Tax trouble for landlords

Already grappled with soaring prices of essentials, tenants in the capital are likely to find themselves in more trouble as the authorities are increasing the tax on holdings manifold.

Although the building owners are to pay the tax, the tenants fear they will have to bear the brunt in the end. They say the landlords will realise a major part of the revised amount from them.

The ongoing general tax assessment in the capital began after 28 years mid last year. As the move, due every five years, came so late, the tax on many of the around 375,000 holdings in the two city corporation areas have been reassessed at three to five times the present amount.

And now, both the house owners and the tenants are worried over the sudden hike in the tax money.

"I am not saying it's illegal but the authorities shouldn't have increased the holding tax so much at a time," said Mostafa Ahmmad, owner of a six-storey building in West Dhanmondi area.

For his building on a three-katha plot, Mostafa has already paid the Dhaka South City Corporation Tk 45,350 as the tax for the current tax year 2017-2018. Following the reassessment, he should be paying Tk 2,14,200 now.

"The tax on my house was reassessed just four years ago and now it has been fixed once again although the building structure has not changed at all," he said.

"I can't pay such a big amount all alone. The tenants have to share the additional costs."

Mostafa, who rents out seven medium-sized flats to tenants, had his holding tax reassessed that year.

He said over a dozen building owners in the locality have filed review applications with the corporation. They say the revised amounts are much higher in comparison to the facilities they get.

Mostafa said he too would file a review.

"Our West Dhanmondi area is very congested and seems unplanned. It also lacks many basic amenities like storm drainage and sewer facilities. The tax officials did the reassessment after showing our building in Dhanmondi residential area on papers," he said.

"You can take higher holding taxes for houses in that area because it is planned and blessed with wide roads, pavements and improved storm drainage system. But doing that for our area, which often gets inundated during the monsoons, is too much." 

Another landlord said the holding tax on his property near Jonaki Cinema in Nayapaltan has been increased almost four times.

"It is absolutely absurd. You can't raise the tax so much at a time. And look at what we get in return!" said the man, who wished not to be named.

"Many houseowners are going for underhand dealings with some city corporation officials and having the tax amount lowered," he added.

Talking to The Daily Star, a number of tenants expressed fear that the landlords would hike the house rent to pay for the "additional" tax money.

"Whenever such taxes are imposed or raised, houseowners increase the rent simultaneously and this is probably not going to be different this time as well," said Akib Javed, who along with family lives in Shyamoli.

The man, who works at a private firm in Mohakhali, said when he started living in a 1,200 square feet flat in 2006, the rent was only Tk 14,000. Now, he is paying Tk 21,000 a month. "My salary has not doubled, but the rent has almost," he said.

Rupa Akhter, wife of a primary school teacher in Jhigatola, said her family was struggling to cope with the soaring prices of essentials.

She said any hike in house rent sounded nothing short of a nightmare to her.

"If the government increases the holding tax, the burden is going to be on us. We can't afford it at all." 

Asked, Yousuf Ali Sardar, chief revenue officer of Dhaka South City Corporation (DSCC), argued that the tax rate was not being hiked.

“The tax reassessment is not to increase the tax rate, but to make the tax amount equal for the properties of similar value as per the existing tax rates." 

The proposed tax amount should not be compared to the current rates, he said, adding, there can be a tax rebate of up to 40 percent of the proposed amount if authorised by a review board led by a ward councillor and an appellate authority headed by the divisional commissioner.

The holding tax is associated with the yearly valuation of the property. The valuation is calculated by multiplying the total floor area with the rate for per square feet of floor. The rate is fixed based on the house rent in a particular area.

The amount is then multiplied by 10 (months). Two months' house rent is excluded considering the expenditure for home maintenance.    

For example, the yearly valuation of a 1,000 square feet apartment with a rate of Tk 15 would be Tk 150,000.

In the capital, the holding tax rate is 12 percent of the total valuation, meaning the tax for the abovementioned property would be Tk 18,000, Yousuf said.

The city corporations can impose up to 27 percent of the property valuation as holding tax, he said, adding that the valuation would be 40 percent less if the property is not rented out to tenants and the owner lives there.

No holding tax is applicable if there is no establishment on the land.

Furthermore, a house owner is also entitled to a rebate of up to 10 percent of the payable tax if that is paid within the deadline, he said.  

Asked about the reason behind the tax reassessment, Yousuf said there had been no general tax assessment in Dhaka city for the last 28 years.

As a result, owners of many buildings constructed 28 years ago have been paying a lump sum amount as the tax for all these years. However, the holding tax on the same sized buildings erected in recent times is quite higher.

The DSCC official could not say why the tax was not reassessed for all those years.

The DSCC realised Tk 195 crore as tax from around 160,000 holdings in the year 2016-2017. With the reassessment, it now eyes at Tk 515 crore this current year, said sources at the city corporation.

From around 215,000 holdings, the Dhaka North City Corporation realised Tk 280 crore as holding tax last fiscal year, said Rabindra Sri Barua, chief revenue officer of the DNCC.