Local self-government institutions (LSGI) would cast their tax net wide to bring more professionals within their ambit and the State government would move the Centre to raise the professional tax ceiling as part of the revenue resource mobilisation moves.
The State government’s nod to the recommendations of the the fifth State Finance Commission, headed by B.A. Prakash, would lend additional strength to revenue resource mobilisation efforts of local bodies. The commission recommends the formation of a database of all potential tax payers in both urban and rural local governments including practising professionals, traders, businessmen, salaried employees and workers in the unorganised sector and also commercial institutions and enterprises which have been licensed by them.
It also moots a survey of professionals with the help of councillors and ward members to widen its tax base.
The government has accepted the recommendation and decided to widen the ambit of the Kerala Municipality (Professional Tax) Rules, 2005 and also incorporate its key provisions in the Kerala Panchayati Raj (Profession Tax) Rules, 1996, to make the revenue augmenting exercise easy in both rural and urban locales.
The recommendation assumes significance in the wake of a fall in its own resources following the implementation of Goods and Services Tax.
Entertainment tax, one of the main sources of its own revenue, was scrapped and the government promised to compensate the loss to local bodies in this score.
Laxity in tapping potential revenue sources has already taken a toll on the functioning of both urban and rural local governments and hence there is an urgency for them to explore new options.
The commission recommends that professional bodies should be made to furnish the list of their members.
Widening the scope of the Profession Tax Rules would help to bring chartered accountants, tax practitioners, stock brokers, private chartered engineers, internet cafe, cable operators, real estate agents and such others within the tax cover.
Mr. Prakash told The Hindu that professional tax was the largest revenue source for local governments, but they were not evincing interest in tapping this source.
“The professional tax rates have not been revised for the past 20 years. The Central Finance Commission had flagged the issue, but the Centre was not responding.
“The commission recommended to augment professional tax collection after a thorough scrutiny and it should be implemented,” he said.