House rents in cash no more

The government is likely to mandate monthly payments of house rents through banks or mobile financial service providers from the next fiscal year, according to the National Board of Revenue (NBR) sources.

A monthly salary payment of over Tk15,000 using the banking channel might also be made compulsory, they added.

Finance Minister AHM Mustafa Kamal will place such proposals in his budget speech for the fiscal 2021-22 on Thursday.  At present, there is a directive in force for paying a house rent of Tk25,000 through banks.

On the other hand, private employees at executive posts and government officers with a minimum salary of Tk16,000 now have to register for Taxpayer's Identification Number (TIN) and submit income tax returns.

According to the NBR sources, a process is also underway to include bill payments of contractors in the banking channel in the next budget to ensure the inclusion of the informal sector in the country's economy.

From the next fiscal year, if any contracting and supplying bills are paid without using banks or mobile financial services, an additional 50% tax will be levied at the existing tax rate, the NBR sources said.

NBR officials said the NBR has proposed including all transactions exceeding a certain limit in the banking channel to further formalise the informal economy.

An income tax official of the revenue board said if the proposal is passed, transactions without official channels will no longer be an "approved spending". Labelling those incomes as well as spending illegal, the revenue board will be able to realise tax and fine.          

"The fine could be 50% of the payable tax, or at least Tk5,000," added the official.

Appreciating the proposal, economists said the NBR's compliance initiative will have a positive impact on the formal economy.     

Dr Ahsan H Mansur, executive director of the Policy Research Institute (PRI), said the initiative is certainly appreciable. "Most of the landlords do not pay taxes while many do not even publish accurate accounts of staff salaries. The initiative will help establish good governance. However, there are doubts about its implementation."

He said the revenue board earlier took such initiatives many times, and there was even a household survey.

"But the result was ultimately zero. If the proposal is approved this year, the NBR will have to emphasise the implementation," added the PRI executive director.  

In the budget for the 2014-15 fiscal year, former Finance Minister Abul Maal Abdul Muhith made it mandatory to pay house rents above Tk25,000 per month through the banking channels. But most landlords still collect the rents in cash.

The NBR so far does not have the actual data about how many landlords collect rents through the official channels.

In December 2012, the NBR started listing the tax-evading landlords in Dhaka and other divisional cities. The survey conducted for more than a year found 1.66 lakh landlords who do not pay income tax. Only a few landlords filed return submissions though all the tax-dodging landlords were notified by the revenue board.