Dodging land revenue: Still an open secret trick

It is a thousands of crore taka tax evasion fraud based on mutual agreement among three parties – the seller, the buyer and land officials — while the government, with almost no counter measures, is the ultimate loser. And how the fraud takes place is not anything secret; the tax evasion tricks in land sales are in fact known to almost everyone.

To deprive the government of land registration revenue, the buyer and seller mutually decide on a throwaway rate to be shown on the registration paper, transact the rest of the money of the actual deal unofficially, and give a pie to land officials for them to turn a blind eye to the misdeed.

Take for instance a recent plot sale in Dhaka's upscale Banani, at road no 7. According to the official sales documents, the land and a single storied building on it changed hands in April this year for only Tk75 lakh.

But according to the Ministry of Housing and Public Works, Rajdhani Unnayan Kartripakkha (Rajuk) and local land registry office, the land and the house would cost a minimum of Tk3.57 crore, plus at least nine types of taxes and government fees on the amount, that is around Tk28 lakh.   

People privy to the sales told The Business Standard that the plot and house on it were actually sold at Tk9.50 crore, and the price was shown much less than the actual in order to avoid paying government taxes.    

"The land taxes are too much. I concealed the actual price on the recommendation of the deed writer," said the buyer on condition of anonymity.      

Transparency International Bangladesh (TIB) Executive Director Dr Iftekharuzzaman says the ongoing festival of corruption in land business is sort of an open secret while there are no counter measures to stop it.

Land registration across the country fetched Tk13,000 crore last year. But Iftekharuzzaman said the revenue would be three times higher if registration corruption could be checked.

"We do not have any exact data about land registration tax dodging. In fact, there is no arrangement to gauge it either," Md. Mokbul Hossain, chairman of the Standing Committee on the Ministry of Land, told TBS.

Barrister Shafique Ahmed, a former law minister, said tax dodging has not been coming under the spotlight since public officials sit idle despite knowing everything.     

A gloomy picture of revenue collection

From January to June this year, around 3 lakh land registrations took place at 16 regional land registration offices in metropolitan Dhaka. The registrations fetched the government Tk3,500 crore.      

An investigation by The Business Standard found there were 8,400 land registrations in upscale Gulshan, Banani and Baridhara areas of the metropolis, with government revenue amounting to Tk200 crore. Only 234 land registrations followed the government fixed minimum plot rates and paid the exact land registration taxes.

The remaining opted for deceptions. According to the Dhaka district land office, the government would get at least Tk1,000 crore more in revenue during January-June this year in the three areas alone if the registrations had followed the government fixed minimum land rates.    

TIB Executive Director Dr Iftekharuzzaman said land prices are shown far too low than the actual prices not only in Dhaka but also across the country as a ploy to dodge registration fees.  

"With almost zero monitoring, there has been a festival of corruption in the sector," he commented.

Several types of fraud 

An 11 katha (0.18 acre) plot with a house on it in Dhaka's Madani Avenue changed hands recently at Tk6 crore. Local land office documents show the land was sold showing its category as "barren" though it is a residential plot.

Before registration, the buyer changed the land category by allegedly managing land officials.         

"The land officials are not to blame alone as the buyers and sellers often adopt deceptive measures for tax evasion," said an official at a regional land office.       

Abdul Mannan, former inspector general at the Directorate of Registration, said, "Land registration tax dodging by changing the land category is quite frequent. Often the buyers show commercial plots as residential or low lands to show a low price in the registration process."         

Mannan underscored strengthening the monitoring of the regional land offices that are responsible for the category change.

In cases, land prices in the official documents are shown to be more than the actual sale rates. This type of fraud takes place so that the seller can sell his plot to his chosen buyer, bypassing the pre-emption right — the legal right of family members to be offered an opportunity for land purchases before moving on to others.      

No arrangement to check evasion

Md. Mokbul Hossain, chairman of the Standing Committee on Ministry of Land, said the committee could not go for any countermeasure to check land registration tax evasion since the registration directorate is under the Ministry of Law, Justice and Parliamentary Affairs while other land related offices are under the Ministry of Land.

He noted that digitisation of the land registration process can stop such evasions.   

That is "because all the documents will be available online. No middleman or influential quarter would then be able to evade the land tax as the process will automatically be under ministry monitoring," he added.   

Ruhul Amin, a former additional secretary and a land management researcher, said land sellers in many developed countries have to notify the city corporation, municipality or land control board prior to the sale. Then these offices arrange potential buyers.

He said since the authorities guide the buy and sale process, tax evasion in land ownership change in the countries is almost impossible. He recommended introducing the system in Bangladesh too.     

Law Minister Anisul Huq said the land registration process is being digitized and that the government is working on it.   

"The digitisation will begin soon after fund allocation. Once our registration goes online, the evasion will be stopped," he added.