New property tax scheme put on hold

Experts suggest change in indices.

The controversial capital value-based property tax scheme (CVS) has become the first victim of the state assembly polls expected to be held in May.

The hugely unpopular scheme, which was to be implemented from April 1 in the city, was held back late on Monday by Governor Rameshwar Thakur for an indefinite period. According to official sources, the scheme will not be implemented till an elected government assumes office in the state.

Consequently, property owners have to pay their taxes for the present year under the existing Self Assessment Scheme (SAS) as per Annual Rateable Value (ARV).

The property owners of the city, especially the commercial property holders, were opposing the scheme since the tax went up by 100 per cent to 300 per cent under the new system.

Taxation experts feel it is the right time to set right the anomalies. Former member of the Bangalore Agenda Task Force V Ravichandar, who played a significant role in drafting the ARV-based SAS scheme, said: "If the polls were notified such an announcement could not have been made. The Greater Bangalore City Corporation (GBCC) will receive property tax payments in April and May 2008. Else no one would have paid till July-end 2008 when there would have been more clarity post-elections," he pointed out.

According to him, for four years since the Act was notified, the erstwhile Bangalore City Corporation (BCC) and the state government exempted Bangalore from CVS. "This shows that elected representatives had reservations of its direct application in Bangalore. So it is appropriate that elected representative take a call on this," he added.

If the GBCC insists on implementing the CVS formula as done for the rest of the state, it will not be feasible to do so on the ground due to increases ranging from 300 per cent to 1,000 per cent. "This is purely because the land guidance values are very high in Bangalore when compared to other cities in the state. So, there is a need to correct the indices," Ravichandar said.

Unhappy with the disparity in the taxation rates, the property owners had approached the governor seeking relief. The issue had even taken a political turn with the BJP proposing to include withdrawal of the new scheme in its election manifesto.

The Congress was being blamed by other parties for introducing the new scheme in the state.

The Congress leaders, in a bid to retain the goodwill of the voters, met the governor on Monday evening and prevailed upon him to put it on hold.

However, the new scheme will be in operation in all the seven old municipalities which were merged to form the GBCC. The old scheme (SAS) will be operational in the erstwhile BCC limits only.

One of the major drawbacks of the new scheme was that it vested absolute powers in the GBCC officials in determining the property tax. The property owners objected to this on the grounds that it heralded the 'Inspector Raj' giving unnecessary powers to the officials.

"The CVS is being levied on the basis of the land value, type of building and construction material used. This is highly irrational as the evaluation is done by the city corporation who can be arbitrary. We are happy that it has been put on hold," said B K Goyal, member, Managing Committee, Federation of Karnataka Chambers of Commerce and Industry.

Goyal pointed out that the land value and the present value of the properties are relevant only at the time of sale or transfer of the property. "Why should the same criteria be applied for levying property tax? We are willing to pay an enhanced property tax if the GBCC improves the quality of its civic services. However, the quality of the civic services remains poor. The GBCC is not in a position to seek higher taxes," he contended.

He noted that the CVS is in operation in western countries where property value fluctuation is not as high as in Bangalore.

"In some areas, the property tax to be paid under CVS will be 500 per cent more than what is being paid under the existing scheme. This will be a burden on property owners, especially residential property owners," he stated.

Goyal said the existing SAS is people-friendly. "The existing scheme has been accepted by property owners. The GBCC, instead of widening the tax base by including property owners, had taken the wrong means to mobilise resources," he said.