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

(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