Property Taxation in India : Issues Impacting Revenue Performance and Suggestions for Reform

Rapid urbanization in India means cities face a tremendous challenge to finance and deliver theincreasing demand for basic municipal services. When compared to peers in the Organisation forEconomic Co-operation and Development (OECD), India performs poorly in generating revenues fromthe urban immovable property tax. The data show that while the average collection from propertytaxes in the OECD group is about 1.1 percent of national gross domestic product, the number forIndia is about 0.2 percent, which is just one-sixth. Most Indian states, including the relatively better performers, collect small amounts compared to OECD countries. Several factors lead to low property tax revenue in India: undervaluation, incomplete registers, policy inadequacy, and ineffective administration. A big challenge for property tax administration is the lack of accurate property tax rolls under the jurisdiction of the urban local bodies (ULBs). Property tax laws are generally seen to provide many exemptions. Undervaluation is rampant. ULBs — especially smaller municipalities and Nagar Palikas — are constrained with the capacities they possess to effectively administer a property tax. Reform would need to undertake a range of activities: updating property tax laws, getting rid of ineffective exemptions, completing property registers, adopting more effective valuation approaches, and strengthening administration. There is merit in preparing a model municipal act to help build a more robust property tax system. A fresh approach to property tax administration is needed to help bridge the resource gap in the revenue raising capacity of ULBs. For small ULBs that lack capacity, property tax (and perhaps other municipal revenue sources as well) could be administered by a centralized body that handles property registers and databases of all ULBs under its remit through a unique information technology platform. The paper suggests a model to support and manage the technical- and policy-related aspects of the property tax: the establishment of a Municipal Revenue Board at the state level. The board is conceptualized to leverage the latest technology to implement the "back office" functions of a typical property tax administration.

Bibliographic Details

Main Authors:	Awasthi, Rajul, Nagarajan, Mohan
Format:	Working Paper biblioteca
Language:	English
Published:	World Bank, Washington, DC 2020-04
Subjects:	PROPERTY TAX, REVENUE MOBILIZATION, TAX REFORM, URBANIZATION, PUBLIC FINANCE, LAND VALUATION, LAND REGISTRATION, TAX ADMINISTRATION, TAXATION, TAX POLICY, GOVERNANCE,
Online Access:	http://documents.worldbank.org/curated/en/852151587668989296/Property-Taxation-in-India-Issues-Impacting-Revenue-Performance-and-Suggestions-for-Reform http://hdl.handle.net/10986/33655
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