Bengaluru has lost out on hundreds of crores of rupees in property tax revenue, only because it did not verify tax declarations and did not raise tax rates in over a decade. This is as per an audit of BBMP for the years 2008-2010, by the Comptroller and Auditor General of India (CAG). In a press release on March 28th, BBMP has sounded the gong for 2012-13 tax collections.
According to the report, false tax declarations alone created loss of at least Rs 207.35 cr in 2008-10. This was based on a sample audit of 169 declarations alone, from 16 Assistant Revenue Officers (AROs) in BBMP. Of the 169 returns, 68 (40%) had wrong tax declarations. BBMP has 64 AROs overall.
BBMP’s HSR Layout Ward Office in South Bangalore, not far from Silkboard. This is one of the satellite tax collection offices. Pic: Abhishek Angad
None of the 16 AROs had verified tax declarations of citizens. Under SAS (Self Assessment Scheme), AROs have to verify citizens’ declaration and payment of at least 10% of returns that are filed. They should have property registers with details of all properties – built-up area, type of usage, number of floors etc – under their jurisdiction.
But the AROs did not have these registers, and in their absence could not verify if the declarations made by citizens were true. AROs did not check if the declarations had full information either. Of the 642 returns sampled by CAG overall, 45% did not have enough information and could not be verified.
Even more blatant was non-verification of cheques given by tax payers. Many cheques had bounced. But the AROs had issued receipts to everyone just as they submitted the cheques, without waiting for the cheques to be realised.
The 16 AROs in CAG’s sample audit were:
Chamarajpet, Hebbal, Jagajeevanramnagar, Jayanagar, Jeevanbhimanagar, Konanakunte, Madivala (BTM Layout), Mahadevapura (Hoodi), Mahalakshmipura, Marathahalli, Nagarbhavi, Nelegedaranahalli, Ramamurthynagar, Shantinagar, Shivajinagar and Whitefield
Auditing details from 30 AROs, CAG found that up till 2009-10, BBMP had lost Rs 1.96 cr because of 1,404 bounced cheques. Of this, Rs 1.79 cr was lost in 2008-10 alone. BBMP did not present similar data from other AROs to CAG; nor did it give data on action taken against the 1,404 defaulters.
BBMP is also supposed to impose penalty on those who delay or default on tax payment at 2% of tax amount. Defaulters’ property can be attached or they can be prosecuted before a Magistrate. But BBMP did not identify defaulters, and collected penalty only from taxpayers who paid voluntarily after the deadline.
|
Category |
Number of returns analysed |
Number of returns found irregular |
Revenue Loss (in cr) |
|
|
|
|
|
|
Residential apartments |
12 |
3 |
26.9 |
|
Educational institutions |
30 |
22 |
26.48 |
|
Sports and recreations clubs |
10 |
3 |
9.3 |
|
Shopping malls and multiplexes |
6 |
3 |
12.29 |
|
Star/luxury hotels |
20 |
9 |
3.58 |
|
Software companies |
25 |
10 |
94.45 |
|
Other nonresidential properties |
50 |
11 |
28.39 |
|
Government residential quarters |
6 |
6 |
5.15 |
|
Hospitals |
10 |
1 |
0.76 |
|
|
169 |
68 |
207.35 |
|
|
|
|
|
Property tax rate not revised in over a decade
BBMP had last revised its property tax rates in the year 2000. According to Karnataka Municipal Corporation (KMC) Act, 1976, BBMP has to revise property tax rate once every three years. Non-revision for over a decade led to low tax collection. BBMP’s Taxation and Finance Standing Committee is supposed to propose these revisions and these have to be approved by the Additional Chief Secretary of the UDD (Urban Development Department).
In 2008-09, BBMP had introduced Unit Area Value (UAV) System to increase revenue collection. Under UAV, BBMP is divided into different zones depending on average market value of property; tax for each property will depend on the zone it falls under. But even in this system, BBMP used market values that were prevalent in 2000 instead of the existing rates.
Tax collection in fact went down the year UAV was introduced. In 2008-09, tax collected was 28% lesser than that collected the year before. Also, that year, property tax made up 73% of the total revenue, as opposed to 79% in 2007-08. BBMP did not give CAG any explanation for this decrease. In the following years, collection did increase, but not in the expected scale. This was mainly because many properties were not under BBMP’s tax net.
Taxation and Finance Committee Chairman G Manjunath Raju (BJP, Kadumalleshwara ward) says that there are no plans to increase tax rates. "We don’t want to overburden citizens, so there will be no hike," he says. In line with this thinking, the 2012-13 announcement by BBMP for property tax collections does not include a rate hike.
Properties survey not completed
BBMP was to do a GIS mapping of all properties and then use this data to do a physical survey. BBMP was formed with its new areas in 2007, and many properties in new areas were not under tax net.
Additional Commissioners of BBMP zones informed CAG that GIS mapping was completed, but not the physical survey. But details of how much of the physical survey was completed, was not given to CAG. CAG report says that the ‘abnormal delay’ in completing survey has cost BBMP a lot of revenue.
Raju says that in 2011-12, over five lakh properties have been brought under tax net. "Last year there were over 11 lakh properties under tax net, this year it is 16.19 lakhs. Physical survey has been completed, and BBMP will issue Property ID (PID) numbers to all these properties. We will collect arrears of previous years from the new properties."
Raju says that property tax collection of Rs 1400 cr is expected this financial year, by March end. In a press release early this month, BBMP had said that it has already collected Rs 1250 cr.
CAG’s recommendations for BBMP
CAG made the following recommendations to BBMP as part of its report.
- Revise tax rates periodically
- Tax should be collected online or through DDs, not cheques
- An independent system to cross-check returns and take action on defaulters
- Revenue officers should be held accountable for low collection and for not verifying declarations
CAG says that though it had forwarded the draft report to state government in January 2011 pointing out issues, there had been no response until March 2011.
BBMP Special Commissioner K R Niranjan, who had accepted the recommendations from CAG last year, says that these have mostly been implemented. "All identified properties will have new PID numbers within a month. Also, we are cross-verifying 10% of tax declarations, focusing mainly on large properties. This is being done by AROs, ROs, zonal commissioners etc. We have found some defaulters; penalty will be levied from them."
He says that Taxation and Finance Committee had last year rejected the administration’s recommendation to hike rates, but that the recommendation will be made again this year. Twelve councillors sit on this committee.
Other issues note in the CAG report
- Property tax paid online is directly accounted in BBMP Central office and is not routed through AROs. Hence AROs – who monitor collection – do not have this data.
- Help Centres that collect taxes are not computerised; no networking between these centres and BBMP offices. Hence no proper accounts of collection.
- In 2009, number of AROs were increased from 53 to 64. But the software was not updated correspondingly and later also payments were accounted (as of March 2011) as per jurisdiction of the earlier 53 AROs.
⊕
It is not correct to say that property tax has not been revised. It has been ANALYSED by re-classifying zones. The rates fixed in 2000 was changed in 2008 and has to continue till 2013 for a full block period of FIVE years.
But the revenue has increased considerably by making the Self Assessment mandatory. (No pilferages by BBMP officials as was in 2000)
AROs have done the homework of scrutinising the returns and have rectified the mistakes last year in plenty of cases, but might not have been recorded. (Most of the times, officials would have got connivance with the tax payer)
There has been a difference between the tax for the year 2010-11 & 2011-12 for the same properties, which reflects with the submission of form V (Blue forms)
CAG’s recommendations have to be accepted except item No.2, where cheques are not to be accepted. Do they expect the tax payers to stand in two queues, once for DD and again to remit tax ? (It is UNACCEPTABLE even if they suggest that the bank charges will be borne by BBMP)
All returned cheques have been returned to the payer and amount collected along with Cheque Return Charges and hence the issued receipts hold good, which is not noted by the CAG.
The table given above seems to be of only one ward and not of entire BBMP as 10% of returns do not form such meagre figures.
Plugging tax evasion is OK. But raising tax rates is not acceptable.Tax rates rise when guidance value is increased.
If BBMP raises the tax rates every three years, perhaps over a period the tax would be more than the value of the property. Who could bear this?
I have written several letters to the Commissioner BBMP on these issues and probably they have landed in the nearest waste paper basket. Those public who are paying directly into the BBMP centers are put into lot of harassment and delays in issuing Receipts on the spot. If the cheque bounces, BBMP can recover appropriate charges and take other suitable actions. Otherwise, let BBPM give their account numbers where the property owners can go and pay in their respective banks into this account and get the Bank seal as a proof of payment. Why this earlier procedure was stopped ? BBMP staff are making money under the table from gullible public for each transaction and the SAS goes unchecked , no data entry, etc etc. To avoid harassment, public are forced into this corrupt practices and what is due to BBMP do not reach its kitty.It is the BBMP who is wholly responsible in such messy affairs .