The Hindu 14.02.2013
Method of property tax calculation challenged
The tax is based on notional market value.
The hike of 15 per cent in property tax for properties within Mysore City Corporation (MCC) limits, which has been challenged in court, has revived the debate on the way property tax is calculated and the need for tax reforms.
The present system, the capital value system, has been called “arbitrary” by its critics, as rates are calculated based on the notional market value of property in question.
The market value is assessed on the basis of the guidance value, which is determined by revenue officials, whose objective is to achieve the revenue targets set by the government.
The MCC intends to collect Rs. 93.2 crore from property tax in the coming financial year, while its target for this year is Rs. 77.54 crore.
H.V.S. Murthy, advocate and general secretary, Federation of Tax Payers’ Association, told The Hindu that this method was not based on scientific principles.
The federation wanted the government to amend the Karnataka Municipal Corporations Act, 1976, to delink property tax and market value, because, Mr. Murthy said, the present system posed a danger to property owners here.
The city was witnessing rapid growth and speculation in real estate had led to artificial increase in the prices and market value of properties. Most properties were being bought by NRIs and people with disposable incomes from other cities, notably Bangalore. This runaway escalation in property price had a direct impact on guidance value, which was reflected in the market value of the property.
If property tax was calculated on the basis of this high market value, a majority of the people would find it difficult to pay tax, said Mr. Murthy, who plans to file a writ petition in court.
The solution, according to the federation, is to opt for the unit area value system as in Bangalore, Kolkata and other cities. As per this, property owners are taxed on the rate per unit area fixed by the authorities, instead of the assumed market value, which could be speculative. The increase in property tax comes into effect on April 1, 2013.
Stakeholders have argued that tax collection has not resulted in the corporation providing better civic amenities, and hence, the property tax rate cannot be increased simply because the law provides for it.
