The two city corporations of Dhaka are seeking to impose additional taxes on income tax, value-added tax and customs duty paid by city dwellers to the government.
Dhaka South City Corporation and Dhaka North City Corporation have already drafted two separate regulations in this connection and sent those to the Local Government Division of the local government, rural development and cooperatives ministry seeking approval of the regulations.
According to the draft regulation of DSCC titled Dhaka South City Corporation Sub-Tax Regulations-2016, city dwellers will have to pay additional 10 per cent as sub-tax on total amount of income tax, value-added tax and customs duty they paid to the government.
The rate of sub-tax will be 15 per cent on other taxes, the draft said.
The DNCC, however, named its regulations as Dhaka City Corporation Import-Export Tax Collection Regulations-2016.
The draft regulations of DNCC said that the government’s tax collecting agencies would have to collect 15 per cent and 10 per cent sub-tax respectively on income tax and VAT paid by the city dwellers on goods imported for consumption, use and sale in the city corporation areas.
The rate of sub-tax will be 2 per cent on export goods which are either produced in the city or exported from the city, the draft said.
The National Board of Revenue and other government agencies responsible for collecting income tax, VAT, customs duty and other taxes will deposit the sub-tax to a bank account determined by the city corporations, the two drafts stated.
The DNCC draft regulations prohibit consumption, use and sales of goods without payment of sub-tax.
It will also have the authority to seize the import-export goods if the sub-tax is not paid, it said.
The city corporations will be empowered to impose 20 per cent surcharge on amount of unpaid sub-tax on officials responsible for collecting taxes.
City mayor or his representative will have authority to seek information from the tax authority to inspect and scrutinise the information of taxpayers to ensure collection of sub-tax appropriately, the draft stated.
The revenue board and other relevant agencies will face a 20 per cent penalty on sub-tax in case of failure in providing information and documents as per requirement of the corporation.
The city corporation will have to sign agreements with the tax collecting authorities for the purpose of sub-tax collection, it said.
The city corporations claimed that as per the forth schedule of the Local Government (city corporation) Act, 2009, they could impose sub-tax on import of goods for consumption, use and sale in city areas and on export of goods from the city as well as sub-tax on tax imposed by the government.
The LGD on June 20 held a meeting to finalise the regulations and decided to seek opinion of Finance Division, Internal Resources Division of the finance ministry and the National Board of Revenue.
Officials said that the LGD would hold further meetings to finalise the rules after getting opinion from them.
Finance ministry officials said that the proposals of imposition of additional taxes on existing income tax, value-added tax and customs duties were not feasible in the context of existing socio-economic conditions of city dwellers.
Any move to impose such additional tax will create complexities in taxation system, they said.
The rate of compliance in tax payment in the country is also very low while the tax base is also thin, they said, adding that such tax may encourage the existing taxpayers even to avoid payment of original taxes.
Earlier in last July, the two city mayors at a meeting with the NBR chairman, Md Nojibur Rahman, had placed the same demand.
Later, Muhith, on a summary of the revenue board sent to him seeking instructions on the proposal of the two city corporations, termed it too complex to implement under the existing tax system, officials said.
Income tax wing of the NBR also gave their negative opinion on introduction of sub-tax or cess on income tax of city dwellers citing that there was no legal provision in the tax law to impose such tax.
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