Black money investment in real estate may face higher taxes next FY: NBR chief

Highlights: 

• NBR chairman hinted that black money whitening scope may go in next budget
• If not fully abolished, black money invested in real estate to face higher taxes
• Real estate developers opposed the move, arguing it would hurt the industry, jobs
• NBR chief also said businessmen's demand for tax exemptions not feasible 

National Board of Revenue Chairman Abdur Rahman Khan has indicated that the provision that allows black money legalisation could be eliminated in the next budget but if complete abolition proves unfeasible, taxes will be increased on such money invested in the housing sector.

"Recently, some facilities for investing undisclosed money have been cancelled. Another facility under the sunset clause will end next June," he said while addressing a pre-budget meeting with stakeholders at the ERF auditorium in the capital's Paltan area today.

The Research and Policy Integration for Development (RAPID) and the Economic Reporters Forum (ERF) jointly organised the event titled "Domestic Revenue Mobilisation for Inclusive Growth and Development: Policy Reform Priorities for Bangladesh."

Currently, the maximum tax rate for individual taxpayers is 25%. However, individuals can legalise undisclosed money by paying the regular tax rate along with a 10% penalty, a provision that is set to end by next June, at the close of FY25.

For real estate investment, taxes on undisclosed money in lands range from Tk300 to Tk15,000 per square meter, depending on the location. For apartments, the tax ranges from Tk500 to Tk4,000 per square meter. 

The highest rates apply in areas such as Gulshan, Banani, Baridhara, and Motijheel in Dhaka. There is also a perception among people that these rates are lower than the standard tax rate when considering the actual value of land and apartments.

The Real Estate and Housing Association of Bangladesh (REHAB) opposed the move, arguing that a decline in housing sector investments could hurt the industry and cause widespread unemployment.

At the meeting, RAPID Executive Director M Abu Eusuf delivered the keynote address. To boost revenue collection, he stressed the need for universal tax registration, a nationwide awareness campaign, and data integration with various government institutions related to revenue.

Shawkat Hossain Masum, head of Online at The Daily Prothom Alo, Doulot Akter Mala, president of ERF, and Abul Kashem, general secretary of ERF, also participated in the discussion.

Businessmen's demand for tax exemptions not feasible

The NBR chairman said that while businessmen have many demands, granting all of them would require Tk1 lakh crore in tax exemptions, severely impacting the government's Tk 4 lakh crore revenue target.

He said that previous budgets were overly ambitious, which led to an increasing debt burden. "For the past 50 years, we have been expanding the budget through borrowing. Why are we continuing to create such ambitious budgets?" he questioned.

"When we seek loans from development partners, they now impose conditions as they worry about getting back the fund. As a result, they give us various terms — asking us to increase this and that [tax increase]," he explained.

As a result, external entities are now intervening in national tax policies, he said, adding, "Not all of their recommendations are beneficial for the country. Yet, we are often compelled to comply."

Addressing concerns about tax policies, the NBR chairman acknowledged that tax rates have been aggressively increased across various sectors. "We have become highly aggressive at the policy level, imposing and raising taxes in multiple areas. Now, both local and foreign investors are expressing concerns about the tax regime," he said.

Despite these challenges, Abdur Rahman assured that the upcoming budget will be business-friendly with a focus on public welfare. He also mentioned the need to rationalise the existing excise duty on bank deposits.

Additionally, the NBR chief highlighted a major issue in tax compliance. Although there are 1.14 crore Taxpayer Identification Number (TIN) holders in the country, only 45 lakh actually file tax returns.

Among those who do file returns, two-thirds declare zero taxable income, meaning the government receives no tax revenue from them, he added.