Property tax collected by local governments should undergo annual revision from April 1, 2023, the Sixth State Finance Commission has recommended.
The revision should be linked to money value and subject to the condition that it is not less than 5%, the second report of the commission, tabled in the Assembly recently, said. Necessary provisions should be made in the Kerala Panchayat Raj and Kerala Municipality Acts in this regard.
The report recommends that all local governments should complete the property tax revision that is under way by March 31, 2022. Government grants should be withheld in the event of failure to do so, according to the report.
A recurring tax levied by local governments on buildings and appended land, the property tax constitutes about 60% of their own revenue. The commission notes that panchayats, municipalities and Corporations can strengthen their identities as local governments only if they mobilise their own revenues. ''For several reasons, enhancement of rates, both tax and non-tax, has not kept abreast with the money value, resulting in serious revenue loss. This needs to be rectified once for all,'' it says.
The commission has recommended that all houses of and above 30 sq m should be brought under the property tax net. However, for houses from 30 sq m to 50 sq m, the tax should be collected at half the rates prescribed for other buildings.
The commission frowns upon exemptions given in tax increases. Exemption from hike given to residential buildings up to 2,000 sq ft and limiting the increase to 25% to residential buildings having more than 2,000 sq ft and to 100% for commercial buildings may be done away with, the report says.
Such exemptions are untenable before the law and unfair to other taxpayers, it noted. In the case of armed forces personnel, exemption should be given only to parents and spouses of personnel either martyred or maimed in action or during the performance of duty, it says.
The commission has also recommended that the the Property Tax Board constituted in February 2011 should be converted into a Local Government Revenue Board with powers to monitor tax collection by local governments. Directly reporting to the Secretary. Local Self-Government, the board, among other things, should guide local governments in preparing rolling revenue enhancement plans and oversee their implementation and help identify new sources of tax and non-tax revenues for local bodies.
