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Wealth surcharge needs market based valuation

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Staff Reporter :
The proposed wealth surcharge in the budget may face difficulty in the absence of valuation of properties based on current market prices, experts said.
They believe that NBR should develop an authentic mechanism for property valuation. Otherwise many wealthy persons may stay out of the surcharge net by showing the transaction value of their assets acquired decades ago, instead of present market value.
Without a system, those who bought flats in recent years had to pay higher wealth surcharge owing to asset price hike, in contrast to those bought earlier.
"There was a huge discrepancy in this area as valuation of wealth was linked with purchase prices or transaction value instead of present market value," said a senior official of the National Board of Revenue.
Moreover, as zero value is shown in gift properties, many may remain out of the surcharge net despite having huge wealth.
The new measure of collecting surcharge tax on the basis of location of the property will plug in the loophole, he said. The NBR imposed 10 percent surcharge tax, or a minimum of Tk 3,000, on those who have 8,000sft property registered in his/her own name in any city corporation.
The move is expected to yield an additional Tk 300 crore, the official added. "It is a good initiative," said Ahsan H Mansur, executive director at the Policy Research Institute.
Those who bought properties in Dhaka's upscale areas such as Gulshan and Banani 50 years ago would be super rich today. But they would remain out of the surcharge net as valuation of wealth is not done based on market rate.
He, however, said there is prospect of a good amount of tax as the number of people owning more than 8,000sft house or apartment in city corporations would not be high.  The NBR should lower the slab to 3,000sft home or apartment and bring land ownership in cities under the wealth surcharge net.
"Wealth is wealth, be it land or cash," he said, adding that inherited properties should also be brought under the system.
The NBR introduced wealth surcharge in fiscal 2011-12 as an alternative to wealth tax in a bid to ensure equity in the society, taxmen said.

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