A step closer to ease, transparency: Municipal tax going online

The government has launched a pilot project to start online municipal tax assessment and collection in 110 municipalities nationwide as part of its "Smart Bangladesh" initiative, aiming to facilitate easier tax payments and bring transparency to revenue collection of the local government bodies.

On 9 January, the Local Government Division issued a directive, mandating the implementation of this system within a month.

An LGD senior official has said that 40 municipalities, which are relatively advanced, have already launched online holding tax assessments and collection. Besides, many of the remaining municipalities said the system is in the process of being implemented while some reported software problems.

He said the response is good, and those who have launched the system as well as those who haven't are also in touch. They are trying to start.

Officials say the online tax system will prevent any party involved in paying or assessing holding tax from gaining undue advantages.

Additionally, it will allow taxpayers to conveniently settle their dues at their preferred time. The system also guarantees that the taxes paid are promptly credited to the municipal account, further ensuring accountability, they say.

Malay Chowdhury, additional secretary (urban development) of the Local Government Division, told The Business Standard that municipalities have completed their preparations, and there is optimism that the new system will be rolled out shortly.

He said two software applications dedicated to tax assessment and tax collection have already been developed. A tax officer and an assistant tax officer from each of the 110 municipalities have received training on the web-based holding tax assessment software. Additionally, two officials from each municipality have received training on the tax collection software.

The system enables taxpayers to calculate their taxes, using the provided information, allowing them to view the amount owed and facilitating online payment. This approach ensures transparency, enhances service quality, and provides taxpayers with the assurance that their payments are being deposited into the municipal account, he added.

The country currently has 329 municipalities, categorised into 205 Class A, 94 Class B, and 30 Class C municipalities. A majority of the municipalities where the municipal tax collection system is being introduced belong to the Class A category.

Some of the selected municipalities have already geared up for the introduction of the new online tax system, with a few even possessing their own software solutions.

Municipality mayors say most residents in various municipalities remain unaware of the initiative. However, municipal authorities are gearing up to launch awareness campaigns on the matter.

Mayor Md Haider Gani Khan Palash of Jashore Municipality told TBS that the online tax system would ensure transparency, providing a more straightforward process for both taxpayers and collectors. The introduction of the online system aims to mitigate conflicts and disputes related to taxes that often arise.

Municipal authorities anticipate relief from concerns regarding tax collection, as the system will provide real-time information on the number of taxpayers and their payments, he said.

He further said in addition to the online system, the traditional method of tax payment will still be available for those who prefer it.

Mayor Md Abdul Gani of Savar Municipality said with the increasing trend of online payments for various services and products, there is an expectation that taxpayers will also show interest in making online payments. This shift is anticipated to be advantageous for both taxpayers and municipalities.

He further mentioned that once the software is launched, efforts will be made to inform residents in the municipal area about its availability. Additionally, there will be a concerted effort to promote and encourage online tax payments as part of the initiative.

However, mayors and officials from some municipalities have expressed fear that the swift implementation of the online tax calculation and collection system may face challenges due to the absence of necessary software in many municipalities. Additionally, a shortage of skilled manpower has been identified as a hindrance.

A municipal mayor, preferring to remain unnamed, said online tax payments represent a voluntary act of tax payment, which poses a significant challenge. Collecting taxes, even with repeated requests and various exemptions, is already a challenging task. The mayor suggested that it will take time for citizens to adapt to the practice of voluntarily paying taxes online.

Municipal tax

Among the sources of municipal revenue, holding tax or building and land tax plays a significant role. This tax, along with the lighting rate, fire rate, garbage removal rate, and water rate, constitutes the municipal tax. The assessment of buildings and land is conducted every five years to determine the tax. As of now, the holding tax rate stands at 7%, lighting tax 3%, garbage removal tax 7% , and sewage rate 10%.

Municipal officials say the holding tax amount depends on factors such as the size of the municipality, the number and type of houses, as well as their designated use. In municipalities characterised by smaller houses with limited residential and commercial usage, holding tax collections tend to be lower.

For homeowners utilising their property as a residence, a fixed tax rate applies. In the case of renting the house for residential purposes, the tax is calculated on the remaining ten months' rent after deducting two months' rent from the annual total maintenance expenditure.

Similarly, if the building is employed for commercial purposes, its tax calculation follows the same method. Both building owners and residents within the municipal area are required to pay taxes every three months.

Officials estimate that holding taxes contribute between 25% and 40% to the total revenue of municipalities, varying based on the municipality's size and the nature of the houses within its jurisdiction.