COMMERCIAL USE OF RESIDENTIAL BUILDINGS: Cabinet asks authorities to make list to check tax dodge

The Cabinet has asked the Local Government Division, Internal Resource Division and home ministry to prepare a list of residential buildings having spaces being used for commercial purposes to prevent tax evasion and ensure proper tax collection from the sector. In its regular meeting on June 8, the Cabinet decided to prepare the list of buildings and plots situated in the cities, particularly on roadsides, running different types of business activities. In last week, the Cabinet Division instructed the LGD, IRD and home ministry to implement the decision and send progress report regularly. There are allegations that many house owners rent a portion of their residential houses to commercial users but pay taxes on residential income. Many restaurants, beauty parlours, shops and other commercial activities are run in residential houses and establishments in residential areas and on roadsides in the cities. An inquiry conducted by the Anti-Corruption Commission last year found that over 3,000 residential buildings in the city’s Gulshan, Dhanmondi, Uttara, Mohammadpur and Segunbagicha areas were being used for commercial and residential-cum-commercial purposes. Rajdhani Unnayan Katripakkha, however, has no official data of residential buildings being used for commercial purposes. Officials of the RAJUK said that the number would be much higher than 3,000. Officials of the National Board of Revenue said that the government was deprived of huge amount of revenue because of such practices as the commercial house rent is higher than that of residential one. House owners evade substantial amount of income tax by showing less income derived from rent as the building is a residential one, they said. On the other hand, users also evade value-added tax at the rate of 9 per cent on the rent amount paid for commercial space and establishment of the size above 150 square feet. The owners of such buildings and businesses established there also pay bills for electricity, water and gas uses at residential rates though the rates for commercial uses are significantly higher. The city corporations also charge holding tax at higher rate on commercial houses. The government agencies including the NBR and city corporations do not have effective monitoring and enforcement mechanism and sufficient manpower to ensure revenue collection properly from the houses, a senior official of the revenue board said. ‘The revenue board gets less income tax as the house owners hide additional income derived from commercial spaces of the buildings,’ he said. On the other hand, commercial users may also evade the VAT as the building is approved as residential one, he said. Taxmen said that collecting tax from the multi-storeyed residential-cum-commercial buildings properly was not very tough as in most of cases different people own the apartments and shops in the building. But it is not easy for taxmen to detect the residential buildings having commercial activities within those buildings in the cities, they said. According to the decision of the Cabinet, the Local Government Division, Internal Resource Division and home ministry will take combined steps to prepare the list and take proper actions. The Local Government Division will take necessary initiatives in this connection, it said. The Cabinet Division has recently informed the decision to the LGD, IRD and home ministry and asked to take necessary steps in this regard. It also instructed the divisions and ministry to send a progress report to the Cabinet Division before the day 4 of every month until the decision is implemented. News Courtesy: www.newagebd.net