This proposal has been passed by the BBMP council and now waits for a nod from the Urban Development Department.

Bengaluru wants to impose 2 cess on property tax to increase revenue residents miffed
news Taxes Wednesday, January 29, 2020 - 15:40

The Bengaluru civic body on Tuesday passed a resolution to impose a 2% ‘road transport cess’ on property tax. The BBMP (Bruhat Bengaluru Mahanagara Palike) council currently led by Mayor M Goutham Kumar passed the resolution on Tuesday – and while the move still has to be approved by the Urban Development Department of the state government, it is likely that the approval will be given, since both the government and the BBMP council are led by the same party – the BJP. 

The cess is planned to be used for road, street and drain maintenance, officials said. A sum of Rs 150 crore is expected to be collected through this, as the BBMP has been facing the heat in the High Court over pothole ridden roads and related accidents. However, residents in the city are miffed with the proposal and say this is effectively punishing those who pay their taxes properly. 

This 2% additional cess has been proposed by two previous Mayors too, but was opposed by BJP corporators in the council who were in a majority. A proposal to hike the property tax itself – of residential properties by 20% and that of commercial buildings by 25% – mooted by the then Congress mayor in June 2019, had also failed to get passed by the Council.

But sources said with both the government and the BBMP council led by the same party, these deliberations were worked on beforehand and the state government's assent for the same is now only a matter of formality.

While BBMP officials say that this financial boost is necessary for the upkeep of road infrastructure, civic activists say BBMP should be looking to improve tax compliance instead of increasing taxes. 

“This is a big joke,” said Srikanth Narshiman, co-founder of Bengaluru Nava Nirmana Party, a recently formed party that plants to contest the upcoming civic polls in the city. “First they haven’t been able to collect property tax from all the properties that exist. This move is like making those who actually pay tax, pay more and more. What about the people who are not paying the property tax at all?” he asked.

“Let us not even expect 100% collection, they can at least collect 90%,” he added. BBMP currently sees a property tax compliance rate of a little over 80%.  

“Secondly, BBMP accounts are not internally-audited on time and there is no transparency in ward wise spendings. So when there is a basic lack of accountability, how can they think of adding on tax?” Srikanth asked. 

Tara Krishnaswamy, co-founder of Citizens for Bengaluru, (CfB) called this an attempt by the BBMP to shore up its revenue despite its inefficiency in collection of taxes and money management. “Every year, they spend only about half of what they budget for,” she said.

But she said a major part of the BBMP’s financial problem still is not a result of the BBMP’s wrongdoing. “For example whatever revenue is collected in Bengaluru, there should be some proportion of what goes back to Bengaluru. The State Finance Commission has not published a formula on how funds are devolved unlike the Central FInance Commission. What is worse is that you don't know how much money each ward will get and it entirely depends on whether the ward is run by a ruling party corporator or not,” Tara said.

“So it is safe to say Bengaluru generates 80% of the state’s revenue but in turn does not get even 10% of it back. So if the state budget is Rs 2 lakh crore, then Bengaluru should get Rs 20,000 crore, but the budget is only around half of it. So the issue of fund shortage in BBMP is a genuine issue,” she explained. 

Tara however objected to property owners being made to pay the cess for road transport; she instead suggested that a cess should be collected on vehicle usage like in Punjab, where a road cess is collected for fuel. 

Srinivas Alavilli, also a co-founder of CfB concurred saying, “As long as BBMP does not get its own funds from the state government by the way of allocations from state finance commission all these cess won’t do justice to city finances. I think property tax is too low and further their collection rate is abysmally low. Fix that first before any of this.”

He added, “If the cess is used for making public transport free, then I will welcome it.”

Incidentally over the last four fiscals, BBMP had failed to meet even 90% of its property tax collection target with the FY 2016-17 being the most successful with 86% collection. In the last two fiscals, the Palike has managed to collect only around 82% of its target for property tax.

Even this year with just two months to go for the FY to end, BBMP has collected only Rs 2425.3 crore (till January 15) out of target of Rs 3,500 crore.

TNM could not reach Ramanna Reddy, the Additional Chief Secretary heading the UDD, for a comment.

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