Bengaluru can collect up to 7 times its property tax revenue: Economic Survey

India’s IT capital has the potential to collect up to seven times its current property tax revenue, but the Bruhat Bengaluru Mahanagara Palike (BBMP) manages to collect no more than 5-20%, according to the Finance ministry’s Economic Survey 2016-17.

Property tax is the only major source of revenue for the BBMP. The Economic Survey found that the city collected only Rs 1,031 crore in taxes. The potential, however, can be Rs 4,369 crore assuming minimum floor space index (FSI) value. It goes up Rs 8,693 crore with maximum FSI and Rs 6,526 crore at average value. “The estimate indicates Bengaluru has potential of collecting up to 4 to 7 times of its current property tax revenue,” the report states.

Satellite imagery of Bengaluru, spanning 784 sqkm, shows that nearly half the city has built-up area, and the Finance ministry’s Department of Economic Affairs estimated property tax potential by fixing a municipal ward as the basic unit for identifying net built-up area, guidance values and FSI ratio.

“The major factors contributing to poor realisation from property tax are the poor assessment rate, weak collection efficiency, flawed methods for property valuation, loss on account of exemptions and poor enforcement,” the report states.

Bengaluru joins Rajasthan’s capital Jaipur in dismal property tax collection. According to the report, Jaipur managed to collect only Rs 41 crore against a potential ranging between Rs 380 crore to Rs 799 crore, which is 10-20 times its current property tax revenue.

The ‘Mobilizing Resources’ section in the Economic Survey deals with revenue generation of urban local bodies. Local bodies of Mumbai and Pune, even with low scores on taxation powers, do well in own revenue. At the same time, those in Kanpur and Dehradun, even with relatively higher taxation powers, perform badly in terms of own revenue, the Survey found.