Stamp Duties in Indian States: A Case for Reform

The authors review the options for reform of stamp duties on immovable property transfers collected by Indian state governments. After briefly reviewing some of the many administrative difficulties experienced with the tax, they turn to an examination of its economic impacts. A review of stamp duties internationally indicates that Indian rates are exceptionally high, at rates often above 10 percent. Most countries' rates are less than 5 percent, including a number of low and middle-income developing countries. With these high rates, the authors find that while the tax has become the third largest revenue source for many Indian states, it imposes high compliance costs on taxpayers, has been subject to a good deal of evasion and fraud, and the distortionary impacts appear to be large, reducing the responsiveness of real estate markets in Indian cities by discouraging transactions essential to the efficient growth of cities. The authors then study the revenue implications of lowering stamp duty rates, which need to be understood if reform is to be viable. Evidence indicates that the current high duty rates, coupled with weak tax administration, lead to widespread evasion of the tax through under-declaration. This under-declaration of property values directly affects collection of other taxes, among them, property taxes and capital gains tax. Moreover, it indirectly affects the collection of all taxes through the impact of under-declaration on the circulation of black money. Simulations indicate that revenues lost due to a lowering of stamp duty rates closer to international levels are quite likely to be recovered in higher collections of other taxes. However, these taxes would at least in part be collected by other levels of government. So reform could be made a more viable option through appropriately designed intergovernmental transfers.

Bibliographic Details

Main Authors:	Alm, James, Annez, Patricia, Modi, Arbind
Format:	Policy Research Working Paper biblioteca
Language:	English en_US
Published:	World Bank, Washington, D.C. 2004-09
Subjects:	ADMINISTRATIVE COSTS, CAPITAL GAINS, CAPITAL GAINS TAX, CAPITALIZATION, CHANGE IN QUANTITY DEMANDED, COMPLIANCE COSTS, CONSOLIDATION, CONSUMERS, COST SAVINGS, DEBENTURES, DECENTRALIZATION, DEMOGRAPHIC TRANSITION, DEVELOPMENT AUTHORITIES, DISTRIBUTION OF INCOME, ECONOMIC EFFECTS, ECONOMIC GROWTH, ELASTICITIES, ELASTICITY OF DEMAND, EQUILIBRIUM, EVASION, EXCHANGE RATE, EXCISE DUTIES, EXCISE TAX, EXCISE TAXES, HOUSING, INCOME GROUPS, INCOME TAX, INSURANCE, INTERGOVERNMENTAL TRANSFERS, LEGAL PROTECTION, LOCAL GOVERNMENT, LOCAL GOVERNMENTS, MANDATES, MARKET VALUE, MUNICIPAL FINANCE, PERVERSE INCENTIVES, POLICY MAKERS, PROPERTY RIGHTS, PROPERTY TAX, PROPERTY TAXES, PROPERTY TRANSFER TAXES, PROPERTY TRANSFERS, PROPERTY VALUES, PUBLIC FINANCE, REAL ESTATE MARKETS, RESERVE BANK OF INDIA, RESOURCE ALLOCATION, REVENUE PERFORMANCE, REVENUE SOURCES, SALES TAXES, SAPS, SAVINGS, SLUMS, STAMP DUTIES, STAMP PAPER, STAMP TAXES, STATE ELECTIONS, STATE GOVERNMENT, STATE GOVERNMENTS, TAX, TAX ADMINISTRATION, TAX BASE, TAX BURDEN, TAX COLLECTION, TAX LIABILITY, TAX RATES, TAX REFORM, TAX REFORMS, TAX REVENUE, TAX REVENUES, TAXATION, TOTAL TAX REVENUE, TREASURY, URBAN AREAS, URBANIZATION,
Online Access:	http://documents.worldbank.org/curated/en/2004/09/5168252/stamp-duties-indian-states-case-reform http://hdl.handle.net/10986/14240
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