ASIA: CPD proposes inheritance tax to reduce wealth inequality in Bangladesh.

As published on tbsnews.net, Wednesday 24 May, 2023.

The Center for Policy Dialogue (CPD) has proposed imposing an inheritance tax as part of a wealth tax to reduce wealth inequality in the country and increase revenue collection.

"The wealth and income disparity in the country has increased. Tax collection should be increased to ensure tax fairness," Debapriya Bhattacharya, distinguished fellow at the think tank, said in his keynote presentation at a dialogue titled "State and scope of property taxation in Bangladesh".

Currently, there is no specific tax called the wealth tax in the country. However, there are six types of taxes and duties, including land development tax, holding tax, capital gains tax, stamp duty, and wealth surcharge, which are generally considered to be wealth taxes. Although there is a gift tax, it is not always effective.

"If property tax is collected properly, it will create an opportunity to reduce wealth disparity," the economist told the event held at a Gulshan hotel in the capital on Wednesday.

The CPD believes that with proper implementation, it is possible to collect an additional Tk6,000 crore in wealth taxes.

Debapriya Bhattacharya said, "The revenue collection and fairness in taxation have not been established in the same way as the wealth has been concentrated; income and wealth inequality have increased."

"For this reason, the introduction of a mandatory wealth tax has become inevitable."

But this wealth tax should be based on efficiency and fairness, he said, adding, "We should move forward with strategic planning based on the existing framework of the National Board of Revenue (NBR) and land management."

He emphasised creating inter- and intra-connectivity between various government institutions, proper valuation of assets, and collection of taxes with the aim of proper imposition of property tax and inheritance tax.

At the event, other speakers also emphasised on inheritance tax. Ahsan H Mansur, executive director at the Policy Research Institute, said, "When (heirs) automatically get wealth without any kind of tax, it increases wealth inequality. It should come under tax coverage."

Blaming the "political economy" for the non-taxation of immovable properties, including land and houses, he said, "People's investment in land and houses is increasing, because their prices are shooting up fast. But taxation is not happening the same way, although these properties are not being used for productive work."

For example, he said, "A land in Purbachal, which was Tk25 lakh 10 years ago, has now risen to Tk3 crore. People are accumulating wealth by taking advantage of tax havens. But it remains unproductive."

Former NBR chairman Muhammad Abdul Majid mentioned that a huge amount of undisclosed money is being generated through this sector due to problems in proper taxation and valuation of land and houses.

Nasiruddin Ahmed, who also previously served NBR as its chairman, said that an initiative to introduce an inheritance tax system was taken during his tenure in 2011, and such a proposal was sent to the Cabinet. But it was not approved.

He pointed to the influential people for their failure to introduce such taxes.

Professor Mustafizur Rahman, a distinguished fellow of CPD, said, "Investment in assets is gaining importance in Bangladesh as returns from here are higher than GDP growth. In this process, the money is going undisclosed."

However, Barrister Shameem Haider Patwary, a member of the parliamentary standing committee on the ministry of law, justice, and parliamentary affairs, said, "Why will there be tax unless people sell their assets they get as inheritance? There will be a capital gain if you sell, and there is tax on that now."

However, he commented that some tax can be levied in the case of a gift of property.

Lands Minister Saifuzzaman Chowdhury also feels that issues like inheritance tax need to be addressed.

Shameem Haider Patwary said tax collection is low due to a lack of democracy and good governance in the country. Additionally, people do not want to pay taxes if they don't get the expected services.

"Without good governance, tax collection will not increase. A country cannot be run by bureaucrats alone," he added.

At this time, he said, bribes have to be paid for land registration and other related services.

Tax collection system will be launched in accordance with the fiscal year

At present, land rent is collected as per Bengali month. The government has taken the initiative to collect it in accordance with the financial year in the future.

Land Minister Saifuzzaman Chowdhury said that a law is being formulated for this. The bill will be placed before parliament in the next session.

Apart from this, as a part of land digitisation, certification of land ownership will be provided to landowners through smart cards. As a result, it will be easy to know where and how much land that person has.

Fahmida Khatun, executive director of the CPD, conducted the dialogue session, while Maurizio Cian, Head of Cooperation, Delegation of the European Union to Bangladesh, Snehasish Barua, tax expert and partner at Snehasish Mahmud & Company Limited, and other experts were also present at the programme.