Property Tax and Assessment News From Around the World- For Information Purposes Only. INDIA What s Inside March 2014

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1 INDIA What s Inside March 2014 GHMC to redress grievances of property tax payers Govt's tax increment financing move raises eyebrows Cut water connections of tax defaulters: Greater Visakhapatnam commissioner Special committee formed to review property tax in Punjab Civic body refutes charge of levying extra property tax Property tax relief for owners Mangalore City Corporation hikes property tax by 15 per cent Music bands help Pimpri Chinchwad Municipal Corporation recover Rs 11cr tax dues Civic bodies told to achieve tax targets Rajkot Municipal Corporation seals 318 properties of tax defaulters in city Property Tax: GHMC to go after big defaulters GHMC TO REDRESS GRIEVANCES OF PROPERTY TAX PAYERS The Greater Hyderabad Metropolitan Corporation (GHMC) will organize the second 'property tax parishkaram programme' in all GHMC circle offices between 10 am and 1 pm on March 2. On Friday, GHMC commissioner Somesh Kumar said property tax payers can air their grievances pertaining to pending property mutations, legal cases, revision petitions, new assessment of properties and any other tax related matters at the event. He asked all the deputy commissioners, zonal commissioners and special officers of all circles to be present at their respective areas without failure. The grievances will be solved either on the spot or will be followed up and resolved at the earliest, he said. GOVT'S TAX INCREMENT FINANCING MOVE RAISES EYEBROWS Government's move to implement Tax Increment Financing (TIF) to fund development works in municipalities in the state has raised eyebrows. Civil society activists say that the move will only increase the tax burden on citizens without accruing the intended benefits. Forum for Good Governance (FGG) made representations to chief secretary P K Mohanty on Friday not to consider the move which may not go down well with the people. IPTI Xtracts Page 1

2 TIF involves raising funds for development works in specified areas by using future gains in taxes accrued as a result of the development of the areas. The municipal administration and urban development (MA&UD) department issued an order (GO MS 79) on February 22, announcing that it was introducing TIF in all urban local body (ULB) areas to fund works related to drinking water, underground drainage, storm water drains, development of water bodies, parks, roads, side walls, streetlights, bridges and culverts. The order further said that TIF was essential to meet an expenditure of Rs 46,695 crore for infrastructure development and maintenance during in the state's ULBs. Activists and urban planners are irked as the government has mentioned it would collect a 'supplementary tax' over and above normal property tax, which property owners have to shell out for repayment of loan that would be raised against future tax gains. M Padmnabha Reddy of FGG asked how the government can increase property tax at a time when public representatives have not been elected to urban local bodies. "The state is in turmoil and the term of previous urban local bodies expired two years ago. There are no elected representatives in those bodies," he said. Urban planning experts pointed out that the idea of TIF in its original form does not envisage additional tax. "If the government seeks to raise loans on future gains in property tax that would naturally accrue as a result of property appreciation, why should the government levy a supplementary tax," asked one expert. The expert opinion is that the government may collect additional tax to insure itself against debt in the event that the properties in TIF areas may not appreciate as expected, which is the biggest risk to the scheme itself. CUT WATER CONNECTIONS OF TAX DEFAULTERS: GREATER VISAKHAPATNAM COMMISSIONER The GVMC commissioner MV Satyanarayana has instructed the officials concerned to take steps to disconnect the bulk water supply connections of vacant land tax defaulters, many of whom are industrial units. Reviewing the progress of tax collections at his chamber here on Friday, the civic chief was informed that the collectable VLT demand was at Rs 82 crore over the last seven years, including Rs 10 crore in the present fiscal, but the corporation had so far received only around Rs 10 crore. Regarding property tax (PT), the civic chief was informed that only around Rs 95 crore was collected so far out of the total collectable demand of Rs 170 crore from nearly 4.2 lakh citizens residing in GVMC limits. He expressed displeasure over the poor progress of PT and VLT collection and ordered the officials concerned to achieve the set targets by March end. He also instructed them to disconnect domestic water supply connections and resort to imposition of Revenue Recovery Act on tax defaulters, if needed. SPECIAL COMMITTEE FORMED TO REVIEW PROPERTY TAX IN PUNJAB The Punjab government has decided to constitute a special committee to review property tax in the state. A decision to this effect was taken after joint consultations were held on this issue between Deputy Chief Minister Sukhbir Singh Badal and Local Bodies Minister Anil Joshi. The issue was earlier also taken up for discussion at the party platform. IPTI Xtracts Page 2

3 Disclosing this, an official spokesman said the committee would examine the tax rate for rented, self occupied and commercial areas. It would also review the collector rate in various districts of Punjab. The spokesman said feedback taken from the field would be the benchmark for the entire review exercise. He said the effective date for implementation of the revised tariffs would also be decided by the committee. CIVIC BODY REFUTES CHARGE OF LEVYING EXTRA PROPERTY TAX Various city-based organizations have alleged that the Kolhapur Municipal Corporation (KMC) is charging property tax that is 20% more than the actual amount by calculating the tax on built-up area instead of carpet area of properties. The organizations claimed that it is illegal and against the norms proposed by the state government. However, the KMC has refuted the allegations and shown readiness to discuss the issue with higher authorities. Members of organisations such as Common Man Association, Prajasattak Samaj Seva Sanstha and Kolhapur Engineering Association met property tax department officials on Tuesday. They demanded that the tax be recalculated and the bills be issued again to property holders. Common Man Association president Baba Indulkar said, "The capital-based valuation of property tax was started in According to the guidelines laid down by the state government, the tax should be levied on the carpet area and the locality of the property. However, since the past two years, the civic administration has been calculating property tax based on the built-up area, which is against the rules. The KMC has also imposed 20% extra financial burden on taxpayers through the tax." Property tax, which is a major source of revenue for the KMC, is charged on residential, commercial plots and other types of properties. The capital-based valuation of property tax was introduced to increase the revenue of the KMC, which according to the civic administration has tripled since the new system was started. Refuting the organizations' claims, KMC chief property tax superintendent Dilip Koli said, "Before 2011, we used to not consider the area, size and the location of the property. However, in the capital-based valuation of property tax, all aspects have been taken into consideration. No injustice has been done to property holders and no extra tax has been charged." Activists also demanded that industrial areas in the Kolhapur should have different tax structure. Presently, the KMC is charging the industries in Udyam Nagar are charged with commercial rates instead of industrial rates, activists claimed. Indulkar said the changes in property tax structures had been sent to state government for approval. Though the urban development department had not yet approved the same, the KMC was still implementing changes such as collection of tax based on built-up area. The civic administration has assured members of the organizations to call a meet with higher authorities in next two to three days. IPTI Xtracts Page 3

4 PROPERTY TAX RELIEF FOR OWNERS The Bombay high court has granted relief to all property owners who have to pay steep property tax on the basis of a new system introduced in They can now pay property taxes under the old un-amended rates with 50% differential between the old and new rates, the HC directed recently. The HC bench of Chief Justice Mohit Shah and Justice M S Sanklecha passed the order while hearing a bunch of 47 petitions by the Property Owners' Association, societies and individual property owners, among others. The petitioners had challenged the new property tax regime based on capital value of the property as "arbitrary and unconstitutional". Several private charitable trusts like Bombay hospital and others had also challenged the new regime since it took away exemptions granted to them earlier. The new system took the capital value of the property to calculate the amount of property tax instead of the "reasonable rent" premises would fetch as a base value under the old law. The POA represented by advocate H N Vakil and others said the new taxes as result were exorbitant and discriminatory. The HC had granted relief to several property owners earlier. On February 24 it extended the relief to others. After it was pointed out that other property owners similarly affected but not before the court would suffer, the HC said its order would be applicable to all property owners even those who were not before the court till further orders. The tax would be accepted by the BMC without prejudice to rights of all parties. The matters were argued at length by a number of counsel appearing for various petitioners. Counsel Snehal Paranjpe appearing on behalf of the Bombay Hospital Trust, instructed by Kanga and Company, argued that being a charitable trust the hospital was entitled to certain exemptions allowed earlier. The HC de-tagged the petition filed by Bombay Hospital from the group of petitions filed by POA and others. It said it would hear the petitions filed by charitable trusts, such as Bombay Hospital and others, separately. But to put an end to petitions being filed on a regular basis by aggrieved owners the HC said the interim order would be applicable to all property owners within BMC limits and adjourned the matters to March 11, MANGALORE CITY CORPORATION HIKES PROPERTY TAX BY 15 PER CENT Property taxpayers in the jurisdiction of Mangalore City Corporation will have to pay more from According to a March 4 notification by the corporation, the property tax has been hiked by 15 per cent with effect from April 1, As per Section 109 (A) of The Karnataka Municipal Corporations Act, 1976, the rates of property tax under the selfassessment scheme (SAS) should be revised upwards once every three years. The tax rates could be increased from 15 per cent to 30 per cent of the property value. This is the second time the tax has been hiked since the civic body adopted the SAS for assessing property tax from The last time the civic body hiked the tax was in by 15 per cent. The prevailing base tax rates for six categories fixed in would remain the same. It is 0.5 per cent (of ratable value) for residential; 1 per cent for non-residential and non-commercial and 1.5 per cent for commercial buildings.a revenue official at the corporation said that cess is calculated only on the property tax. As the corporation has introduced the solid waste management (SWM) cess, the outgo will go up further. There is a proposal to add two per cent transport cess to the other cess of 24 per cent. IPTI Xtracts Page 4

5 Thus the total cess will be 26 per cent of property tax. But the body till Friday has not taken any decision on adding the transport cess, sources said. MUSIC BANDS HELP PIMPRI CHINCHWAD MUNICIPAL CORPORATION RECOVER RS 11CR TAX DUES PUNE: Pimpri Chinchwad corporators may find it humiliating to use brass bands to recover property tax, but the municipal administration finds the exercise highly rewarding. Since January 27, the Pimpri Chinchwad Municipal Corporation (PCMC) has recovered Rs crore from over 2,500 property owners. The Pune Municipal Corporation (PMC), which started the practice, collected Rs 72 crore between September and December last year. Last month, immediately after Pimpri Chinchwad municipal commissioner Shrikar Pardeshi was transferred, the general body asked the administration to stop playing bands outside the houses of defaulters because "the practice is inhuman and humiliating". Corporators reasoned that people were defaulting because of industrial recession. They said that properties could be seized to recover dues. Mayor Mohini Lande directed PCMC to stop use of bands, but the property tax department continued the practice. Bhanudas Gaikwad, PCMC assistant commissioner and chief of property tax department, said, "The department will continue the drive till March 31. Owners should either clear the entire dues or clear the arrears partially and commit to pay in installments." Gaikwad refused to comment on the corporators' wisdom. In April last year, the property tax department's annual target was Rs 250 crore, which was revised to Rs 350 crore. Civic officials said that meeting the target is important because the Local Body Tax (LBT) target could fall short by Rs 330 crore. Since April last year, the state government has replaced octroi with LBT. The civic body has hired 10 brass band teams and the municipal limits have been divided into 15 divisions for recovery. CIVIC BODIES TOLD TO ACHIEVE TAX TARGETS AURANGABAD: With the current financial year coming to an end, principal secretary of the state urban development department (UDD) on Friday asked the heads of respective municipal bodies across the Marathwada region to improve the collection figures of various taxes. Till date, the collection figures through property tax stands at 47% and 32% through water tax. In a meeting attended by senior officials from across eight districts of the region, principal secretary Shrikant Singh directed them to ensure 100% recovery of property and water taxes before the end of the fiscal. During the financial year , as many as 54 civic bodies spread across eight districts in the region were supposed to collect Rs crore through property taxes and Rs crore in the form of water tax. However, according to the data presented to the principal secretary, only Rs crore and Rs crore has been collected through property and water taxes respectively. IPTI Xtracts Page 5

6 UDD director Purshottam Bhapkar, who was also present in the meeting, told TOI, "The recovery by the civic bodies across the region, especially by the departments of property water taxes, is very low. After going through the figures put forth by the Aurangabad divisional commissionorate's general administration department, the principal secretary has directed the concerned officials to ensure cent per cent recovery before March 31." Singh also reviewed the expenditures made under the urban infrastructure development scheme for small & medium towns (UDISSMT) in the region. As per the scheme, Rs crore was allotted to the civic bodies of which Rs 340 crore was spent. Officials said the UIDSSMT aims at improving urban infrastructure in towns and cities in a planned manner. It shall subsume the existing integrated development of small and medium towns scheme and accelerated urban water supply programme. RAJKOT MUNICIPAL CORPORATION SEALS 318 PROPERTIES OF TAX DEFAULTERS IN CITY Rajkot Municipal Corporation (RMC) has intensified its tax recovery drive across the city to meet the financial year target of Rs 170 crore before the March 31. RMC has sealed 318 properties whose owners failed to pay the property tax. The civic body has also disconnected drinking water connection to 240 houses for not paying the taxes. RMC officials said they have put 58 properties on auction "We are in the process to put another 105 such properties on auction whose owners have not paid property taxes," an official said. On Friday, RMC officials recovered property tax worth Rs 15 lakh from different parts of the city. "There were many tax defaulters who paid their dues on the spot after we warned of sealing their properties. So far we have collected Rs crore as property tax in the city,'' the official said. RMC has used SMS alerts to send tax due reminders to property owners and has got a good response. About 2.20 lakh property owners have paid their property tax in city. PROPERTY TAX: GHMC TO GO AFTER BIG DEFAULTERS Focus on 150 top defaulters in each circle, notices, warrants and seizure of properties led to the GHMC netting Rs.775 crore of property tax thus far, surpassing last year s collection of Rs.747 crore at the same time. With just a week for March 31 deadline, the civic body hopes to inch towards its ambitious target of Rs.1,250 crore. GHMC Commissioner Somesh Kumar said a series of concerted efforts have started to yield at least Rs.10 crore per day and special attention will be paid towards big defaulters eluding the tax net. IPTI Xtracts Page 6

7 Tax from the government to the tune of Rs.40 crore was already deposited and departments such as the BSNL, CPCDCL, Railways and APSRTC which have to make payments between Rs.6 crore and Rs.8 crore, were asked to clear the amounts in the next couple of days. More payments are expected to trickle from Wednesday onwards since large clearances are made on the last days. Individuals and institutions are in the habit of clearing the dues in the last hour, and there has been an instance when payments of almost Rs.150 crore were made on the last day, he said. The offer of interest waiver on property tax dues till the month-end would also spur a last minute rush, it was reasoned. Special counters are proposed to be set up on the last two days of the month, which are holidays. The GHMC has also sought property tax from the metro rail developers for land belonging to HMT which was taken on lease for the casting yard at Qutbullahpur, and also raised a few structures there. Mr. Somesh Kumar HMT owed a considerable chunk of property tax dues, of around Rs.10 crore including interest component. They (Metro Rail) have to make lease payments to the HMT. We have asked our tax dues to be cleared from the amount they have to pay to the HMT, he said. That apart another Rs.29 lakh as property tax have been sought for a pre-fab structure. The issue was discussed with both the HMR and L&TMRH officials and a positive outcome is expected in a day or two. Some points related to concessionaire agreement were raised and they said the government should pay the tax and not them. They will have to resolve the issue with the government, Mr. Somesh Kumar added. IPTI Xtracts Page 7