City has potential to earn Rs 8,700 cr in property tax: Economic Survey

Bengaluru ranks 8th on scale of 10 in terms of transparency: report

The Bruhat Bengaluru Mahanagara Palike, which has collected Rs 1,900 crore property tax this year, has a potential to collect between Rs 4,359.5 crore and Rs 8,693.8 crore, revealed an Economic Survey Report of the Government of India. In terms of availability of services by urban local bodies (ULB), Bengaluru ranks 11th while in transparency, accountability and participation, it is in the eighth place, below Bhopal, Ludhiana, Lucknow and Kanpur, shows the report. In terms of capital expenditure per capita, Bengaluru ranks 15th, below Kanpur, Bhopal, Lucknow and Raipur.

Since the primary source of revenue of ULBs are property taxes, the ministry chose Bengaluru and Jaipur as models to show revenue leakage in ULBs. The report pointed out: “An attempt has been made to assess the property tax potential of Bengaluru and Jaipur using the latest satellite-based imagery. The results estimate that currently Bengaluru and Jaipur are collecting no more than 5% to 20% of the property tax potential. Put differently, cities could increase their resources five to 20-fold. All efforts must be directed at realising the potential of property taxes. (sic)”

The report observed that major factors contributing to poor realisation from property tax are the poor assessment rate, weak collection efficiency, flawed methods of property valuation, loss on account of exemptions, poor enforcement and under-valuation. Collection is also hampered by inadequate staff, it noted. It opined that geographical information system (GIS) technology-based Big Data solutions can help in assessing the total built-up area in a city and in estimation of the property tax potential and its valuation.

Use of NASA images
Using satellite imagery from LANDSAT programme from the National Aeronautics and Space Administration (NASA) and United States Geological Survey (USGS), raw data was geo-processed to identify built-up area, "including everything from an independent housing unit to apartments as well as urban slums”. Using the information from net building data density, an aggregate built-up estimate of Bengaluru was arrived at.

The report said that the building density on the ground provided an estimate of total built-up area, which when interacted with guidance value of property tax per unit area, gives an aggregate sum of the potential property tax to be collected. BBMP’s Taxation and Finance Committee chairman M K Gunashekar doubted the report saying that the ground realities are different.

He said, “Around 25% of property in the city is defence land. There are Central, state government and BBMP buildings, which too have been calculated.” He, however, admitted that there was potential to increase property tax revenue.