
Parishad Ordinance 2008 promulgated by Caretaker Government. But the elected government
formed in 2009 did not ratify the ordinance of 2008; as a result, the UZP Ordinance 2008 lost the
forces of law. The Upazila Parishad Act 1998 has been freshly re-enacted and enforced with few
amendments in 2009 after 10 years of inaction. The UZP Chairs and Vice-Chairs and the Parishad
got its legitimacy under UZP Act 1998 as adopted in 2009.
After the independence of Bangladesh, the first major initiative to enact an ordinance for union
parishads was taken in 1983 and the Local Government Ordinance (Union Parishad), 1983 was
promulgated by the then military government. Only minor changes have been made in the
ordinances/acts over time. 2 The Caretaker Government gave much importance to Union Parishad as
a key tier of local government and local development and revised the existing ordinance to provide
more authority, responsibility and financial resources to UPs. This ordinance has further
strengthened UPs capacity for a good public service delivery. The elected government has ratified
the ordinance as Local Government (Union Parishad) Act, 2009 only with few amendments have
been made by the parliament.
2 See Musleh Uddin Ahmed. Local self-government System in Bangladesh”, in Prof. Abul Kalam (ed.), Bangladesh
Internal Dynamics and External Linkages, Dhaka : University Press Limited, August, 1996. pp. 73-89.
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III. Legal Status of UPs Revenue Mobilization
In Bangladesh, the Union Parishad is the oldest local government institution. The UP is an elected
body composed of 13 members; one from each of the nine wards, three women members (from
reserved seats – one from each of three wards) and the chairman elected by the total electorate of
the UP. The Union is staffed by a full time Secretary, appointed by the Deputy Commissioner who
is head of district administration and local police (1 Dafadar and 9-12 Gram Polices). The UP
Secretary is responsible for accounting and record keeping and all kinds of registration e.g. birth,
death etc. Very recently, government has posted an Accountant cum Computer Operator at UP.
The Local Government (UP) Act, 2009 assigned it with 38 functions. The functions of UP are wide
ranging. In reality, the UPs are mostly involved in the selection and implementation of schemes,
sanitation programs (latrines), local level revenue collection, registration of births and deaths, social
safety net activities such as, distribution of relief goods and Vulnerable Group Feeding (VGF),
preparation of list of widows for pension distribution and organization of food/cash for work
activities (popularly known as Kabikha); maintenance of law and order including conflicts
resolution and administration of justice (village court). The Act also empowers the UPs to monitor
the functions and activities of the Union-level officials of the service delivery departments of the
central government and report on their performances to the higher authorities located at the Upazila.
Section 53(ii) and section 65 of the Local Government (Union Parishad) Act, 2009 mandated the
UPs to generate revenue/resources from some particular sources by imposing taxes, rates, fees, tolls
fines and other charges within their administrative boundaries and the section 68 authorised the UPs
to collect the taxes to meet their expenditure and finance their own development activities. 3 Section
66 of the act also empowered the government to formulate the new Model Tax Schedule. But the
present UP Model Tax Schedule was formulated in 2003 under the Section 55 of the Local
Government (Union Parishad) Ordinance, 1983 which has described the imposition of holding tax
(buildings and land), fixed amount taxes on 93 items of business, trades and professions, taxes on
advertisement, cinemas and some vehicles. 4 The detail tax assessment system and collection
procedure has discussed in the section 22 to 30 in chapter III of the Union Councils (Taxation)
3
GoB. Bangladesh Jatiya Shangshad, The Local Government (Union Parishad) Act, 2009. Dhaka, Bangladesh Gazette,
15 Oct., 2010
4
GoB. Bangladesh Jatiya Shangshad, The Union Parishad Model Tax Schedule, 2003 Dhaka, Bangladesh Gazette, 06
Dec., 2003.
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Rules, 1960 and the Instructions of the Guidelines on Tax Assessment and Collection Strategy
issued by the Local Government Division of the Ministry of LGRDC in 2003. 5
IV. Present UP Revenue Context of Bangladesh
a. Present Sources of Revenue Income
Revenue/resource mobilization is one of the major concerns for UP to deliver quality of services to
the citizens. Currently the UPs have three sources of following formal revenue income. Besides
these, UPs have many other opportunities to explore and generate revenue from optional and non-
conventional sources.
� Own revenue: Own revenue consists of the holding tax (buildings and land), tax on trades,
businesses, professions, advertisement cinemas, exhibitions and vehicles, registration and
other fees, tolls, charges .fines. etc.
� Shared revenue: Shared revenue includes the 1% of the land transfer tax collected by the
Land Registration office at Upazila level, 50% of market le0asing fees for one selected
market within the UP and ferry concession fees.
� Transfer from central government: Transfer from central government includes the block
grant allocation at Upazila level as part of the national ADP (subsequently shared among all
UP) and the UP direct block grants; grants for salaries and administrative costs;
discretionary grants from government for development expenditure and grants/loans from
donor funded programs/projects.
The major own sources revenue income of UPs are as follows:
� Holding Tax on buildings and non-agricultural land within the UP, levied on the basis of the
tax assessment of holding tax (buildings and land) at the rate of 7% of the annual value of
the buildings or land;
� Taxes on business, trades and professions with fixed amount imposed on 93 items,
� Taxes on advertisements, cinemas, vehicles fairs and exhibitions;
� Taxes on commercial activities within the UP
� Lease money from huts and bazaars, currently administered by Upazilas, with UPs receiving
a share;
� 1% share of the nationally collected Land Transfer Tax;
� Fees for various certificates (birth, citizenship, etc.);
� Other local income (bank interest, rents from UP property, etc.);
5 GoB. S.R.O No, HSLG/S-VIII/BD-71/59/76. The Union Councils (Taxation) Rules, 1960.and GoB, Local Government
Division of the Ministry of LGRDC, Instructions of the Guidelines on Tax Assessment and Collection Strategy issued
in 2003 .
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� Regular transfers from central government: both the block grant direct to the UP and the
ADP grant that is managed at Upazila level;
� Special transfers under various government and donor-funded programmes, such as LGSP
and LGSP-LIC.
Own and shared revenues are deposited in the UP revenue accounts which are managed by the
Chairman and the Secretary (co-signatory). The payments are executed by either the Secretary or
the Chairman and recorded in the concerned accounting books. There are no requirements for
reporting the financial statements and bills related to own and shared revenues to Upazila
Accounting Officer. The ADP block grant at the Upazila level is transferred by the Chief Accounts
Officer (CAO) of the Ministry of Local Government, Rural Development and Cooperatives to the
bank account at the Upazila level that acts as the treasury. Once the projects are approved, the
Project Implementation Committee (PIC) and Project Supervision Committee (PSC) are formed.
The Accounts Officer directly or indirectly (through the Upazila Engineer) executes the payments
of bills. The Accounts Officer does not report back to Controller General of Accounts (CGA) Thus,
funds are never transferred to UP.
In the case of direct UP block grants introduced in 2004, the funds are transferred from the bank
that performs the treasury function at the Upazila level in four instalments in the course of the fiscal
year on the basis of UP requests countersigned by the Upazila Nirbahi Officer (UNO). At the end of
the year the UP has to provide the Accounts Officer with the receipts of payments together with a
financial statement. The last allotment is transferred only when the Accounts Officer has reconciled
the previous ones. The Accounts Officer does not report back to CGA. Direct funding to Union
Parishads is quite a new phenomenon in Bangladesh. The Sirajgang Local Governance
Development Fund Project (SLGDFP) (funded by UNDP and UNCDF) first piloted the concept in
Union Parishads that were covered under the project. Inspired by the successes of this new
approach, the government has been providing Block Grants directly to UPs since 2004. It is
envisaged that the LGSP will cover all the UPs in Bangladesh in phases. The performance based
direct fund transfer has been the most important salient feature of this project. In the same vein,
some other projects in different sectors with financial support from various development partners
have been launched.
b. System of Tax Assessment
According to the section 22 in chapter III of the Union Councils (Taxation) Rules, 1960 and the
Guidelines on Tax Assessment and Collection Strategy issued by the Local Government Division of
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the Ministry of LGRDC in 2003, assessment should be based on the 7% of the annual value of the
property with the maximum ceiling of Taka 500 for any one property (including the land on which
the property is situated, but not agricultural land). Tax is to be assessed and levied on the basis of
the Annual Rental Value (ARV) on constructed properties, buildings (building includes any shop,
house, hut, outhouse, shed, stable or enclosure built from any material and used for any purpose) or
land (excluding agricultural land) at a rate of up to 7%. ARV can either be determined from actual
rents if the building is rented (or if it is not, from rental data for comparable buildings), or
calculated from construction costs. Regulations specify the way the tax would be calculated. Even
where the house is owner occupied, rental value can be determined based on rents for equivalent
properties. The rate of 7% of the annual rental value (ARV) can be applied to assess the holding tax
(buildings and land) for wholly let-out buildings or for wholly occupied buildings as well as partly
rented and partly occupied buildings. Where rental value data does not exist, the capital value of the
house can be estimated, using Public Works Department’s (PWD) construction cost figures
converted to rental value by applying a 7.5% rate of return and adding the ground rent for the land.
The assessment is then calculated as 10/12 ths of the annual rental value allowing deduction of two
months rent as the cost of maintenance, if it is rented house and also deductions of annual interest of
the loan if the house is built with bank loan. After deduction of two months rent plus annual
interest, tax would be calculated at the rate of 7% of ARV. If the house is occupied by the owner
than the provision for the deduction of further one-fourth of the rental value after deducting 2/12 ths
of the annual rental value i.e., allowing two months rent as the cost of maintenance house and also
deductions of annual interest of the loan if the house is built with bank loan before the assessment is
made at the rate of 7% of ARV.
Holding tax is the main revenue source for UPs. In many UPs, the tax is taken to apply only to
residential properties, with business being taxed through licences. In other UPs, the holding tax is
applied to some or all non-residential properties. Thus, there remains an ambiguity about the
application of the tax to non-residential property. In relation to holding tax on residential property,
performance is generally very weak, with the majority of people not paying. However, in some UPs
(notably in Sirajganj), revenue performance has improved as people are involved in decisions about
the use of resources and as accountability for tax revenue is strengthened.
For many Ups visited, this system is quite complicated, and they generally lack the skills to
implement it. Some UPs use assessors (typically students) to prepare the valuations based on the
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official formula. 6 However, in many cases this assessment are quite abbsent. In many cases,
arbitrary adjustments are made, whether on the basis of assumptions of household income or for
other reasons, so that the final assessments bear little relationship to the formula. In other places,
UPs are making much simpler assessments based on the number of rooms, type of construction and
facilities (water supply, sewerage etc.). These assessments may be sufficiently fair, especially, if
they are made in a transparent way. However, the problem with either arrangement is that
assessments are often not made systematically and adjustments for household income or poverty
may not be made transparently. As a result, there may be significant inequities in the assessment
system. This can undermine people’s trust in the system, and therefore their willingness to pay.
The calculation set out in the Ministry’s 2003 guideline (but which is based on established practice
and applies also in paurshavas and cities) contains a number of anomalies. Firstly, it gives a
reduction on the assessment for the interest costs where a property is subject to a loan or mortgage.
This is not appropriate, since it creates an inequity simply according to the method of financing. It
is also likely to benefit the better off who are more likely than the poor to use loan finance for their
house. Secondly, it gives a 25% reduction for owner occupiers, on the grounds that they are not
earning income from the house. However, in principle, the type of tenure is irrelevant to the value
of the property, or to the costs to the local government of providing services to that property. This
creates an inequity between types of tenure, benefiting owner-occupiers. 7 If the holding tax is to
remain the main source of UP revenue, it is suggested that these anomalies be removed.
In practice, few UPs appear to be using this method of assessment, whether for lack of
understanding of the rental value method or lack of data, or simply because it seems unnecessarily
complicated. Even where UPs attempt to use the method, the final assessment is usually adjusted
(often without any clear relationship to the original figure) on the grounds that the household cannot
afford to pay, or for some other reason. The resulting, adjusted assessments are generally much
lower than the formula would have suggested, especially for the more valuable properties. There
are, therefore, some doubts about the validity of the assessment, even when the official method is
applied.
6 An NGO, Comilla Shastha Sheba Foundation, has started offering a service to UPs in one district (perhaps more) to
make assessments of holding tax. They offer to compile the UP’s assessment register using the proper ARV method,
at no cost to the UP. They generate some revenue by offering to households a plot number plate, but this is optional.
From the one example seen, it appears that the assessment register is properly compiled, although how accurate or
uniform are the valuations is difficult to tell. Such a service could well be appropriate for UPs to use, although it is at
present only available in a limited area
7 Nor can it be assumed that the resulting higher tax for rented housing is born by the landlords: as with any tax, the
burden is shared between buyer and seller according to the elasticity’s of supply and demand; thus at least part of
the burden of the high tax – and probably the majority in the case of rented housing – will be borne by the tenant.
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Most UPs appear to be using a cruder system. This involves assessing houses against some general
criteria: number of rooms, size of rooms, house construction materials, provision of tube well and
toilet. Typically, this results in assessment of Taka 10-20 for a one-room house of temporary
materials to Taka 150-250 for a four roomed house of permanent materials. The resulting
assessment may also be modified by assumptions about the occupier’s ability to pay. Overall, this
method of assessment may be acceptable, providing the criteria are clear and applied consistently
and transparently, for example, in a open budget meeting. In the end, what matters is not the
absolute value of the property but rather a fair distribution of the tax burden between households.
But it does require that a clear set of criteria is consistently applied and that the process is
sufficiently transparent.
Each UP is supposed to have a register of all houses 8 , together details of the property and the owner
or occupier and the assessed values. These lists were generally compiled more five years ago, and
are now due for revision (in one case, the register had not been revised since 1991). It was claimed
that adjustments are made each year for new houses or changes to houses. In the UPs visited, the
registers were said to have been compiled either using data from a survey conducted by students,
contracted by the UP and guided by the UP Secretary and councillors, or on a ward basis by UP
councillors themselves. In some cases, it was claimed, the registers and assessments were compiled
in public meetings. If that is so, it should ensure a degree of transparency and fairness. But there are
risks that only certain people attend such meetings, so that others are less fairly treated, although
given the very low levels of the assessments, a degree of unfairness may not be a major issue.
Where the ARV method is used, the tax rate has to be set (up to 7%) and applied. Where the
simpler system is used, the assessment comes directly to an amount per house, which may or may
not have any relationship to a rate of tax on the annual rental value. The tax rate, and the fixed
assessments, appears not to have been changed since the current tax rules came into effect in
2002/03, apart from where there have been changes to individual properties. In most cases, the
resulting tax assessments are very low: Taka 20 – 60 per year in most cases (equivalent to about US
30 – 80 cents), with some at Taka 100 or 200. 9 Exceptionally there are assessments of Taka 400 or
500. However, in the UPs in Gazipur, on the fringe of Dhaka, there were a number houses assessed
8 It is claimed that these registers are completed, but it is possible that some properties are not included, whether
because they are new or for some other reason.
9 As an indication of how low these tax assessments are, the typical assessment of Taka 20 – 60 corresponds to 0.15 –
0.4% of the annual minimum wage of a garment worker. In one UP that had not revised its assessments since 1991,
there were assessments of Taka 3 –5, amounts which are now too low to be collectable.
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at the ceiling rate of Taka 500, including a number of multi-storey blocks of rooms for garment
workers. 10 Overall, the average assessment was probably around Taka 35 to Taka 50.
c. Present Revenue Collection and its Performance
Bills are not issued for holding tax. This is not surprising, given the small amounts involved and the
cost of issuing bills. Instead, either taxpayer comes to the UP office to pay or tax collectors
contracted by the UP go house-to-house to collect the tax. Payments can be in more than one
instalment (normally two). Collectors (up to one per ward, but often only one for the UP) are paid
15% commission. This commission is supposed to be paid from the bank once the money collected
has been deposited into the bank, although it seems likely that, in many cases, collectors deduct
their commission before depositing the money. Collectors are issued with a ward register of
properties and their assessed values, and with serially numbered receipt books. Every few days (or
once a receipt book is used up), the cash is deposited at the UP office, and the receipt book and
register are checked by the UP Secretary against the cash before the money is deposited in the bank.
A chronological register is also kept of all payments received, together with the number of the
receipt issued.
In the UPs where a relatively high proportion of tax assessments are recorded as being collected,
this leaves little scope for fraud or collusion. However, there are, no doubt, places where the system
is not operating properly. There could be fraud in terms of collectors pocketing the tax payment and
not issuing a receipt, or issuing fake receipts; or there could be collusion between taxpayer and
collector to pay a smaller amount, again without a receipt. But unless there is a record of payments
against assessments, it is not obvious which households have not paid. If no record of defaulters is
ever produced or publicised, and if no action is taken against defaulters except follow-up by the
same collector who had perpetrated the fraud, then the fraud may never be revealed. Such fraud can
be countered by producing and publishing a list of defaulters, so that taxpayers who have paid
without getting a genuine receipt will complain. It could also be countered by rotating tax collectors
between wards so that follow-up of apparent defaulters reveals any fraud. However, rotating
collectors may be difficult if the system is for them to collect from the ward where they live.
The system used in most UPs does not make it easy to identify and hence follow-up non-payers.
Collections are recorded in a chronological register. Although this records the plot number, it would
10 Where such blocks consist of separate apartments, presumably each apartment can be taxed separately, but where
the block consists of multiple rooms, for example for garment workers, then only one tax can be levied on the whole
block. In one UP, such a block was reported to be earning a monthly rental of well over Taka 10,000, yet the
maximum annual tax that could be levied was Taka 500.
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equire a separate exercise to check against the assessment register to identify who had not paid. In
practice, lists of defaulters are not produced for purposes of follow-up, and there is no record of
arrears. Although claims are made about follow-up action, it is doubtful if this really happens.
Collection rates are generally very low. It is likely that in most UPs, only 5% to 20% of households
are paying. This is generally explained in terms of people being poor, problems of floods, and
reluctance of elected Chairmen to take unpopular enforcement action. A few places have managed
to increase collection rates significantly. It is observed that collection rates for UPs in Sirajganj
district as a percentage of budgeted revenue, ranging from 1% to 91%. However, budgeted figures
may not reflect the full potential revenue (especially if arrears are not included), so these figures
may overstate the performance. Moreover, a significant proportion of the revenue may be paid by a
few business or institutional payers. For example, one UP visited (Gopaya in Narshingdi district)
had managed to collect around half of amount holding tax due in 2007/08, but 70% came from just
five institutional payers. The remaining 30% came from 580 other payers (17% of households),
while 83% of households paid nothing. In another UP (Nurpur), receipts were issued to 400
households (12% of the total number of households), and money received amounted to 18% of the
total assessment.
V. Improving UP Assessment System, Administration and Collection Procedure
a. Holding Tax Assessment by Improved Method of Mass-Appraisal System
What is proposed for piloting in some UPs is a simpler and more transparent assessment system,
commonly known as mass appraisal. 11 . A simple table is provided in the following showing house
construction types and numbers of rooms (construction type will need to be defined precisely
enough so as to minimize scope for manipulation). From that, it is very easy to assess a particular
house. It uses five grades of construction and up to four rooms. For houses with more than four
rooms, a rate per sq ft can be used. It includes one category of shop (up to 100 sq ft), being the most
common type of non-residential property in UPs. The assessment figure might be increased by
10%. (private water supply and toilets would not be included in the assessment) where UP provided
water supply (tube well or piped) is available on the plot,
11 See Nick Devas (July 2007): Local Revenue Sources for Union Parishads: Report of a Study; and Nick Devas
(September 2008): Enhancing Revenue Sources for Union Parishads
11

Table 1: Holding Tax Assessment Piloting: Mass Appraisal System
Tax Rate: 3%
Tax in Taka High Quality Pacca Semi-Pacca Tin Roof Katcha
1 Room 150 100 80 50 30
2 Rooms 250 150 120 80 50
3 Rooms 350 220 160 110 80
4 Rooms 450 300 200 150 100
For more than 4 rooms, rate per sq.ft. (1) 15 10 7.5 5 3
Small shop or stall (up to 100 sq ft) (2) 350 220 160 110 80
UP provided Water facility on plot (3) Add 10%
Or
Tax Rate: 5%
Tax in Taka High Quality Pacca Semi-Pacca Tin Roof Katcha
1 Room 250 170 110 80 50
2 Rooms 420 250 200 130 80
3 Rooms 580 370 270 180 130
4 Rooms 750 500 330 250 170
For more than 4 rooms, rate per sq.ft. (1) 25 17 12.5 8 6
Small shop or stall (up to 100 sq ft) (2) 580 370 270 180 130
UP provided Water facility on plot (3) Add 10%
Or
Tax Rate: 7%
Tax in Taka High Quality Pacca Semi-Pacca Tin Roof Katcha
1 Room 350 230 190 120 70
2 Rooms 580 350 280 190 120
3 Rooms 820 510 370 260 190
4 Rooms 1050 700 470 350 230
For more than 4 rooms, rate per sq.ft. (1) 35 23 17.5 12 7
Small shop or stall (up to 100 sq ft) (2) 820 510 370 260 230
UP provided Water facility on plot (3) Add 10%
Notes:
(1) Government order will require to remove the ceiling of Taka 500 and be prefixed at the
maximum Taka 1000 for four room house with extra amount charged for more than four rooms and
other facilities provided by the UPs.
12

(2) If house/building has more than one storey, consider all storeys as separate unit.
(3) For shops, industries and other businesses larger than 100 sq ft (10m 2 ), and multi-storey
residential blocks, either this method or annual rental value method may be used.
(4) Add 105 tax for water facility on plots means UP supplied or served water.
(4) Katcha here means mud and thatch. Tin-roof is taken as being between katcha and semi-pacca.
High quality means pucca construction with a high standard of finishing work.
Table 1 shows the assessment values at various tax rates: 3%, 5% and 7%. Tabulations for 4% and
6% could easily be prepared if required. The UP would choose which tax rate to set and therefore
which table to adopt. The assessments in the table are based on estimates of the annual rental value
using the construction cost figures produced by GoB’s Public Works Department (PWB). However,
they are not precise valuations but they nevertheless provide a consistent basis for assessment.
(Precise valuations are not required, of course: what matters is consistent treatment between all
properties, so that the tax burden is distributed fairly.) One requirement for the new system to work
properly is to remove the present tax ceiling of Taka 500 per building/land (non agricultural land).
This ceiling is a serious anomaly because such a ceiling benefits only the rich and this ceiling was
introduced in 1961 about 50 years ago. Inflation has eroded the value of Taka 500, so that annual
rental values of larger properties, and particularly non-residential properties, are well above that
ceiling. A particular issue arises with multi-storey blocks of rooms, where the assessment should be
many times higher than Taka 500. 12
There seems to be some ambiguity about whether holding tax applies to all property or only to
houses. Most UPs do not appear to be collecting holding tax from non-domestic properties and
some businesses refuse to pay on the groups that they are paying trade licence fees. 13 The LG (UP)
Act, 2009 refers to buildings and land. It is, thus, clear that non-domestic properties are covered.
There is, therefore, no reason why UPs are not collecting both holding tax and business licences
from a business. Most non-domestic properties like shops will be covered by the mass appraisal
system. There are some issues in relation to major public infrastructure, such as railways, power
plants and power distribution systems. These issues need to be resolved at national level, since such
facilities are generally state-owned and assessment of these sectors creates considerable problems.
b. Improving Revenue Administration and Collection Performance
12 This ceiling mainly benefit the rich and are not justified in a proper property tax assessment system.
Ideally, they should be eliminated. However, adopting the mass appraisal system avoids these anomalies.
13 There also appears to be an issue about exemptions from taxes for export industries. Although officially
such exemptions only apply in a few export processing zones, it was claimed that some industries elsewhere
refuse to pay local taxes on the grounds that they are producing for export.
13

It should be pointed out that there are the problems of local revenue in UPs and that many of the
problems faced here are common to local governments around the world. Most of what is proposed
here is far from new 14 . Much of it is about enabling UPs to implement what they are already
supposed to do, or to adopt good practices which have already been adopted in some UPs. There is
considerable scope for improving UP revenue administration. At present, in many UPs, only 10-
20% of the holding tax is collected and many businesses do not have licences. Collection of holding
tax is never likely to achieve 100% achievement because so many people are poor, but a number of
UPs have demonstrated that it is possible to increase collection performance significantly.
The following are the steps that UPs need to take in order to achieve a higher collection
performance.
a) Prepare a register of all properties in the UP, including non-domestic properties, and updating
that register annually (see Annex -2 for a pro-forma).
b) Use the mass-appraisal system to assess all the holdings. The register, with the assessed values
should be made public so that people can see if there are anomalies, and any collusion between
assessor and household can be revealed. This will inspire public confidence that the system is
fair. 15
c) At present, reductions to assessments are often made on the grounds that households are poor. It
is suggested that any reductions should be made explicitly (as per the pro-forma at Annex- 2),
ideally, at ward level, if possible, and approved by the UP. It is also suggested that the
reductions should be limited to 25% of the assessment and should be given only to the most
needy, not to everyone, so that everyone contributes at least something. This will also help to
create trust in the fairness of the system. Furthermore, it is proposed that not more than one
quarter of households be given a reduction. Annex - 3 provides a pro-forma for a revised
assessment register, showing the basic information on the property (plot number, owner,
occupation or income source, number of rooms, type of construction, whether or not there is an
individual water supply on the plot). From this, the basic assessment can be made from the
assessment table (Table-1). There is then a column for reasons, if any, for a reduced assessment.
The last column shows the final assessment, taking account of any reduction (may be 25% that
14 See Nick Devas (July 2007): Local Revenue Sources for Union Parishads: Report of a Study; and Nick Devas
(September 2008): Enhancing Revenue Sources for Union Parishads
15 Citizens will still have the legal right of appeal, first to the UP, then to the UNO, and finally to the Deputyt
Commissioner, if he/she considers the assessment is wrong or unfair.
14

may have been given. This assessment register should be a public document which anyone can
consult.
d) There should be a register for payments, listing for each plot and plot owner, the final
assessment (i.e. the amount due for the current year), plus any arrears from previous years, the
amount paid in the current year (with date of payment and receipt number), and the amount still
outstanding (see Annex-3 for a sample pro-forma). Such a register enables the UP to identify
immediately who has not paid, and the amount owed, thereby enabling effective follow-up of
on-payers.
e) Tax collection for the current year should start on 1 st July and be completed by 30 th June.
Collections should not spill over into the following fiscal year. Any amount outstanding at 30 th
June should be recorded as an arrear to be collected the following year (with or without
penalty). This helps to clarify what should be paid and when, and helps with accounting for the
year’s revenue.
f) The present system of issuing receipts and recording money received in a register, with details
of the receipt number and date, appears to work reasonably well, enabling cash received to be
checked against receipts (so long as those checks are actually made). However, in addition to
(or instead of) the chronological register of cash received, revenue receipts should be recorded
in the register specified in (d) against the plot number, so that non-payers can immediately be
identified.
g) Money collected should be paid into the bank promptly after checking cash against receipts
issues. Ideally, this should be on a daily basis. Ideally, also, larger payments should be made
directly to the bank, reducing the risk of loss or fraud. This would require a bill to be issued,
which can be taken to the bank. This is now done in some cities and municipalities (e.g. Tongi),
but for UPs it would only be realistic for the largest payments (say Tk.1, 000 and above).
h) Collectors should continue to be employed on the basis of commission. It is commonly claimed
that 15% commission is not sufficient incentive. However, with the higher assessments, and
other steps to improve collection performance, the amount collected should increase
significantly, augmenting the incentive effect. Guidance issued by LGD allows a further 5% to
be allocated to village police, and to reward the best performing collectors, but it is not clear
whether this is being applied at all, and if it is, whether it has any effect. UPs may spend 3% to
remunerate the village police in the ward concerned, 0.5% for the head of the village police
group and a further 1.5% for incentives for the best collection performance among the villages
An alternative would be for the UP to directly employ collectors and pay them out of the
revenue collected. However, that is almost certain to increase collection costs, as they would
15

probably be paid more than the 15% commission. It might also reduce the motivation to collect.
Thus, it is recommended that UPs continue to employ collectors on commission, but review
how the incentives can be augmented.
i) Spot checks by the UP Chairman or Secretary to see whether there is fraud by collectors (e.g.
not giving a receipt or giving a fake receipt). For example, selective follow-up visits to the
houses visited by collectors would reveal any fraud if households say that they have paid but do
not have a proper receipt. Rotating collectors between wards part way through the year could
have the same effect, but that would only be possible if there were several collectors.
j) Prompt follow-up action where people have not paid. Households should be visited at least one
a month for the first three months of the financial year until they have paid what is due.
k) After three months (i.e. end of September), compiling and displaying a list of defaulters (e.g. on
the UP notice board and/or in other public places), or putting notices on the houses or
defaulters; this should have the effect of shaming non-payers into paying. It would also help to
reveal any fraud by collectors or collusion between households and collectors.
l) Motivating people to pay through public information campaigns at ward and UP level,
explaining how developments already completed under LGSP-LIC and other programmes are
threatened by people not paying their tax. Such meetings may carry more weight if supported by
the UNO, so the UP Chairman should solicit the help of the UNO. People’s willingness to pay
can also be increased through opportunities to participate in decisions about how resources are
to be used (e.g. budget prioritisation meetings), and where there is confidence that the taxes
collected are used properly, through increased transparency about resource use.
m) As a last resort, taking enforcement action against those who can afford to pay but who refuse to
pay. Initially this may take the form of a letter from the UP Chairman to give the signal that it
sends to other people is that the UP is serious about collecting tax. Hopefully, that will induce
other defaulters to pay up.
n) In the case of business tax / licences, the UP should prepare a comprehensive list of all
businesses in the UP. This will require field inspection, and can be cross-checked against the
holding tax register for non-domestic properties (ideally, using the same plot number and/or
taxpayer identification number in both registers to facilitate cross-checking). The type of
business should be recorded, together with the size category (consistent with the classifications
in the suggested Model Tax Schedule – Table 2), and the amount payable. All business,
commercial and professional activities that are covered by the Model Tax Schedule should be
listed, including NGOs.
16

o) A record should be maintained of payments of business tax / licences against each business in
the register (as pro-forma will be developed). This will show clearly which businesses have not
paid for the current year. Where a business has not applied for a licence by the due date (say,
30 th September), the collector should visit the business and require payment. If no payment is
forthcoming, the steps outlined above in (k), (l) and (m) should be adopted. The ultimate
sanction would be to close the business.
p) Where possible, follow-up action in relation to a business tax / licence should be integrated with
action to recover holding tax from the same property, so as not to duplicate effort.
q) Simple computerised spread-sheets can help improve revenue performance, by tabulating
clearly assessments, arrears, payments and outstanding balances. Cross-checks can easily be
made and the list of defaulters can be produced. However, UP require someone with knowledge
of computers, and preferably more than one person, to reduce the scope for fraud by the system
manager. Automatic checks should be built into the software to prevent fraudulent transactions.
Also, paper copies of all records should be maintained to reduce the risk of loss of data through
system failure or data corruption.
r) Overall performance of revenue collection can be motivated by the inclusion in any grant
system (including the LGSP-LIC grant allocations) of a performance indicator or indicators
based on revenue performance. One indicator might be that the UP has compiled a holding tax
assessment register and a business tax/licence register in the approved form. Another indicator
might be performance of collection against assessment (i.e. effectiveness – what proportion of
the assessed tax has been collected). An alternative indicator might be the percentage increase in
tax revenue. 16 In addition, there might be competitions between UPs within a district to see
which could collect the highest proportion of assessed tax with small rewards for the Chairman,
elected members and officials of the best performing UP.
VI. Rationale and Challenges of UP Revenue Strategy
This is an opportune moment to be proposing improvements for enhancing UP revenues, for a
number of reasons. Firstly, the Committee for Accelerating and Strengthening Local Government
reported in November 2007. Among its recommendations, it identified the revenue sources of UPs
which are given below 17 :
� ensuring that local tax assessments are updated every five years;
� improving revenue collection performance of local governments;
16 The indicator should not be the total amount collected, since that would favour UPs with greater revenue potential.
17 This list is based on the English language summary of the Committee’s report.
17

� increasing UPs’ share of the Land Transfer Tax from 1% to 2%, and ensuring that the money
from this source is passed on to UPs;
� giving UPs a 3% share of the Land Development Tax;
� reviewing the distribution of revenues from leases on huts and bazaars to ensure a fairer
distribution;
� giving local governments more discretion about local tax rates;
� increasing the share of ADP (annual development program grant) for local government (as a
whole) to 10% of the national budget;
� Apportioning to local government a share of national taxes collected locally.
Secondly, the Government has recently promulgated a new Local Government (Union Parishad)
Act, 2009, to replace the 2003 Ordinance. This takes account of many of the recommendations of
the Local Government Committee. It is reported that it will be followed by a revision to the Model
Tax Schedule for UPs, very soon. Thus, the present study can provide a direct input into that
process.
Thirdly, Government has shown its support for UPs by channelling some block grant allocations
directly to UPs, starting from 2004. This has enabled UPs to have greater choice and control over
resources used locally. In addition, from 2008, substantial funds are being channelled through UPs
in poorer regions of the country for rural works programmes to reduce poverty.
Fourthly, the LGSP is channelling substantial resources to UPs. This programme started in 2007 in
1,050 UPs, and will gradually extend to all UPs (at least, those UPs which meet minimum
performance qualifications). LGSP builds on the earlier experience of the Sirajganj Local
Government Development Programme which, among other things, was successful in increasing
local revenues in a number of UPs. As part of LGSP, the Learning and Innovation Component
(LIC), funded by UNDP, UNCDF, EC and DANIDA, is developing and disseminating good
practices and innovations to UPs in six districts. Under this component, there is scope for pilot
projects in a number of UPs to experiment with revenue enhancing reforms. This strategy provides
suggestions for what could be included in these pilots.
VII. Purpose and Objective of the Strategy
The traditional, theoretical argument for decentralization and local government is about matching
the expenditure on local services that benefit the residents of a jurisdiction with the willingness of
residents to pay taxes to finance those services. Thus, the key political choice for a local
18

government is about how much to tax local residents in order to pay for the public services they
receive, so that local residents have an electoral choice about how much to be taxed for what level
of local services and how properly this tax to be assessed. The objective of the strategy areas
follows:
a) Assess current UP performance (strengths, weaknesses, complexities etc.) with regard to the
assessment, administration and collection of own-source UP revenues
b) Develop a provisional strategy for enhancing – on a pilot basis – the revenue base and revenue
collection performance of UPs
c) Identification of new and additional expanding revenue sources for UPs self sufficiency and
better service delivery including other local taxable income including fees, rates, charges and
fines
d) Improvements to local revenue administration procedure and collection arrangements including
proper documentation, register maintenance and collection process
e) Identification of motivational and awareness building program as well as incentive system for
own source revenue collection
f) Improvements in robust follow-up and enforcement process including monitoring and evaluation
strategy
g) Some related reforms including intergovernmental transfers, policy advocacy with government
and local financial resource management.
VIII. Sampling of UPs for Piloting
For the purpose of raising revenue mobilization in capacity building of Ups for better service
delivery piloting activities will be undertaken in thirty Ups of six LGSP-LIC districts (5 UPs
from each of 6 LGSP-LIC districts.) The selection of the piloting Ups will be Identified by the
Consultant with LGSP-LIC Project Team, UNDP, UNCDF & finalization on the basis of the
outcome and completion of baseline survey. The following criteria would be followed for
selecting the five Ups in each LGSP-LIC district.
a. First UP will be selected from each Upazila on the basis of higher revenue target achievement
as well as proper assessment on the basis of assessment procedure
b. Second UP will be selected which is situated in semi-urban in nature and near to the UZHQ
c. Third UP will be selected where revenue collection was not so high and not systematic
assessment maintained
d. Fourth UP will be selected where other sources collection was higher than holding tax if any
or other sources collection was higher than any other UP in the districts
19

e. Fifth UP will be selected where holding tax assessment procedure is properly followed
but the citizens are not willing/ reluctant to pay even with the UPs initiative for collection target
achievement
IX. Proposed Piloting Areas and Activities of Enhancing UP Revenue/Resource Mobilization
The capacity building of local government units especially UP is enormous as they are responsible
to manage their own affairs independently by providing service delivery with the mobilization
of own sources of revenue/resources effectively. So that it is necessary to make them able to
finance their activities through proper orientation and support. For this, LGSP-LIC conducted a
study during 2007-8 aimed at gaining a better understanding and identifications of constraints in
local government taxation system and revenue collection procedures and the scope for
enhancing UP own-sources revenues/resources. With these experiences and the current field
study/experiences, LGSP-LIC has developed a strategy paper by identifying some piloting areas
and activities for enhancing UP revenue/resource mobilization. :
Summary of the Activities of Piloting proposals below could be tested in 30 UPs.
� Benchmark of piloting-
The benchmark of piloting includes identifying some samples of 60 UPs for baseline survey before
starting the activities of piloting on 30 UPs of 6 LGSP-LIC districts.
For this, the baseline survey will be conducted by a firm/ NGOs and the findings will be presented
at the dissemination workshop at the national level. After this,
a. Inception workshops for piloting activities will start at every six LGSP-LIC district of Barguna,
Feni, Habigonj, Narshingdi, Sathkira and Sirajgonj followed by
b. Inception workshops at all the 30 LGSP-LIC UPs of 6 districts.
� Effective and Improved Method of Holding Tax Assessment by introducing mass
appraisal system
1. Introducing a simplified mass-appraisal system for assessing holding tax for houses, based on
number of rooms and construction type, and retaining a choice over tax rates (up to the
equivalent of 7% of annual rental value) .by providing training through manual development to
secretary , Tax Collector, WDC and UFT for proper use of mass appraisal/ self appraisal
system
20

2. Arrange brainstorming meeting/discussion with the citizens on the mass appraisal/self
appraisal system
3. Exposure visit
For this, following things should be considered-
a. Making assessments more systematic and transparent, with any reductions on the grounds of
poverty being made explicitly and recorded transparently.
b. Clarifying that holding tax can also be levied on non-domestic property, including
structures like mobile phone masts.
c. Requiring every UP to carry out a re-assessment of holding tax over the next twelve months,
compiling a complete register of properties, together with their assessments.
� Expanding the Revenue Base for UPs self- sufficiency and better service delivery
4. Arrange Training/ Workshop with elected functionaries and officials to identify
Different sources of revenue other than holding tax by introducing a training manual
5. Arrange Training/ organize discussion meeting/ open budget session to the UP elected
representative, officials, WDC members, UFT members as well as some citizens for promoting
understanding between service delivery and tax payment
For this, give a direction to impose certain ceiling of tax on three-wheeled CNGs, mobile towers,
advertisements (bill-boards), coaching centres, tutorials, private clinics and hospitals, community
centres etc; impose fees for particular services rendered, as well as rural electricity, professional
varieties, leasing of government land for tree plantation, extraction of sand, stone and other
building materials; impose charges for services that the UP provides directly to beneficiaries and
impose fines for late payment of arrear taxes.
6. Simplifying the classification of businesses while also making the list more
comprehensive, to include all services, professions and NGOs, introducing a simple and obvious
classification of business size, to reflect ability to pay, thereby improving equity as well as
increasing the revenue that can be generated and allowing a limited range of choice for the UP
21

about the level of business taxes, with three approved levels of tax (low, medium and high) and
Requiring every UP to compile, within twelve months, a register of all businesses in their
jurisdiction
� Better Revenue Administration and Collection Arrangements
7. Develop materials for Training on systematic documentation, maintenance of registers and up
dated pass book for transparent revenue administration and collection
a. technical support for effective tax collection by introducing improved assessment form in mass-
appraisal system;
b. up dated Pass book maintenance for transparent tax collection;
c. collection registers showing current year’s collection arrears due; record keeping for present and
arrear collection;
d. pay slip for regular tax collection; effective follow-up of non-payers, with prominent notices
displayed on the houses of defaulters (a three-stage set of notices, black, yellow, red); and
e. requiring every UP to compile, within twelve months, a register of all businesses in their
jurisdiction, each with a tax assessed according to the Model Tax Schedule
8. UPs to maintain records of tax payment against assessment so that it is immediately obvious
which properties or businesses have not paid, and records of arrears can be compiled
a. Collections to start on 1 st July and finish on 31 st June, with any non-payments by then being
recorded as arrears.
b. Prompt banking receipts, with larger payments being made by the payer directly to the
bank.
c. Prompt follow-up action in the event of non-payment within the first three months, with lists
of defaulters being prepared and publicised after that.
d. Spot checks and selective visits (e.g. by the UP Chair or elected members) to non-payers,
both to motivate payment and to reveal any collusion or fraud by collectors.
9. Improving UP budgeting and expenditure management, including realistic budgets, based on the
revenue that can actually be collected and greater opportunities for citizen’s participation in
decisions about resource use
10. Enhancing accountability for resource use, through publicly available information on finances,
and project monitoring by residents
22

� Motivation, Awareness Campaign and Incentive System for Own-Source Revenue
Collection
11. Greater efforts to mobilise payment through information at ward-level and UP-level public
meetings, citizen participation in decisions about resource use, public display of financial
information, and proper accountability for the use of revenues, leading to greater willingness to pay.
12.. Motivational and awareness building campaign with citizens at UP and ward level for paying
tax linking better service delivery by organizing brainstorming/ discussion/ interacting meeting
with chairman, members and secretary for UP’s capacity building;
13.. Awareness campaign to empower and to increase access of information through IEC strategy
to motivate tax-payers that revenues collected will be properly used to provide services that benefit
them
14. The grant system should incorporate rewards based on performance of revenue collection
against assessments (or based on increased revenue collection)
15. Introduce cash/kind award for targeted tax collection achievement to the best tax
collector/secretary/reward to the regular tax payer; introduce special
award/prizes/rewards/appreciation to the best chairman/member (public representatives) for
targeted tax collection achievement in every division and a system of appreciation to the best tax
payer at UP and ward level during open budget session in various forms
� Robust follow-up and enforcement process
16. Introduce a M&E strategy for piloting of UP revenue mobilization through training on M&E
Strategy to DF, DDLG and UCOs;
17. knowledge sharing on the basis of periodic monitoring and evaluation; and gradual introduction
of simple computerised spreadsheets at UP for managing and monitoring local revenue collection
.18. Gradual introduction of simple computerised spreadsheets for managing and monitoring local
revenue collection.
23

� Policy Advocacy
a. Policy advocacy to the government and ministry level in order to influence policy
makers (i.e., LG Division of the Ministry of LGRDC) for updating the Model Tax
Schedule, 2003.
b. Advocacy, Networking, Liaison with government and local administration for
returning the right of leasing Jolmohal and Hutbazar for leasing by UP up to the
certain level of ceiling with UNO monitoring the tendering process ( now UP is
getting 20% for the salary of the UP staff, 5% to the UP where the market is located
and 45% to be deposited in the Upazila development fund to be distributed between
the UPs in the Upazila).
c. Advocacy program for increasing the IPTT tax to 2 percent from existing one percent,
enhancing the UPs’ share of the Land Transfer Tax from 1% to 2%, introducing 3%
(or higher) share of the Land Development Tax for UPs in return to their assistance
with mobilising the tax and to identify one possible new revenue source for UPs is a
small local tax on electricity (collected through the electricity company as a percentage
addition to the electricity bill)
d. Advocacy to appoint each UP a finance officer, with at least basic training in
accounting and financial management and to take measures that Upazila Parishad’s
new revenue sources should not be at the expenses of UPs revenue sources
e. Increasing transparency and reliability in the allocation of intergovernmental fiscal
transfers, with more of the transfers being paid directly to UPs and greater scope for
local (UP) choice about the use of transfers
f. Ensuring that any reforms of UPs revenues with mutual learning about good practices,
and improved performance being shared between local governments units
24

Table 2: Indicative Framework of UP Revenue Factors for Piloting
Outputs/Areas/ Themes of
Piloting
Strategy Plan for Enhancing UP Revenue/Resource Mobilization Piloting
(National Consultant for UP Revenue Mobilization Piloting: Professor Musleh Uddin Ahmed, Ph D)
Strategic Intervention/
Activities of Piloting
Expected Result Target Group Responsibility Time Line
Description of what is being Piloted and Purpose of the Pilot and Determining Pilot Activities
1. Benchmark of 1.1Conduct Baseline Survey by Firm/NGO 1.1 Baseline Survey data made available 30 LGSP-LIC UPs, 15 LGSP UNDP & Project March-April, 2010
Piloting
UPs & 15 Non LGSP-LIC Ups
1.2 Dissemination workshop on Baseline 1.2 Stakeholders/Policy Planners given LGD, Development partners, UNDP & Project May, 2010
findings
information about the Baseline data UNOs, DDLGs, DFs, UCOs &
some selected UP Chairman
1.3 Inception workshop of Piloting at every 1.3 Idea generation/Brainstorming to initiate Selected UP Chairman, DDLG, DDLG & DF May, 2010
District Level (01 day each in 6 LGSP-LIC appropriate activities for piloting
DCOs, UCOs, UNOs and
district)
related stakeholders
1.4 Inception workshop at selected 30 1.4 Idea generation/Brainstorming to initiate Secretary, Tax Collector, WDC DDLG, UCO & DF May, 2010
LGSP-LIC UP level in every six LGSP-
LIC districts (01 day)
appropriate activities for piloting
member, UFTs and Community
2. Effective and 2.1 Manual Development for systematic 2.1 Improved and effective methodology of Secretary, Tax Collector, WDC Consultant Continue
improved tax assessment by simple mass-appraisal mass-appraisal tax assessment system in member & UFTs
methods of tax system for assessing holding tax containing place
assessment transparent tax assessment procedure,
outlining categories and process for
documentation
2.1.1 Training to UP Secretary, Tax 2.1.1 Tax assessment process disseminated Secretary, Tax Collector, WDC Consultant May, 2010
Collector, WDC member and UFTs on and related capacity of personnel involved member & UFTs
proper holding tax assessment
enhanced
2.2 Arrange meeting/discussion to motivate 2.2 Citizens oriented about the method of UPPC , SSC and Citizens UCO May, 2010
the citizen on mass appraisal/self appraisal tax assessment, mentally prepared to accept
system of assessing UP revenue for getting new system and appropriate documentation
adequate services
procedure put in place for citizen to crosscheck
validity
3. Expanding the
revenue base for
2.3 Exposure Visit 2.3 On-field experiences gathered, improve
sensitization and strengthening peer learning
3.1 Arrange training/workshop to
motivate the UP elected functionaries,
secretary and tax collector on identification
3.1 Idea developed for the importance of UP
revenue mobilization from different own
sources towards local capacity building on
25
UP Chairman, Members,
Secretary, Tax Collector, WDC
& SSC member, UFTs and
Community
UP Chairman, Members,
Secretary and Tax Collector
UCO, DF & UFT May, 2010
UP
Continue

Ups’ self
sufficiency and
better service
delivery
4. Better revenue
administration
and collection
arrangements
of different sources of revenue other than
holding tax
3.2 Organize discussion meeting/open
budget session for UP functionaries and
citizens for promoting understanding of the
optional sources for wider range of UP
revenue
3.3 Organize orientation/brainstorming
session for imposing certain ceiling of fees
to establish close linkage between UPs
particular service directly rendered to
beneficiaries and revenue income
3.4 Introduce the classification of
businesses bringing all types of business
under tax net
4.1 Manual development on systematic
documentation and maintenance of registers
for transparent and systematic revenue
collection.
4.1.1 Training to Chairman, Secretary, Tax
collector & UFTs
4.2 Manual Development for better
collection performance (i.e., banking
transaction, installment basis payment)
4.2.1 Training to Secretary, Tax Collector
and UFTs
4.3 Introduce Public discloser mechanism
for revenue self sufficiency linked to UPs
capacity building (open budget, bill board,
information dissemination etc.)
4.4 Effective follow-up of non-payers,
with notices prominently displayed on the
houses of defaulters (a three-stage set of
notices, black, yellow, red)
revenue self sufficiency
3.2 Understanding of roles and
responsibilities of UP towards its
community and the rights of citizens towards
their UP improved
3.3 Self-awareness and perception for
getting quality of services by paying
revenue timely and regularly improved
26
UP Chairman, Members,
Secretary, Tax Collector, WDC
& SSC member, UFTs and
Citizens
3.4 Quantum of tax volume enhanced LGI, UPZ, DC office, LGD &
other agencies.
4.1 Tax collection performance by
introducing proper assessment form, up
dated pass book maintenance, collection
registers showing current year’s collection
and arrears due, record keeping for present
and arrear collection and pay slip for
regular and transparent tax collection.
Improved
4.1.1 The related capacity of personnel
involved in documentation and maintenance
of revenue collection registers enhanced
4.2 Capability for the efficient/better use of
cash book, bank transaction etc increased
4.2.1 Tax collection performance and related
capacity of personnel involved enhanced
4.3 Actual tax collection status made
available with general public
4.4 Number of defaulters are expected to
decline
UP Continue
Citizens UP Continue
UP Chairman, Secretary, Tax
Collector & UFTs
Secretary, Tax collector &
UFTs
Secretary, Tax collector &
UFTs
Secretary, Tax collector &
UFTs
Secretary, Tax collector &
UFTs
UP Secretary
LGD Continue
Consultant
Continue
DDLG & DF June 2010
Consultant
UCO & DF
Continue
July 2010
UCO & DF August 2010
UP Continue

5. Motivation and
Incentive system
for own source
revenue collection
6. Robust followup
and
enforcement
process
7. Policy
Advocacy
5.1 Motivational and awareness building
campaign for UP’s capacity building with
citizens at UP and ward level for paying
tax linking better service delivery by
organizing brainstorming/discussion/
interacting meeting with chairman,
members and secretary
5.2 Introduce awareness campaign to
empower and to increase access of
information through IEC strategy to
motivate tax-payers that revenues collected
will be properly used to provide services
that benefit them
5.3 Introduce cash/kind award for targeted
tax collection achievement to the best tax
collector/secretary
5.4 Introduce special award/prizes/
rewards/appreciation to the best
chairman/member (public representatives)
for targeted tax collection achievement in
every division
5.5 Introduce a system of appreciation to
the best tax payer at UP and ward level
during open budget session in various
forms
6.1 Introduce a M&E strategy for piloting
of UP revenue mobilization through
training on M&E Strategy to DF, DDLG
and UCOs
6.2 Knowledge sharing on basis of periodic
monitoring and evaluation.
6.3 Gradual introduction of simple
computerised spreadsheets for
managing and monitoring local
revenue collection.
7.1 Advocacy program for national and
ministry level in order to influence
policy makers (e.g., LGRD&C. LG
Division etc.) for updating the Model
5.1 Awareness to pay tax for getting better
service benefit and revenue capacity
building by achieving collection target
fulfillment created
5.1.1 Sense of responsibility and duty of
client oriented responsiveness towards
community increased
5.2 Public awareness about their rights and
duties improved, citizens perception about
tax payment made crystal clear and access
to information raised
5.3 Initiatives for higher collection through
vigorous performance taken place by tax
collection functionaries
5.4 Public representatives are encouraged to
take initiatives for higher volume of tax
collection .
5.5 Tax – payers feel honoured and thus
motivated to pay more setting examples to
others
6.1 Tax collection processes are better –
monitored and made more accountable
6.2 Personnel involved are better prepared
for follow–up action and a more effective
and efficient mechanism developed to share
responsibilities
6.3 Efficiency increased, system simplified
and productivity enhanced
7.1 Support for updating the model tax
schedule incorporating some new sources of
UPs own sources revenue income mobilized
27
Chairman, Secretary, Tax
collector, WDC, UFT
UP
Citizen LIC Team
Continue
Continue
Secretary & Tax Collector UP Continue
Chairman & Member
DDLG, UCO & DF Continue
Citizen UP Continue
DF act as facilitator,
DDLG,UNO & UCO closely
involved in monitoring
DF, DDLG and UCOs
LIC Piloting UP
UNDP
Consultant
LIC team
LIC Team
Continue
Continue
LIC team
UP 2010 – 2011

Tax Schedule, 2003 to at least reflect
inflation since 2003.
7.2 Advocacy, Networking, Liaison with
government and local administration for
returning the right of leasing (Hatbazar,
Jalmohal etc)
-a return of Jalmohal and Hatbazar
for leasing by UP up to the certain
level of ceiling (with UNO monitoring
the tendering process)
7.2.1 Advocacy program for
- Increasing the IPTT tax to 2 percent
from existing one percent
- Increasing the UPs’ share of the Land
Transfer Tax from 1% to 2%:
- Introduce 3% (or higher) share of the
Land Development Tax for UPs in return to
their assistance with mobilising the tax
7.2.2 Advocacy to
- Appoint each UP a finance officer, with at
least basic training in accounting and
financial management
.
- take measures that Upazila Parishad’s
new revenue sources should not be at the
expenses of UPs revenue sources
7.2 UPs rights of enhancing share of own
sources revenue increased
7.2.1 Transparency and reliability in the
allocation of intergovernmental fiscal
transfers with more of the transfers
being paid directly to UPs and greater
scope for local (UP) choice about the
use of transfers increased
7.2.2 Accountability in UPs budgeting and
expenditure management, including
realistic budget making based on the
revenue that can actually be collected
with taking care of greater
opportunities for citizen’s participation
in decision making about proper use of
resource improved
28
Citizen
*Note: Budget, Timeline and Responsible Party would be finalized after discussion with the UNDP, LGD and Project Authority.
LGD
LGD
Continue

Annex-I: Action Plan for UP Revenue/Resource Mobilization Piloting
Outputs/
Areas/
Themes
1. Benchmark
of Piloting
2. Effective
and improved
methods of
tax
assessment
3. Expanding
the revenue
base for UPs
self
sufficiency
and better
service
delivery
4. Better
revenue
administration
and collection
arrangements
Strategic Intervention/Activities
1.1 Conduct Baseline Survey by
Firm/NGO
1.2 Dissemination workshop on Baseline
findings
1.3 Inception workshop of Piloting at
every District Level (01 day each in 6
LGSP-LIC district)
1.4 Inception workshop at selected 30
LGSP-LIC UP level in every six LGSP-
LIC districts (01 day)
2.1 Manual Development for systematic
tax assessment by simple mass-appraisal
system for assessing holding tax
containing transparent tax assessment
procedure, outlining categories and
process for documentation
2.1.1 Training to UP Secretary, Tax
Collector, WDC member and UFTs on
proper holding tax assessment
Time Frame Responsibil
2010 2011
ities
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q
29
UNDP &
Project
UNDP &
Project
DDLG &
DF
DDLG,
UCO & DF
*budget
(in US $)
tentative
13000
8000
12000
10000
DF & UCO 5000
Consultant 5000
2.2 Arrange meeting/discussion to
DF & UCO 5000
motivate the citizen on mass
appraisal/self appraisal system of
assessing UP revenue for getting
adequate services
2.3 Exposure Visit DF & UCO 5000
3.1 Arrange training/ workshop to
motivate the UP elected functionaries,
secretary and tax collector on
identification of different sources of
revenue other than holding tax
3.2 Organize discussion meeting/open
budget session for UP functionaries and
citizens for promoting understanding of
the optional sources for wider range of
UP revenue
3.3 Organize orientation/brainstorming
session for imposing certain ceiling of
fees to establish close linkage between
UPs particular service directly
rendered to beneficiaries and revenue
income
3.4 Introduce the classification of
businesses bringing all types of business
under tax net
Enhancing the effectiveness and/or efficiency of UP revenue administration and collection through
4.1 Manual development on proper
documentation and maintenance of
registers for transparent and systematic
revenue collection.
4.1.1 Training to Chairman, Secretary,
Tax collector & UFTs
4.2 Manual Development for better
collection performance (i.e., banking
transaction, installment basis payment)
4.2.1 Training to Secretary, Tax
Collector and UFTs
4.3 Introduce Public discloser mechanism
for revenue self sufficiency linked to UPs
DDLG,
UCO & DF
DDLG,
UCO & DF
DDLG,
UCO & DF
DDLG,
UCO & DF
Consultant,
DF, UFT &
UP
Consultant,
DF, UFT &
UP
Consultant,
DF, UFT &
UP
Consultant,
DF, UFT &
UP
Consultant,
DF, UFT &
3000
4000
3000
4000
2000
3000
2000
3000
3000

5. Motivation
and
Incentive
system for
own source
revenue
collection
6. More
robust followup
and
enforcement
process
7. Policy
Advocacy
capacity building (open budget, bill
board, information dissemination etc.)
4.4 Effective follow-up of non-payers,
with notices prominently displayed on
the houses of defaulters (a three-stage set
of notices, black, yellow, red)
5.1 Motivational and awareness building
campaign for UP’s capacity building with
citizens at UP and ward level for paying
tax linking better service delivery by
organizing brainstorming/discussion/
interacting meeting with chairman,
members and secretary
5.2 Introduce awareness campaign to
empower and to increase access of
information through IEC strategy to
motivate tax-payers that revenues
collected will be properly used to provide
services that benefit them
5.3 Introduce cash/kind award for
targeted tax collection achievement to the
best tax collector/secretary Introduce
cash/kind award for targeted tax
collection achievement to the best tax
collector/secretary
5.4 Introduce special award/prizes/
rewards/appreciation to the best
chairman/member (public
representatives) for targeted tax
collection achievement in every division
5.5 Introduce a system of appreciation to
the best tax payer at UP and ward level
during open budget session in various
forms
6.1 Introduce a M&E strategy for piloting
of UP revenue mobilization through
training on M&E Strategy to DF, DDLG
and UCOs
6.2 Knowledge sharing on basis of
periodic monitoring and evaluation.
6.3 Gradual introduction of simple
computerised spreadsheets for
managing and monitoring local
revenue collection.
7.1 Advocacy program for national and
ministry level in order to influence
policy makers (e.g., LGRD&C. LG
Division etc.) updating the Model Tax
Schedule, 2003 to at least reflect
inflation since 2003.
7.2 Advocacy, Networking, Liaison with
local administration for returning the
right of leasing (Hatbazar, Jalmohal
etc)
-a return of Jalmohal and Hatbazar for
leasing by UP up to the certain level of
ceiling (with UNO monitoring the
tendering process)
7.2.1 Advocacy program for
- Increasing the IPTT tax to 2 percent
from existing one percent
- Increasing the UPs’ share of the Land
30
UP
Consultant,
DF, UFT &
UP
Consultant,
DF, UFT &
UP
Consultant,
DF, UFT &
UP
Consultant,
DF, UFT &
UP
Consultant,
DF, UFT &
UP
Consultant,
DF, UFT &
UP
Consultant,
DF & UFT
Consultant,
DF & UFT
Consultant,
DF & UFT
UNDP &
Project
UNDP &
Project
3000
3000
5000
5000
7000
5000
2000
3000
3000

Transfer Tax from 1% to 2%:
- Introduce 3% (or higher) share of the
Land Development Tax for UPs in return
to their assistance with mobilising the tax
7.2.2 Advocacy to
- Appoint each UP a finance officer, with
at least basic training in accounting and
financial management
.
- take measures that Upazila Parishad’s
new revenue sources should not be at the
expenses of UPs revenue sources
*Note: Budget, Timeline and Responsible Party would be finalized after discussion with the UNDP, LGD and Project Authority.
31

Annex- 2 : Holding Tax Assessment Register
Holding Tax Rate Selected (3% / 5% / 7%) Year:
Residential Property
Holding
Number
Name of
Occupier /
Owner
Occupation
/ Income
Numbe
r of
Rooms
Construction
Type
Basic
Assessment
33
+10% if water
on plot by UP
Total
Assessment
Reasons
for Any
Reduction
Amount
of
Reduction
(%)
Adjusted
Assessment
1 2 3 4 5 6 7 = 6 x 0.25 8 = 6 + 7 9 10 11 = 7-10
Non-Residential Property
Plot
Number
Name of
Occupier /
Owner
Type of
Business /
Activity
Buildin
g Size
(sq ft)
Construction
Type
Construction
Rate (PWD
rate per sq ft)
Rental Value Or Actual
Annual Rent
x 10/12
Total Assessment
1 2 3 4 5 6 7 = 4 x 6 x 7.5% 8 9 = 7 (or 8) x tax rate
All buildings should be included, either under residential or non-residential. Mobile phone masts can also be included.
Reductions may be given for residential assessments for reasons of poverty, under the following conditions:
� all reductions should be agreed by the Ward Committee and approved by the UP
� the published assessment register for residential properties should indicate the reasons for the reduction (column 9)
� reductions should normally be limited to 50% of the assessment
� not more than 25% of the households in the ward should be given reductions

Annex- 3: Collections and Arrears Record
Year:
Holding Name of Assessment Tax Due for Arrears Penalty (if Total Now Amount Date Paid Receipt Amount
Number Occupier
Current Year
any) Due Paid
Number Still Owed
1 2 3 4 5 6 7 = 4+5+6 8 9 10 11 = 8-7
Tax Due for Current Year (column 4) taken from Holding Tax Assessment Register (Annex 3, col.11 for residential, col.9 for non-residential).
Total Now Due is the sum of Tax Due for Current Year + Arrears + Penalty (if any).
Amount Still Owed at the end of the year (column 11) = Total Now Due (column 7) minus Amount Paid (column 8); this figure becomes the figure for
Arrears (column 5) for the following year.
34