Composite Area Linked System for Property Tax Reform in India*

Abstract

In India, property tax is presently levied on the basis of the rent‐based rateable valuation system. Various official Commissions and Committees and professional experts have, over the last four decades, commented upon the inadequacies of this system, which, among other things, are the absence of an open market in land and rental transactions, the non‐availablility of professionally trained valuers and the subjective nature of assessments in a corruption‐prone administrative environment. As to the direction of future reforms, there have been two schools of thought ‐ one, advocating for amendment of current rent control laws; and the other, favoring a new system of local taxation, delinked both from the capital value and rental value systems which are difficult to administer in India. This paper highlights the findings of a policy‐oriented research study commissioned by the Ministry of Urban Development for the design and evaluation of such a system.

Challenges to Property Rate Administration in the Offinso South Municipality, Ghana

“…It is sometimes difficult to value properties for rating purposes in many developing nations (Bahl, 2009). For example, problems with the tax base and the administration of the rent-based rateable valuation system have undermined the buoyancy of property tax in India (Kapoor & Ghosh, 1992). Also, the prevailing revenue collection mechanisms of most local authorities in most African countries are generally inefficient and realized revenues are in some instances inappropriately managed (McCluskey et al, 2003).…”

“…Also, the tax provides opportunity for broad and expanding tax base and it is therefore a potentially attractive means for financing local governments in developing countries (Dillinger, 1991;Mauer & Paugam, 2000). Aside the tax's ability to mobilize revenue for local authorities, it has significant potential as a tool for urban land development policies (Kapoor & Ghosh, 1992). It is a vital constituent of local government finances in many nations.…”

“…The fiscal autonomy of decentralized governments depends on the efficacy of the tax instruments, the growth potential of non-tax revenues, and principled inter-governmental transfers (Kapoor & Ghosh, 1992). An efficient tax regime provides predictable revenue stream, has less-incidence on tax payers' decisions, has limited administrative burden, and is equitable (Bell, 2003).…”

Constraints on property rating in the Offinso South Municipality of Ghana

“…Property tax is an ideal tax for local governments in low-income countries since it serves as benefit levy, is progressive in its distribution of the tax burden, and has significant revenue-raising potential (Bahl, 2009). In addition, its ability to mobilize revenue for local authorities has immense potential as a tool for land and urban development policies (Kapoor and Ghosh, 1992). It is imposed for the purpose of mobilizing revenue for government, public purposes, infrastructure, municipal services, or land use planning (Needham, 2000).…”