Owners will pass on tax burden to tenants

Owners will pass on tax burden to tenants

Owners will pass on tax burden to tenants

The State Cabinet’s recent approval of the proposal by the Urban Development Department to impose a betterment fee to fund various infrastructure projects in the city has come as a shocker for many Bengalureans.

The fee is to be collected from commercial properties falling within a fixed distance from the Metro lines and other infrastructure projects in the city. Deccan Herald spoke to a few stakeholders to see how the decision might affect their establishments.

Manohar Kalro, the proprietor of Vicky Garments in Malleswaram, is of the opinion that the businesses will not suffer much if the fee is a small amount. “If the amount is nominal, it should not be too much of a burden. Development of the Metro will only help the businesses around.”

But the proposed fee is a third of the appreciation cost of a property. Kalro feels that if the fee is very high, property owners will be directly affected. “They will, in turn, pass on the extra cost to the tenant establishments. Tenant owners like us will have no choice but to share that burden with our customers,” he points out.

Many disagree with the government’s strategy. Malathi, whose family runs a women’s garment store near the Mantri Mall, says that an additional tax will not do the businesses any favour. “We sell branded clothes and cannot raise the prices indiscriminately. Our goods have a price fixed by the company. Today, customers are knowledgeable and will refuse to pay more for a product that has a fixed price. They will not hesitate to go farther and buy the same product from another shop.”

A shop owner in Gandhi Bazar says that the rise of e-commerce and malls has hit the garment business hard. “Most people today prefer to buy their clothes online. We already work with very slim margins. If we have to pay additional taxes, it will be very difficult for the business to break even.”

Navakarnataka Publications has a showroom on KG Road. Ramesha Udupa, the General Manager of the firm, says, “If a betterment fee is levied, essential services like eateries may still be able to do business. However, business in bookstores will definitely suffer.

Prices of books cannot be unduly raised. The footfalls in bookshops are already dwindling and we are selling books without making a profit. Rents are already high and increased taxation will hit our future.”

Properties in the vicinity of infrastructure projects do see an appreciation in their value. This is a phenomenon the government is hoping to cash in on to mobilise funds for other developmental projects.

Not every body agrees with this logic. The owner of a footwear store in Ulsoor says, “My business suffered when the Metro was being constructed. Though the number of people who walk past my shop has gone up, it has not translated into increased business. Many people think prices are higher in shops on the main road or in the vicinity of Metro stations. They prefer to walk farther and buy goods from smaller shops.” 

Most people contend that the governments have a poor track record in utilising the funds collected from taxes. Additional taxation to fund infrastructure projects can only work if an action plan can be drawn up to effectively utilise the taxes collected. Otherwise, a betterment fee will just prove to be a severe blow to property owners, tenants and finally, the customers. Bengaluru’s middle class, which is already reeling under increasing costs, will be hit the hardest.

Owner, Vicky Garments, Malleswaram
Property owners are forced to pass on the increase in costs to their customers. Consumers, who are the end-users, are the ones who will ultimately suffer from the betterment fee to be levied.

Proprietor, Raghavan & Bros
The state government is already collecting various taxes which have not been utilised properly. If they had been, then we should have seen better developed infrastructure in the city.

GM, Navakarnataka Publications
Additional taxes such as the betterment fee may not be a huge burden on bigger companies. However, smaller firms that rent spaces will certainly take a hit if they have to end up paying more.

Retail Manager, Wearhourse, CMH Rd
During the Metro construction phase, sales were down drastically at most business outlets on CMH Road. It has not improved much since, mainly due to the parking issues and lack of adequate footfalls.

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