Thiruvananthapuram: With the local self-government department issuing an order, which links property tax to fair value of the land and determining basic tax rates unilaterally, the civic body will have no say in fixing basic tax rate.
The order regarding tax assessment based on fair value is also being perceived as an infringement upon rights and powers of local bodies. As per Kerala Municipality Act, the municipal councils reserve the right to fix the basic tax rate and the government can fix minimum and maximum values for basic tax rates.
For instance, government had fixed minimum rate of Rs 8 per sq ft and maximum of Rs 20 per sq ft for residential buildings in corporation areas. Trivandrum corporation had fixed basic rate at Rs 16 per sq ft and Kochi corporation had fixed the rate at Rs 18 per sq ft for residential buildings. The new order has unilaterally fixed basic rates corresponding to fair value of the land and in a way deprives urban local bodies of their right to pick between minimum and maximum value.
While the government issued the new order as part of urban utility reforms to enable additional borrowing of 2% of gross state domestic product ( GSDP) for the state, the order is vague about how revised tax will enable urban reforms. The state doesn’t even have an urban policy and has failed to implement a proper online system for tax collection all these years. It remains to be seen if the additional tax burden borne by the public in urban local bodies would eventually come to their own benefit in terms of upgraded urban services. The corporation has suffered from the lack of a well-managed online payment system for property tax aswell as a web-based system for building permits.
It is also pointed out that the local self -government department may have repeated a decade-old mistake while issuing the latest order linking fair value of the land to property tax. In 2009, the local self-government department was forced to put on hold five orders regarding tax revision which were issued between 2007 and 2009.
The executive orders issued by the then government on tax revision met with legal objections in the assembly. It was cited that any tax revision shall be introduced only after making mandatory amendments in act and formulating corresponding rules. The government conceded the mistake and withdrew all orders regarding tax revision. Later tax rules were passed in 2011 for the implementation of a new kind of tax assessment.
The recent order from LSGD may face similar legal hurdles since tax is being assessed and collected by urban local bodies as per Kerala Municipality Act and in accordance with Kerala Municipality Tax Rules, 201,1 and subsequent amendments. Without making amendments in the act and drafting new rules, an executive order may not prevail.
The order also calls for revision of tax every year which would result in significant hike in certain areas since fair value will be the deciding factor. The order also fails to mention whether access, age of building will have an impact on final assessment. Going by the order, an area with a high fair value would fix higher tax for two buildings which may differ in terms of facilities, access and time of construction.