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Property Tax: Is it only an increase of 15% or more than 170%? 

5 min read
Bhamy V Shenoy
 
Mysuru: There are not many Mysureans who are hot agitated about the payment of property taxes – failure of online system to function, long lines to pay taxes, and above all the unexpected increase in taxes.
In this article I have attempted to analyze the reasons for tax increase. It was just five days before the dead line of April 1,  the earliest one can pay property tax for 2021-22 we were told that property tax will go up by 15%. However in reality it has gone up much beyond 15% for most – as much as 170% or more depending upon the vacant land around the house. Why did the government wait till the last minute to make an announcement without calling for comments from the public? 
 
It is a crying shame that an important topic like property tax is handled in the most undemocratic way. According to 74th amendment to the Constitution, urban local body has the responsibility to look after several subjects like poverty alleviation, health, sanitation, urban forestry, gardens, parks, slum improvement, solid waste management, etc. But it has no authority to decide policies concerning property tax. It is decided by the the state. ULBs can only collect the amount decided by the state. 
I am sure that no one at MCC wanted to mislead the public. MCC had to incorporate the tax changes dictated by the government to get grants and they had no option to soften the shock. But this does not let them off the hook. They knew the deadline of April 1. 
 
It is unfortunate that despite having all the time, much anticipated online tax system created a lot of problems – first few days it will not allow payment online, frequent server downs forcing residents to wait in line for hours ( I was one of them) to pay at MCC service centers etc. Apartment owners had to wait even longer since the online system was not ready to accept their payment. After paying tax and check being cleared, system does not show taxes have been paid even after two weeks.
 
Through MLAs, corporators should have asked the government about new tax policy several months back. What can be more important than property tax which account for more than 50% of total MCC budgets? Obviously they failed. They could have avoided the shocks most of the tax payers had. 
 
Even now MCC has not come up with any explanation about how they goofed and misled the public by stating it will go up by mere 15% and that too during a pandemic year. 
 
Through a table which gives tax for four different types of houses, I have attempted to throw light on why taxes have gone up to start a debate. 
As shown in the table on property tax, for the House A with no vacant land around the house, tax has gone up by only 14%, for House D with huge vacant land it has gone up by 170%. For other two Houses B and C, increase are 47% and 76% respectively. 
 
These increases are mostly because of two factors – both justified. One is to reflect the increase in cost of construction from Rs 580 to Rs 1365 per square feet and the other is to reflect value of land from Rs 1000 to Rs 3716 per square feet. This is partly compensated by reducing tax rates from 0.9131% to 0.647% ( I wonder why such precision to four decimals). Also instead of taking 50% of the market value for land,  25% of the value is considered to compute taxes. 
 
Still for houses around which there is vacant land, tax increases are huge. In the past, vacant land did not attract any tax. This was not fair and equitable  since land is often far more valuable than the house. Thus a small house on a small pot had more or less the same tax liability as a small house on a large parcel of land. While the government is justified in putting a tax of vacant land, they should have done it gradually and not at one go. There are some argue that such a huge tax on vacant lands forces them to sell to apartment construction companies instead of developing it as green space. 
 
Whether it is a glitch in the computer software or a revised policy that houses without a completion report (CR) do not have to pay double the amount like in the past. This should have made many house owners happy.
 
If only the government had public discussion about property tax earlier and not pulled an unpleasant surprise, the government could have gained the support of the public and avoided the vehement opposition to sudden increase in the tax.
 
Just like people not renting their houses get 50% discount, they could have considered giving some concession to senior citizens. It is not clear on what basis depreciation rates for buildings have been based or how land and construction values have been arrived at. It looks as though the entire exercise of property tax policy has been done in an undemocratic way by bureaucrats without consulting experts and also not taking into consideration the burden on vulnerable section of the society. Government should form a committee of experts and elected leaders from all parties to formulate a sound policy to take a comprehensive look into the property tax. 
 
Table: Property Tax for four different types of houses.
 
House A (little vacant land)
House B (Some vacant land)
House C ( medium site)
House D (large site with huge vacant land) 
Site (Square Ft) 
1800
2500
3000
9000
Building Size 
1500
1750
1750
3250
Vacant Site which is taxed (sq ft) 
0
750
1250
6500
Land Value for 2020-21 (Rs/sq ft) 
3716
3716
3716
3716
Land Value for 2021-22 (Rs/sq ft)
1000
1000
1000
1000
Tax on land
0
0
0
0
Building cost for 2020-21 (Rs/sq ft)
1365
1365
1365
1365
Building Cost for 2021-22 (Rs/sq ft)
580
580
580
580
Tax Rate for 2020-21 (%)
0.647
0.647
0.647
0.647
Tax Rate for 2021-22 (%) 
0.9131
0.9131
0.9131
0.9131
Total Tax for 2020-21 (Rs) 
5423
7438
8933
26275
Total Tax for 2021-22 (Rs) 
4757
5073
5073
9739
% increase in 2021-22
14%
47%
76%
170%
 
In my published article in 2018, I had estimated that if property tax system is scientifically developed and efficiently administered MCC can collect more than Rs 250 crore per year. Even the new estimate given by MCC of Rs 180 crore is an underestimation. While honest payers follow the rules, many manage to pay less.
–Team Mysoorunews

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