City property tax may not rise yet 2006-07-26 11:27 Source :
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Politics has once again prevailed over civic reforms in Mumbai. The Vilasrao
Deshmukh government has deferred the move to rationalise the civic property
tax system in the city, reports *Economic Times.*
Faced with a stiff opposition from the Shiv Sena-BJP, the government has
decided to refer the proposed legislation seeking a shift from the archaic
rateable value system of assessing property tax to a more pragmatic capital
value system to a joint committee of both the houses of Maharashtra
legislature.
This effectively means that the state government has put the reforms on the
backburner. "All political parties have more stakes in the civic elections
early next year than in civic reforms. It would have been difficult for them
to sell the reforms had the legislation been passed," a civic official told
ET.
Under the norms for the Centre's National Urban Renewal Mission (NURM), it's
mandatory on civic bodies to carry out reforms in property tax structure.
The Planning Commission and the World Bank, which is financing some of
Mumbai's infrastructure projects, have also called for a realistic and
modern system of calculating property tax.
The Shiv Sena-BJP ruled Brihanmumbai Municipal Corporation (BMC) had engaged
Tata Institute of Social Sciences (TISS) to conduct a survey of all systems
of assessing property tax prevailing in India as well major metros across
the world. The TISS study found that a majority of cities in developing
countries favour the capital value system and recommended it to the BMC.
In '03, the BMC submitted a proposal to the state government seeking powers
to switch over to the capital value system. "Even before the TISS study was
commissioned, the BMC was convinced that the rateable value system was
useless for Mumbai which wants to be on the fast track of urban
development," a civic official said.
The BMC sought an amendment to the BMC act of 1888 from the state government
to switch over to the capital value system. But the amendment bill has been
referred to the joint committee of the legislature which would study it for
six months.
"It simply means the shift has been indefinitely postponed. The committee
will take a minimum six months to study the bill. It's certain that the bill
won't come to the legislature for 8-9 months," an urban development
secretary told ET.
ET had reported earlier this month that the Shiv Sena-BJP rule at the BMC
was against shifting to the capital value system at least before the civic
elections. "But the state should have at least carried out the amendment to
put BMC under pressure.
The state is responsible to ensure that civic reforms are carried out if it
wants to overhaul Mumbai's infrastructure," a BMC official said.
Even Mr Deshmukh, who holds the urban development ministry, justified
capital value system as being a realistic, transparent, flexible, and
related to inflation in real estate prices and lifestyle while moving the
bill. But the chief minister, who was equally radical about making Mumbai
free of illegal slums in the early part of his second term, succumbed to
political pressures.
The rateable value system coupled with the Maharashtra rent control act
provides a cushion to age-old residential as well as commercial properties
against a realistic hike in the property tax. Property tax under the
rateable value system is calculated on the basis of the annual rent for the
property in question.
In Mumbai, all rental properties have the protection of the rent control
act, which has virtually frozen the rent to the 1940 levels (or allowed a
maximum hike of 5 per cent effective from 2000). "Since rent control
regulation has existed in Mumbai for around 65 years, actual rent is rarely
used as the basis for assessing property tax.
Mostly, pre-1940 rental levels or marginally increased rent are used to
calculate tax," the chief minister's justification for shifting to the
capital value system says. So, the island city, which is home to old
properties, has to shell out a minimal property tax but the same is
exorbitantly high in suburbs.
The capital value system, however, factors current capital cost and life of
the property, its location, quality of construction, and even cost of the
living of the inhabitants.
Moneycontrol.com * Most Popular* *E-mailed* *Read*
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shareholding in 82 BSE 500 stocks dip in
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or Wipro: Which stock is a better
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Politics has once again prevailed over civic reforms in Mumbai. The Vilasrao
Deshmukh government has deferred the move to rationalise the civic property
tax system in the city, reports *Economic Times.*
Faced with a stiff opposition from the Shiv Sena-BJP, the government has
decided to refer the proposed legislation seeking a shift from the archaic
rateable value system of assessing property tax to a more pragmatic capital
value system to a joint committee of both the houses of Maharashtra
legislature.
This effectively means that the state government has put the reforms on the
backburner. "All political parties have more stakes in the civic elections
early next year than in civic reforms. It would have been difficult for them
to sell the reforms had the legislation been passed," a civic official told
ET.
Under the norms for the Centre's National Urban Renewal Mission (NURM), it's
mandatory on civic bodies to carry out reforms in property tax structure.
The Planning Commission and the World Bank, which is financing some of
Mumbai's infrastructure projects, have also called for a realistic and
modern system of calculating property tax.
The Shiv Sena-BJP ruled Brihanmumbai Municipal Corporation (BMC) had engaged
Tata Institute of Social Sciences (TISS) to conduct a survey of all systems
of assessing property tax prevailing in India as well major metros across
the world. The TISS study found that a majority of cities in developing
countries favour the capital value system and recommended it to the BMC.
In '03, the BMC submitted a proposal to the state government seeking powers
to switch over to the capital value system. "Even before the TISS study was
commissioned, the BMC was convinced that the rateable value system was
useless for Mumbai which wants to be on the fast track of urban
development," a civic official said.
The BMC sought an amendment to the BMC act of 1888 from the state government
to switch over to the capital value system. But the amendment bill has been
referred to the joint committee of the legislature which would study it for
six months.
"It simply means the shift has been indefinitely postponed. The committee
will take a minimum six months to study the bill. It's certain that the bill
won't come to the legislature for 8-9 months," an urban development
secretary told ET.
ET had reported earlier this month that the Shiv Sena-BJP rule at the BMC
was against shifting to the capital value system at least before the civic
elections. "But the state should have at least carried out the amendment to
put BMC under pressure.
The state is responsible to ensure that civic reforms are carried out if it
wants to overhaul Mumbai's infrastructure," a BMC official said.
Even Mr Deshmukh, who holds the urban development ministry, justified
capital value system as being a realistic, transparent, flexible, and
related to inflation in real estate prices and lifestyle while moving the
bill. But the chief minister, who was equally radical about making Mumbai
free of illegal slums in the early part of his second term, succumbed to
political pressures.
The rateable value system coupled with the Maharashtra rent control act
provides a cushion to age-old residential as well as commercial properties
against a realistic hike in the property tax. Property tax under the
rateable value system is calculated on the basis of the annual rent for the
property in question.
In Mumbai, all rental properties have the protection of the rent control
act, which has virtually frozen the rent to the 1940 levels (or allowed a
maximum hike of 5 per cent effective from 2000). "Since rent control
regulation has existed in Mumbai for around 65 years, actual rent is rarely
used as the basis for assessing property tax.
Mostly, pre-1940 rental levels or marginally increased rent are used to
calculate tax," the chief minister's justification for shifting to the
capital value system says. So, the island city, which is home to old
properties, has to shell out a minimal property tax but the same is
exorbitantly high in suburbs.
The capital value system, however, factors current capital cost and life of
the property, its location, quality of construction, and even cost of the
living of the inhabitants.