Municipalities don't realise potential from property tax: Economic Survey

It adds, Bengaluru and Jaipur are collecting no more than 5 to 20% of the potential

India’s urban local bodies, or municipalities, have a huge potential to raise resources through taxation such as property tax, the Economic Survey said. It said low level of per capita expenditure of Urban Local Bodies (ULBs) against state per capita expenditure show either states are not devolving adequate financial resources to these bodies or ULBs are not raising resources on their own.

The Survey’s assessment of property tax collection potential of Bengaluru and Jaipur shows that currently both these cities are collecting no more than 5 to 20 per cent of the potential. The study on municipal finances conducted by the 14th Finance Commission indicated per capita revenue from property taxes was Rs 1,677 at most, with a low of just Rs 42. The Survey said with higher devolution of taxes to the states and grants to ULBs after the 14th Finance Commission, overall public funds available for urban rejuvenation has increased and municipalities should make good use these. According to some studies, by 2011, there were no less than 380 million, living in around 8,000 cities and towns, at least 53 of which were home to over one million people, the survey said. Urban Indians now form about a third of the population and produce more than three-fifths of the country’s gross domestic product.