MCC's self-punishment tax?

Mangalore City Corporation (MCC) far from following Colbert’s advice, seems to revel in inflicting maximum punishment on its tax-paying citizens as reflected in the administration of the so-called self-assessment property tax.

Notwithstanding the pre-election assurance of all parties to resist such a tax in its present form and its sudden imposition need not be an issue now. The need for, and inevitability of, taxation has been for long and well recognised. As Jay Franklin had said long ago, in this world, nothing is sure but death and taxes. And as for expecting reasonable taxes, Edmund Burke had said that to tax and to please as much as to love and be wise is not given to mortals.

So, we have to grin and bear what cannot be avoided. But the burden of taxes can be lightened through thoughtful administration of taxes, especially in its mode of collection.

The term self–assessment has an inviting democratic flavour about it. You are lulled into thinking that you are your own boss; decide what you pay! In practice a raw half-baked temporary inductee, sitting in a bleak, poorly ventilated sub-offices of MCC, like the one I encountered at Kavoor junction, decides what you pay, depending on the off-the-cuff answers you blurt out – with dozens of others jostling you and breathing down your neck. In the result, it is neither self-assessment nor fact-based scientific and rationally derived tax amount.

On the other hand, the self-assessment bit could be a trap as it is possible that at a later date, on the basis of spot inspection, the tax-payer is liable to be penalised for giving wrong data or suppressing data. Such penalty situation has also the potential for blackmail for bribe to regularise the lapse off the record by confirming the original submission. I hear of stories of spot inspectors drilling holes in the walls to ascertain the material used in its construction.  

SAS avatar

Now, I will take you through the time and labour one expends in the self-assessment avatar of the tax. You go to the sub-office and get hold of a booklet from a permanent employee of MCC. Then you join a group of a score of persons pushing their way to catch the attention of the (apparently temporary) “writer”. When your turn comes, depending on your jostling power, the person fills in the form that has 10 pages, including the cover jacket.

The person calculates the figures, on the basis of your answers, on a mini-calculator the size of a mobile phone. Then you go to the designated bank, pay the cash and return to the sub-office. The permanent staff stamps the booklet, tares out and returns pages meant for you, and the transaction is over.

The next time around, the same drill continues; but on the basic data is in the copy they issued to you last year. So, the tax can vary for three reasons – allowance of depreciation, as happened last year; increase in the tax rate as happened this year (15%) or increase in the guidance value as is likely to happen in the coming years – in sympathy with rise in real estate prices. But, the form can ask for more information. I, at 73 a senior citizen myself, was also fronting for a more senior citizen of 86 who also has two rented premises. This time around, I had to supply the names of the two tenants and the names of their fathers/husbands. Tenant is a shifting entity and the owner and tax payer is a permanent fixture. How are details of shifty tenants going to make a difference unless MCC is out for irrelevant information overload? Also, after the first year, you have to attach a photocopy of the previous year’s bank payment receipt – perhaps to satisfy MCC that previous payments have been settled.

Punishment?

What does all this translate in terms of punishment to the tax-paying citizen? Take my own outing in the latest instance. I go to the sub office at about 10.30 am. The basic booklet (mercifully free) is not available because, apparently the permanent staff has not arrived. (It now comes out from the proceedings at the Mayor’s meeting with senior citizens at Don Bosco Hall on April14 that these booklets are in short supply). I am advised to come later. I go again at 11 am.

The booklet has come; but there is a jostling crowd. This time around there is an empty chair in front of the writer and I sit on it. But, the writer is bullied by poor ladies who have perhaps to go back and cook lunch for their families or do paid cleaning work for other households. Then there are (apparently) agents or touts, who front for people like me who value their time, who thrust a bunch of booklets and promise to return later. I could not get the attention of the writer for the one hour I sat on the chair. Then, pitying my grey hair, she offers to take my four booklets home and bring them back the next day.

So, the next day the drill repeats and the transaction is over. That brings me to the cost of tax collection.

The cost of collection has to be reasonably low compared to the amount collected. That is why over the years some taxes have been abolished. For instance, India has no estate tax (also dubbed inheritance tax or death duty) now. A tax on transfer of property, financial investment and stakes in companies upon a person’s death was abolished in 1985 as it was not bringing in the expected revenues in relation to the cost of administering it to justify it continuance. In the case of MCC’s self-assessment tax, the cost to it may be negligible because the tax payer bears the cost of Rs 25 charged by the inductee writer for filling up the booklet. In other words the cost is passed on to the tax-payer. That Rs 25 cost is only the tip of the iceberg. The hidden cost to the taxpayer is the monetised cost of the time involved in paying the tax and the transport cost of the tax-payer.

In the corporate sector, employees have an hourly cost which is billed to the client – as in the case of IT companies. It was Rs 1,000 for me when I was at the peak of my career. It does not mean that if you are not formally employed, you have no time cost. There is an opportunity cost. If I write this article, it takes me two hours. If I am paid Rs 400 for this, my hourly opportunity cost is Rs 200. Over two days, I spent 8 hours in paying the MCC tax, making the lost opportunity cost of Rs 1600.

The petrol cost (real) was Rs 150. So, the total cost of tax collection borne by me is Rs 1,775 (including Rs 25 for the writer). The tax paid by me is Rs 1888. Thus the cost of collection works out to about 90% of the tax amount – but it is not borne by the tax collector but by the tax payer. In other words, effective tax paid by me is Rs 3,663.

Can this cost to tax-payer be reduced? Send computerised bill as was sent, six-monthly, before the self-assessment regime. In such an event, a high-cost person like me need not go personally but send a low cost peon in a bus. This is being done for water, electricity and telephone bills. But, MCC will have to do the initial home work like surveying the properties on one-time basis. This has been done in the case of land records, taking the outsourcing route, and now one can get RTCs at the click of a button.

It is a one-time enumeration, like the ten-yearly census work, and developing a user-friendly software.

Officials at the sub-office level rue the current system (or lack of it?) but have no clue on what is being cooked for the future – a poor case of internal communication in MCC.

Finally, the mode of payment: Miscreants broke into MangaloreOne office in MCC headquarters building on MG Road on Sunday (April 10) and decamped with cash of Rs 2.75 lakhs collected from the public through different bill and kept in drawers. It included Rs 55 paid by me, because wrong water bills had been issued by MCC and had to be corrected by a corporation clerk before paying. Hence, I could not pay the bill through a bank – which does not accept defective bills.

The exclusive attachment to cash is reflected in the anonymous epigram: In God we trust; others must pay cash. Another such epigram says: Plenty of people are willing to give god credit, yet few are willing to give him cash. A sign in a restaurant reads: If you are 80 years old and accompanied by your parents, we will cash your check. But, the scenario is now so much changed that the two most beautiful words in English language are: “Cheque enclosed”.

 This raises the question as to why not accept cheques for payments for property tax? The world has moved from cash to cheques to credit cards to electronic payment.
Why persist with outmoded method of cash payment, risk robbery and deny tax-payers the choice of payment modes? The telephone department has no problem with cheque payment. Or, is MCC bent on punishing its tax-paying citizens?

“What is the difference between a taxidermist and a tax collector?” asked Mark Twain and answered: “The taxidermist takes only the skin”. Chew on this!