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RBI report flags large-scale variation in property tax collection across civic bodies
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IANS | 20 Nov, 2022
It may look surprising but it is a fact that the property tax revenue of
the municipal bodies in Delhi is much more than that of bigger states
including Uttar Pradesh, Madhya Pradesh, Rajasthan and many other
states.
There is a large-scale variation in property tax
revenue of municipal bodies of different states. For instance,
municipal bodies in Delhi and Gujarat recorded the property tax revenue
receipts of Rs 2,940 crore and Rs 1,548.69 crore respectively during
2019-20. On the other hand, the property tax revenue of Uttar Pradesh
and Rajasthan was Rs 936.77 crore and Rs 343.98 crore respectively
during the same year.
A latest report by the RBI on the financial
condition of municipal bodies in the country has disclosed that
municipal bodies in states like Delhi, Gujarat, Maharashtra, Chandigarh,
and Chhattisgarh collect higher taxes relative to other states.
The
report has noted that the collection system is marred by challenges of
pending litigation and inadequate staffing in municipal bodies and there
is a need for large-scale reform of property taxation practices in
India. It also said that despite its dominance over other municipal
taxes, property tax collection in India is much lower compared to the
OECD countries due to several factors including property undervaluation,
incomplete registers, policy inadequacy and ineffective administration.
It
also noted that poor enforcement mechanisms, coupled with multiple
outdated exemptions, dated property rolls and databases, sub-optimal tax
rates, property undervaluation and weak tax administration have
resulted in significant under-recoveries in the majority of the Indian
cities.
While the level of urbanisation and the urban population
density bear a positive correlation with the amount of property tax
mobilised, there are several corporations which have been able to
generate relatively higher revenue at much lower levels of urbanization,
said the report.
It also highlighted that the potential of
property tax needs to be fully leveraged by extending coverage, regular
revision of tax rates, improving the assessment system and raising
efficiency in tax administration.
"For the smaller MCs, lack of
institutional capacity to undertake these reforms constitutes the main
challenge and assistance from the state governments in this regard may
be helpful. For the larger corporations, it is vital that the expansion
of tax base and increase in efficiency of tax collection are achieved
through the use of technologies such as satellite photography and
geo-coding of data," said the report.
The report has said that
most municipalities in India do not have balance sheets in the public
domain and many of them continue to follow a cash accounting system.
"Municipal
laws do not prescribe any uniform accounting standard to be followed,
rendering municipal accounts largely incomparable across states and even
within a state. Most municipalities only prepare budgets and review
actuals against budgeted plans but do not use their audited financial
statements for balance sheet and cash flow management, resulting in
significant inefficiencies," it said.
"This report, the first of
its kind, seeks to bridge this data gap through compilation of available
budgetary data of 201 municipal corporations in India across all
states," it said.
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