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

Awasthi, Rajul ; Nagarajan, Mohan

World Bank, Washington, DC

关键词: PROPERTY TAX;    REVENUE MOBILIZATION;    TAX REFORM;    URBANIZATION;    PUBLIC FINANCE;   

RP-ID  :  147943

学科分类：社会科学、人文和艺术（综合）

来源: World Bank Open Knowledge Repository

【 摘 要 】

Rapid urbanization in India means citiesface a tremendous challenge to finance and delivertheincreasing demand for basic municipal services. Whencompared to peers in the Organisation forEconomicCo-operation and Development (OECD), India performs poorlyin generating revenues fromthe urban immovable property tax.The data show that while the average collection frompropertytaxes in the OECD group is about 1.1 percent ofnational gross domestic product, the number forIndia isabout 0.2 percent, which is just one-sixth. Most Indianstates, including the relatively better performers, collectsmall amounts compared to OECD countries. Several factorslead to low property tax revenue in India: undervaluation,incomplete registers, policy inadequacy, and ineffectiveadministration. A big challenge for property taxadministration is the lack of accurate property tax rollsunder the jurisdiction of the urban local bodies (ULBs).Property tax laws are generally seen to provide manyexemptions. Undervaluation is rampant. ULBs — especiallysmaller municipalities and Nagar Palikas — are constrainedwith the capacities they possess to effectively administer aproperty tax. Reform would need to undertake a range ofactivities: updating property tax laws, getting rid ofineffective exemptions, completing property registers,adopting more effective valuation approaches, andstrengthening administration. There is merit in preparing amodel municipal act to help build a more robust property taxsystem. A fresh approach to property tax administration isneeded to help bridge the resource gap in the revenueraising capacity of ULBs. For small ULBs that lack capacity,property tax (and perhaps other municipal revenue sources aswell) could be administered by a centralized body thathandles property registers and databases of all ULBs underits remit through a unique information technology platform.The paper suggests a model to support and manage thetechnical- and policy-related aspects of the property tax:the establishment of a Municipal Revenue Board at the statelevel. The board is conceptualized to leverage the latesttechnology to implement the "back office"functions of a typical property tax administration.