State and local governments across India should digitize property tax systems to unlock their revenue-raising potential. Explain (200 Words)
Refer - Financial Express
Enrich the answer from other sources, if the question demands.
IAS Parliament 4 years
KEY POINTS
· Under the Atmanirbhar Bharat Abhiyaan, states will be permitted to borrow more money than before. Of this, additional borrowing of nearly Rs 50,000 crore has been linked to an increase in urban local body (ULB) revenues.
· As property tax is the biggest source (approximately 60%) of self-generated revenue for ULBs, this automatically means a greater focus on property tax reforms. ICRIER reports that property tax collections as a share of India’s GDP stood at only 0.15% in 2017-18.
· Further, informal urban growth makes it difficult to estimate what percentage of properties are excluded. The valuation formula, which determines how much tax is charged on a property, is often indexed to outdated rental values—a poor reflection of the market value of the property today. Finally, low collection rates compound the challenge: on average, only 37% of billed tax is collected.
· Dues are calculated manually, based on entries in physical registers; bills are printed and then delivered by post or hand, and citizens pay their taxes in person at ULB offices or service counters, often carrying stacks of paper receipts from previous years—just in case a dispute arises.
· A digital property register can integrate records from multiple departments or silos, serving as a “single source of truth” to which various users can refer. For instance, one source of revenue loss is that industrial or commercial properties which would be charged higher taxes are misclassified as residential properties.
· Automating the billing process and making bills accessible through a website or mobile app can also improve collections significantly. In Andhra Pradesh, an integrated e-bill, combining property taxes and utility charges, was found to particularly enhance the convenience for citizens.
· They could receive real-time updates on payments due, and make a single consolidated payment at one click. It also cut down the time taken to raise bills from four months to one week and saved considerable money and effort on the billing process.
· Digitisation is, in itself, a key first step to enhance property tax collection; it will also enhance the quality of subsequent analyses and policy decisions, by providing high-quality data from cities’ own administrative systems. State and local governments across India should see digitisation as a key to unlocking their revenue-raising potential.
