taxation of property best practices

8/2/2019 Taxation of Property Best Practices

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Taxation of property Best Practices :

Country Question AnswerUSA 1) How Much Money Does the Property Tax

Generate and How is it Spent?1 In 2010, Washington State taxpayers paid atotal of $8.8 billion in property taxes to localgovernments, state government and schooldistricts.

1.1 Property taxes are the largest source of taxrevenue for local governments, generating about$4.4 billion in 2010. The property tax is thefourth largest source of revenue to the stateGeneral Fund, generating approximately $1.9billion in the 2010 fiscal year, including in-lieutaxes, or about 13 percent of General Fundrevenue.

2) What Property is Taxable? 2 State Constitution defines property aseverything that can be owned, whether tangibleor intangible. The property tax is appliedannually to the assessed value of all propertyunless it is specifically exempt by law.

The Constitution requires that taxes be uniformwithin a class of property. For property taxpurposes, there are two broad classes ofproperty, real and personal.Real propertyconsists of land and buildings, structures, orimprovements that are affixed to the land.In general, everything else is referred to aspersonal property.


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2.1 Exempted motor vehicles, household goods,and personal effects from the property tax, onlypersonal property used in business is subject to

the property tax.3)What are the Major Exemptions from PropertyTax?

3 Constitution allows the Legislature to exempttypes of property; it does not allow theLegislature to exempt property based on itsowner.

3.1 The largest exemption is for intangibleproperty. This includes money, mortgages,notes, accounts, stocks and shares ofcorporations, trademarks, trade names, patents,copyrights, trade secrets, franchise agreements,

licenses, etc.

3.2 Other exemptions include businessinventories, household goods, most personalproperty, retired persons, churches, nonprofithospitals, private schools and colleges, andagricultural products.

4) When Were These Exemptions Granted? 4.1 The exemption for intangible property wasoriginally granted by the Legislature in 1925 andhas been amended several times, most recently

in 1997.4.2 The exemption for business inventories waspassed by the Legislature and phased in over tenyears, beginning in 1974.4.3 Motor vehicles were exempted fromproperty tax in 1937, when the current motorvehicle excise tax was enacted.4.4 Computer software was exempted in 1991


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4.5 Exemptions for agricultural products weresubject to legislative changes in 1973 through1984 when the current exemption for all suchproducts was enacted.

4.6 Private schools and colleges were exemptedby the Legislature in 1925.

4.7 The State Constitution authorized otherexemptions, such as exemptions forgovernmental entities, a $15,000 exemptionfrom tax on personal property for soleproprietors, and property tax exemptions forretired persons.

5) What Types of Property Tax Relief are

Available to Retired Persons?

5.1 Property tax exemptions are available to

retired persons who meet income requirementsand are retired. Exemptions include totalexemptions for excess levies (voter-approvedproperty taxes) or partial exemptions fromregular levies.

5.2 Exemption Program

Homeowners 61 years of age and older mayapply for an exemption from paying excesslevies if their household income is $35,000 or

less. The property tax relief is available for taxespayable in the year after the application is madeand every year thereafter. They are also exemptfrom regular levies on a portion of their homevalue if their income is $30,000 or less. Afurther benefit for these homeowners withincomes of $35,000 or less is that the taxablevalue of the property is frozen when the


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homeowners becomes eligible for the program.

5.3 Deferral Program

A related program allows homeowners at least

60 years of age with household incomes of$40,000 or less to defer payment of all propertytaxes. These taxes may be deferred until the saleof the property or until the property ceases to bethe permanent residence of the homeowner orsurviving spouse.

6) What Types of Property Tax Relief areAvailable to Low-Income Persons?

6.1 Deferral Programproperty tax deferral program for householdswith a combined disposable income of $57,000

or less. This program is similar to the existingproperty tax deferral program for retiredpersons, but the new program has no age orretirement due to disability requirement.Under this new deferral program, eligiblehomeowners of any age may defer one-half ofthe property taxes and special assessmentsimposed on the homeowners primary residence,if the first half taxes and assessments are paid bythe April 30 due date. To qualify, the

homeowner must have owned the residence forat least five years. The total amount of taxesdeferred under this program may not exceed 40percent of the homeowners equity value in the

property.

7) What are Current Use Valuations and 7.1 A current use assessment for open space,


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Open Space? timber, and agricultural lands. Although not atax exemption in the strict sense of the term,current use valuations reduce the tax burden oncertain properties.

7.2 The assessed value is based on how theproperty is currently used, rather than the marketvalue (or the highest and best use) of theproperty.

The open space program allows agriculturallands, timberlands, and other open space lands

to be assessed according to their value as theyare currently being used, rather than the marketvalue. This current use value is typically much

lower than market value and is, therefore, a taxbenefit for the property owner.

Open space lands are lands which conserve

natural resources, promote conservation,enhance public value and recreation, preservevisual quality, or have other legislativelyidentified attributes which are of public benefit.Agricultural and timber lands are subject tovarious requirements regarding size, use, andincome.

What Types of Restrictions and Limitations areThere on Property Taxes?

8.1 Uniformity in TaxationThe most important principle of propertytaxation in the state is the uniformity oftaxation.

Congress imposed a strong requirement foruniformity in taxation in order to prevent the


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territorys residents from imposing a

disproportionate share of taxes on nonresidents.

This means that taxes must be the same on real

property of the same market value. Uniformityrequires both an equal rate of tax and equality invaluing the property taxed.

8.2 One Percent Limit (Ten Dollar Limit)

In 1972, Washington State voters amended theConstitution to limit the annual amount ofproperty taxes that may be imposed on anindividual parcel of property to one percent ofits true and fair value. By law, tax rates arestated in terms of dollars per $1,000 of value.

Therefore, the 1 percent limit is the same as $10per $1,000. Under the constitutional amendment,the one percent limit ($10 limit) may beexceeded only with the approval of 60 percent ofthe districts voters.

8.3 The Limit (Inflation) Factor

Local government taxing districts generallydetermine their property tax levy based on therevenue required to fund their budget for thefollowing year.

Legislature imposed a statutory limit on annualincreases in local governments revenues from

property taxes. Under this limit, revenues fromany districts regular property tax levy may not

exceed 106 percent of the highest amount ofrevenue received from any levy in the preceding


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three years.

Under this provision, taxing districts with apopulation over 10,000 were only allowed to

increase the regular levy by the rate of inflationor six percent, whichever was smaller.

How is Assessed Value Determined? There are three criteria used to value realproperty: comparable sales, cost, and incomepotential.

Comparable sales: value is determined orestimated based on multiple sales of similarproperties. Most residential property is valuedusing this method.

Cost: value is determined based on the cost ofreplacing an existing structure with a similar one

that serves the same purpose. This method isused to value new construction.

Income: value is determined based on theincome producing potential of the property. Thismethod is often used to value business property.

Legislature adopted a property revaluation cycle,requiring that revaluation occur a minimum ofevery four years.

How is the Amount of Tax Levied by a TaxingDistrict Determined?

A taxing district levies a property tax in theamount needed to fund its budget for thefollowing year. By November 30th of each year,the amount of taxes to be levied by taxingdistricts are certified to the County Assessorwho computes the tax rate necessary to raise thatamount of revenue. The County Assessorcalculates the tax rate necessary by dividing thetotal levy amount by the amount of taxable


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property in the district. This number is expressedin terms of a dollar rate per $1,000 of valuation.For example, a rate of $0.00025 is expressed as25 per $1,000 of assessed value.

There are three main components to the propertytax; the levy, assessed value, and levy rate.

The levy is the total amount collected fromthe taxpayers by a taxing district. Currently, thetaxing districts are only able to increase theirlevies by 1% per year.

The assessed value and the levy rate are thetools that are used to distribute the property taxburden equally to all taxpayers.

Assessed Value x Levy Rate = levy

How are Individual Property Taxes Determined? The tax on a particular property is calculated bymultiplying its assessed value by the tax rate

The rate is expressed in terms of dollars per$1,000 of assessed value. The rate is multipliedby each $1,000 in value for each parcel todetermine the tax. An individual tax bill is thetotal of all such calculations for all of theindividual districts levying tax on the particularproperty.

How is Property Assessed and the TaxCollected?

All property, except new construction, isassessed on its value as of January 1 of theassessment year and is listed on the tax rolls byMay 31. For new construction, the value as ofJuly 31 of the tax year is listed on the rolls.Notices of valuation changes are mailed to theowner of the property.


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The treasurer in the county where the property islocated collects property taxes. The treasurer isrequired to send each taxpayer a notice whichmust include the amount of tax owed, the value

of both real and personal property, and the nameand amount for each taxing district levying a tax.

The county treasurer mails the tax bill to thetaxpayer listed on the tax rolls, which may be

a lending institution in cases where the propertyowner has provided that taxes are to be paidfrom a reserve account administered by thelending institution.

Are Public Schools Funded from the PropertyTax?

The Washington State Constitution establishedbasic education as the states paramount duty.

This duty has been reaffirmed in subsequentstatutes and court decisions, which acknowledgethat the state must provide sufficient aid to localschool districts to fund basic education.Currently, almost one-half of the state GeneralFund budget is spent for public schools.As mentioned earlier, the state property tax levyis dedicated for public schools and is frequentlycalled the state school levy. The revenues arepaid directly into the General Fund, along withall the other tax revenues that go to the GeneralFund.

What are Some of the Recent LegislativeChanges to the Property Tax?

Property taxation system


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Issue answerAny taxation systems should; i) serve clearly defined social objectives; ii) raise significant amount of

revenue; iii) be exclusively under the control of the government authority;iv) be administered in a way that public understands and sees as fair; v) berelatively simple and cheap to collect; vi) be designed to make it difficultto avoid making payments; vii) distribute the tax burden equitably acrossthe community; viii) encourage the good use of resources.

The power to tax may rest with the central government, regional or local governments, orboth. Generally, a countrys constitution would establish basic taxationpowers. In most of the countries the power to tax property rests with thecentral government. However, all or a portion of property tax revenues areassigned to local governments, the central governments may give localgovernments some power to set tax rates, to decide which properties are to

be taxed, and to grant exemptions and property tax relief beyond thatcalled for in national legislation

property taxes may be classified broadly into annual and incidental taxes. Taxes levied annually onproperty are seen wealth tax in every country. The annual levy may bebased on the estimated market value for which the property would sellunder normal circumstances, or the assessed rental value of the land orproperty, or in some countries area of the property. Incidental taxes arisebecause a specific event triggers the tax, such as the sale of the property,or its change to more valuable use

Object of the property taxation could change from a country to another country and it may be defined asthe land alone, the buildings alone, or the land and buildings together.Also, the liability for the tax may lie with the owner or the occupier; thebuyer or the seller (MUNRO 2000). Property tax exemptions are grantedby central, state or local governments. It may be based on various factorssuch as ownership, the use of the property, or on characteristics of theowner or occupier.

In property taxation, there are two most common tax bases. These arevalue and area bases. In value based systems, usually market value of

estimating market value of the property, three most common valuationapproaches are practiced. These are comparison approach,income


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the property is considered. approach and cost approach. The comparison approach is the simplestway to estimate the market value of the property is to identify anotherproperty that has recently sold and which has identical characteristic. Ifthere is no identical property in market for comparison, the cost approach

or income approach is applied. In the cost approach, the market value ofthe property is arrived at as follows: Estimated reproduction orreplacement cost of the building new, less estimated occurreddepreciation, if any, plus estimated land values. It may be used in serviceand special purpose buildings, some types of industrial buildings, certainkinds of rental projects. In the commercial or industrial propertyvaluations, income approach is applied. It is used to determine of themarket value of the property by capitalizing its net operating income at arate stemming from similar type properties which have been sold. Theother tax base is area of the property. If using of market value in taxassessment does not possible, usually area based system is preferred.

Under area based property tax systems, taxes are determined simply bymultiplying a measurement of area by a rate. As pointed out by ALMY(2001), area-based systems have the advantage of being simpler toadminister. In these systems, only area measurements are needed. Theyare easier to implement, because market data do not have to be collectedand analyzed. They are also more objective than value-based systems, inthat area measurements are less contestable than value estimates. On theother hand, area-based property tax systems are less fair. For example,highly desirable properties pay the same taxes as undesirable properties.

Property tax rates are determined by local or central governments and in many countries local governmentslevy rates that differ by property class. Different tax rates may be imposedfor different classes of property (residential, commercial, and industrial,for example).This system gives local governments the power to manage the distributionof the tax burden across various property classes within their jurisdictionin addition to determining the size of the overall tax burden on taxpayers


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(BIRD and SLACK 2002). They may be fixed legislation; annuallyadjusted for inflation or determined based on budgetary needs. If rates isdetermined based on budgetary needs, the amount of total budget ofadministration, total amount of estimated non-property tax revenue and

the amount of total assessed value are needed.

Land management can include farming, mineral extraction, property and estate management,and the physical planning of towns and the countryside. It embraces suchmatters as; i) property conveyance, including decisions on mortgages andinvestment; ii) property assessment and valuation; iii) the developmentand management of utilities and services; iv) the management of landresources such as forestry, soils, or agriculture; v) the formation andimplementation of land use planning; vi) environmental impactassessment; vii) the monitoring of all activities on land that affect the bestuse of that land

The land policy is categorized as urban land policy and rural land policy. The generalpurpose of the urban land policy is to harmonize the individual

ownership and the public interests on the land and also prevent using landagainst to public interest.

The property taxation is the most efficient fiscal instrument in both urbanland policy and in rural land policy. Whether taxation is arranged andapplied for land management purposes, it will adjust and providediscipline in land markets.

Functions of the property taxation for the land management process, suchas:

To increase urban land plot supply and so, decreasing urban land

prices, to taxation of unbuilted urban lands.

To prevent property speculations and establish socialjustice, to taxation of underutilized properties.

To control, protect and prevent density of settlements insensitive areas, such as historically and environmental areas, to


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taxation of the lands in these areas.

To support for maintenance and restoration of historicaland artistic buildings by tax exemption.

To adjust urban development, orient the demand fromoverdevelopment area to underutilized area.

To prevent illegal settlements by levy highly taxation rates on illegalbuildings

To apply property transfer taxation for prevent oftentransfer of property for speculative purposes.

To protect agricultural attributes of rural lands bydecreasing tax rates in rural areas.

To provide community justice by taxing on incrementsvalue of properties that is the resultof public investments andplan practices.

Land administration and property taxation The benefits of land administration are outlined in Land AdministrationGuidelines. These are summarized as follow; i) guarantee of ownershipand security of tenure; ii) support for land and property taxation; iii)provide security for credit; iv) develop and monitor land markets; v)

protect state lands; vi) reduce land disputes; vii) facilitate rural landreform; viii) improve urban planning and infrastructure development; ix)support environmental management; x) produce statistical data.

Land administration functions may be divided into four components;juridical, regulatory, fiscal and information management.


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Turkey practice In Turkey, property taxes are solely accepteda revenue source for localgovernments activities and theirbalancing and controllingfunctions have been not to take into consideration. In ourcountry there is no tax structure which regulates property

market.

local governments have been vested with limited authority to change tax rates and to giveexemptions, but in Turkey local governments have not such authority tomake arrangements about taxes. Nevertheless, tax revenue collected andshared by local governments

Turkey have been levied taxes on every building and land according to

Property Tax Act.

Property tax is calculatedand levied depend on declarations stated owners by municipality. Declarations are composedof attributes data about property legal situation, such as

ownership data, development plan data, address data and etc.

Tax payeris property owner, owner of usufruct right, and if both are absent the personwho use the property. The person, who is an owner of a shared property,liability of tax is limited as his share. In cooperation ownership, propertytax liability of each owner spreads all of the property.

tax exemption has been given to public institutions and organizations, universities,municipalities, village legal personalities and etc due to typeof their ownership, and also health, religious, transportation,infrastructure and other public services buildings due to theirusage. These properties are out of taxation. Giving taxexemption is under the authorization of The MinistersCouncil.

In Turkey, tax value of the property is accepted a tax base. Cost of building per square meter which isdetermined with the cooperation of Finance and Public Works ministriesand parcel value which is estimated the Commissions of the Valuation

are used for assessment of building tax value. Urban parcel tax value is


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computed according to unit value which is estimated with taking everylocal zone into account by Commissions of the Valuation. Agriculturalland tax value is computed according to unit value which is estimated withtaking soil types into account by Commissions of the Valuation in every

county. Buildings and parcel tax value is increased according to half timesof revaluation rate for every tax year. Revaluation rate can be used formaking tax values update as explained in our laws. Revaluation rate whichis computed by Ministry of Finance express annual changing rate in theWholesale Price Indices

tax rate is 0.1% for residence building, 0.2% for non-residence building, 0.1% foragricultural land and 0.3% for urban parcel. These rates are used twotimes in metropolitan areas. In addition to this, The Council of Ministershas authorization to decrease 50% and increase 30% of these rates that aredetermined in the act.

India practice

1.2 Overview of Reforms

1.2.1 Context:Property tax is one of the most important sources of revenue for urban local bodies (ULBs) in India. Property tax (also called general purpose tax orgeneral tax) is a generic term, which not only include property tax but also include a variety of service taxes and cesses. Service tax includes water tax,

sewerage tax, scavenging tax, drainage tax, conservancy tax, education tax, fire tax, education cess and tree cess. This PT tax structure differs fromstate to state in India and many states have problems related to the fixation of tax base and tax rate, tax assessment, tax collection, tax exemptions,dispute resolution etc. If assessed on the Annual Ratable Value (ARV) of land and building, it may include service taxes on water supply, drainage,street lighting etc.The ARV system of taxation which is a rent-based rateable valuation system where the annual value or the annual rental value of the property shall bedeemed to be the gross annual rent at which the land or buildings might, at the time of assessment, be reasonably expected to be let from year to year.


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Capital value reflects the markets assessment of the income to be derived from a property in future including income generated by more intensive useof the property. The tax base comprises the assessed value of land and improvements i.e., the value at which a willing buyer and seller would agree in afree market. It follows that the capital value is extremely elastic and the property tax will have a base that will grow with the economy. The unit areaassessment (UAA) system is a simple arithmetical system of calculation of property tax based on covered area of the building and the unit area value or

unit area tax for the category (of locality or amenity etc.) in which the premises is located through which it is possible for any citizen to self-assess hisproperty tax and file his return form.

In principle, the base of the property tax should respond to the increasing value of properties. In practice, there is growing evidence that this tax has notbeen a buoyant source of revenue.1.2.2 Legal/Policy Issues:

The ARV method of assessment was one of the most prevalent systems in India.

1.2.3 Management:

Proper management of the property tax system is as important in improving revenue generation as improving the policy and legal framework of thesystem.

These legal or management reforms have helped to rationalize the property tax system and increase revenues. These experiences can help to pave theway for improved practices and property tax revenue increase in the country.

Hyderabad: A paper on Reforming Property Tax in Hyderabad (Mohanty, 2002) presents a critical analysis ofthe property tax reforms carried out inthe city. It provides a number of lessons, some of which are:

Some principles such as close involvement of tax payer, tax service linkage, incentives for filing tax returns, disincentives for non-filing, taxeducation etc. are important in designing of successful reforms.

Arbitrary adoption of slab rates of tax in the name of elimination of discretion in the levy of tax is not desirable;Correction of inequities in the tax system can be an important source of enhanced mobilization of PT revenues;Tax education and organized publicity campaigns to address the psychology of taxpayer are more important than economic factors;

Direct involvement of tax payers in the provision of civic services is a must for better tax compliance andTax reforms may need to be pursued in an incremental manner.


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Existing sistem Present systemThe system of property tax assessment prior to 2001-02 was verycomplicated and in many ways irrational. Being based on notionalrental value of properties, the assessed values were very low.

Consequently, the AMC could only raise the tax rates, whichstood at 73% of the annual ratable value in the case of residentialproperties and 83% for non-residential properties.

Outcome of the low assessment of property values was that 72%of the total number of residential properties in Ahmedabad and31% of the commercial properties were exempted from paying thegeneral property tax. There was also enormous disparity betweenassessment of self-occupied and tenant-occupied properties. Theratio of tax burden was 1: 15 in favour of the former.

Property tax is the second most important source of revenue forAMC. Especially after the elimination of octroi tax, property tax hasbecome a very important source of revenue generation for the

corporation.

In order to utilize this source to the maximum of its efficiency, AMCadministration understood the deficiencies of the existing system ofproperty taxation and replaced it with an alternative more rationalsystem.

AMC initiated reforms in a phased manner to accommodate andminimize the legal and administrative challenges that are usuallyattached to reforms of this nature.

A number of effective steps were taken to increase property taxcollection with immediate effect. First, the municipal records ofproperties were updated and a large number of previously unrecordedproperties were added. Next, all existing properties whose assessedvalue was grossly inadequate were reassessed. Finally, a number ofpunitive actions were taken against property tax defaulters. Theseincluded disconnection of water supply and drainage services;attachment of movable and immovable properties; and occasionallyauction of properties for tax recovery.

In the second phase of reforms, the AMC decided to evolve an area-

based property tax system to replace the existing system based onannual ratable value. It was an elaborate exercise involving large-scale survey of properties through out the city and computerization ofdata. Nearly one million properties were surveyed.

Under the new formula, the property tax is computed by applying aper unit tax rate to the total carpet area of the property and adjusting


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for location, age, type of use and whether the property is owner ortenant occupied.

Assessment System

The new assessment mechanism was adopted in the year 1999provides that property tax shall be levied annually on buildings andlands on the basis of the rate per square meter of the carpet area.Multiplying factors giving weightage for:

Location :( 4 gradations based on land value)Age :(5 gradations)Residential Properties: Type of building (5 gradations)Non-Residential Properties: Use of building (6 gradations)

Occupancy :( Self Owned / Tenant)

Property Tax = Area X Rate X Location factor X Age factor X Type

of building or use factor X Occupancy factor.

Other Rules (available)

Updation

In order for the new system to work effectively, it is very importantthat the property records, and other guidance values are updated at aregular interval.a) Owing to this, the property records are updated periodically. Thelast update happened in the year 2004 and currently, a zone wiseupdating of property records is being carried out.

b) The guidance values were last revised in the year 2005 and it isdecided that they would be revised every four years.c) However, recently the Govt. of Gujarat has adopted the method ofrevising land value records every year. Hence, frequency of revisionof guidance value would be done on annual basis. However for doingso an amendment in the provisions of the BPMC Act will be requiredto be carried out.5


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d) AMC has town planning & development department, whichsanctions plans for new building constructions as well asaddition/alteration in existing buildings.e) Moreover, town-planning department issues Building UsePermission to the new constructions. One copy of building planapproval as well as building use permission is sent to Property taxdepartment for the purpose of assessment.f) Change of ownership / occupation is captured whenever anyamendment for taxpayer's details is applied for.g) Also, the land values are usually identified from the Jantri (theyear 2000) i.e. the ready reckoner used for the assessment of stampduty on property transactions.h) Due to the very recent revision of Jantri, the new values have not

been amended in the property tax bills for year 2008-2009, the newland values are expected to be used from the next billing cycle i.e.

from April 2009.

Billing and Collection System

The property tax bills are raised at the Head Office of AMC for all theproperties and are subsequently sent to the zonal offices for collectionpurposes.

Mode of payment can be through

ChequeCredit cardBank- As an innovative approach, AMC has partnered with a

private bank (Kalupur Commercial Bank), which gives the citizens anadded ease and option to pay their property tax bill at the nearestbranch. Thus, bills can be paid at the 24 civic centers in the city and13 bank branches.

Internet: www.egovamc.com

Recovery measures for default / delay in payment of property tax


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leads toDisconnection of water supply connectionDisconnection of sewerage connectionSealing of propertyAuction of property

Exemptions

Type of Exemption QualifyingInstitution/individual

Revenueimplication ofexemption

Property Tax

exempted byassigning Zero

value to property

Non - ResidentialReligious Plausanctorum of suchplaces of worsh

Rs. 80.60 lakhs peryear

In the present property tax system exemption is not given to any typeof property except religious places where property tax is exemptedonly for the area of sanctorum. Such properties have to pay water andsewerage charge. Thus no property is issued a bill of zero demand.Also, for closed and unused building, 3/4 property tax is exempted.

Benefits from New System

The various initiatives of AMC for increasing property tax revenueshave shown impressive results.

The initial drive to increase the properties in the tax net and actions

against defaulters produced immediate results. The tax revenueincome doubled within two years and has increased steadily sincethen.

Another major jump came in 2001-02 when the new area basedsystem was introduced.

The property tax was de-linked from the Rent Control Act, whichwas thought by the


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citizens as a very complex and irrational method to calculate propertytax.

Dispute of assessment was totally removed among old and newbuildings.

Self-assessment is possible and hence discretion availed by lowerlevel staff and corrupt practices can be easily curbed.

There are several tangible advantages of the new system. Firstbeing, the number of exempted properties came down drastically from62% to 28%.

The disparity between owner-occupied and renter occupiedproperties also went down from 1:15 to 1:2.

In addition, there was an increased flexibility in increasing the taxrate every year.

The most impressive of all these being, the number of litigationshas become nil because

of increased level of transparency.

Reductions In The Number Of Litigation Cases-AMC

Year 1999-00 2000-01 2001-02Cases 42378 38500 Nil

Due to rationalization of the property tax assessment system, thezone wise demand of property tax too went down with theimplementation of the new system.

Use of Modern Technology

E-governance as a tool for Self Assessment of Property Tax and anAid in Billing and Collection has played a very important part in thesuccess of the property tax reforms carried out by AMC and hence, itforms an integral part of the system. In order to provide a verytransparent process of assessment of property tax and hence avoid anydiscretion and litigation, AMC provides a tool on its website. Thistool helps the citizens in self-assessment of the property tax on their


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individual properties by plugging in very basic information. The userfriendliness of the website and ease in navigation has made this awidely accepted initiative among the citizens. The following screenshots from the AMC website (www.egovamc.com) illustrate this tool.Apart from this, the citizens can also get the amount of property taxon their property assessed by going to any one of the 25 civic centers.Not only in the assessment of property tax, Egovernance also plays animportant role in billing and collection of the same. The tool availableon the website also helps in generating the annual bills and keeps therecords of bills paid and those that are due. The use of same databasethroughout the entire system has also lead to increased amount of easein data maintenance and management.

Collection Ratio

The collection ratio for last three year (2005-06 to 2007-08) shows

increase in the property tax collection after the new carpet area basedmethod adopted by AMC. Last three years figures show that growthin property tax collection is more than 100% of the current demandand with arrears, collection efficiency is also over 70%. Table withrates available)

Issues

Administrative Issues: The only issue that could evolve with time isthat of administering around 5000-6000 properties by a single wardinspector. Not only is he responsible for hand-to-hand delivery of theproperty tax bills but also examines any changes in tenants or owners

of the properties. He is responsible for reporting any changes orupdates regarding the property and/or tenants of his particular ward.Thus, a single inspector in charge of these many properties may giverise to productivity and effectiveness issues in a long run. Thus thereis a need to increase the staff and provide training to them.


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Lessons Learnt

The property tax reforms at AMC show that a rational, equitable, andtransparent system of property taxation can be more acceptable totaxpayers while generating higher revenues for the ULB. Toadminister the system, an excellent database is essential. It is veryimportant to ensure that the taxpayers are not inconvenienced by theprocedures and facilities for obtaining information or makingpayments. There should be clear policies and rules to deal with taxdefaulters and corrupt staff and these should be strictly enforced.

taxation of property best practices

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