Propriety of property tax hikes

CHENNAI: Now that the dust seems to have settled on furious debates over the property tax hike, it perhaps is time to have a more sober look at the increase, what it means and why it matters. The basic premise is well-known, but worth recalling to set the context: Earlier this month, the State government increased the property tax in Corporations, municipalities and town panchayats, hiking it to the tune of 25-150 per cent. This triggered instant protests, not only from political parties, who accused the DMK of hypocrisy for having opposed a similar hike only a couple of years ago when it was in the Opposition, but also from the public who is already bearing the burden of the steep rise in the cost of living.

As there are no elections in the immediate future, the ruling party managed to weather the storm and it has now been accepted that there will not be any roll-back; the hike is here to stay. As sudden as it was, the hike may not have been totally unexpected to those who were following Finance Minister PTR Palanivel Thiaga Rajan’s statements closely. Addressing a pre-budget event, he had hinted at ‘bitter pills’ on the anvil. And during the budget discussion, he stressed on how essential it was to revise the property tax rates to achieve the growth rate that the State was aspiring for.

To understand the property tax increase in full, it is necessary to take a look at the larger perspective. Across the world, property tax is the main source of revenue for local bodies to generate funds for all the works – ranging from creating and/or maintaining infrastructure to ensuring basic services. However, in the case of Chennai, the last time property tax was increased was way back in 1998. Since then, petrol price has gone up by 300% while diesel rose more sharply at 800%; inflation has trebled; and the cost of road construction has shot up by nearly six times.

In contrast, the Greater Chennai Corporation’s own source of revenue fell from 60% of the total revenue in 2010-11 to 43% in 2020-21. It is not just infeasible, but irrational as well because the balance is made up largely from State coffers, money that should ideally be spent on smaller civic bodies in backward districts that are in greater need of government support.

It is also important to go beyond the percentage calculation, and instead measure the hike in absolute numbers. Consider this: The half-yearly property tax for a residential building measuring between 1,201 sq ft to 1,800 sqft in Teynampet Zone has gone up by 100%, to Rs 4,150 from Rs 2,075. But calculating absolute numbers, this means an increase of Rs 345.8 a month. In the case of Anna Nagar zone, the owner of a similar property has to shell out Rs 247.5 per month. It is Rs 92 in the case of Tiruvottiyur and Rs 165 in Madhavaram. In short, this is not exactly an unbearable burden for an individual who owns a residential building of that size in a metropolitan city.

However, even while acknowledging the rationale behind the hike, it must be pointed out that the sudden and sharp increase was necessitated by the failure of successive regimes to put in place a system where the tax rates are increased periodically and rationally instead of postponing it for political expediency. While expecting citizens to willingly pay up the taxes, the government and local bodies can adopt a participatory planning method to involve the people while spending the funds thus raised. Each ward committee and area sabha could discuss the projects that the local public wants, and prioritise them on the basis of actual benefits on the ground. That would elevate the common citizen as an actual stakeholder instead of restricting her/his role to a mere resource to be tapped.