Taxation without representation

The Karnataka government has announced a slew of measures concerning taxing properties in Bengaluru either in the form of bills passed in the legislature or through notifications, all of which appear to be half-baked and taken without proper application of mind.

The BBMP dropped a bombshell when it issued a draft notification without any public consultation making guidance value the basis of calculating property tax. This supersedes the present system of classifying properties under zonal classification of areas under the BBMP.

The tax will now be calculated on the basis of two components -- the guidance value of the property and the built-up area. Starting April 1, several properties will see a jump in annual tax, though the hike will be capped at 20% from what owners paid the previous year.

Properties, including flats, have been further classified into tenanted, self-occupied and fully vacant, with each category being assigned a different percentage of guidance value. The effect of this will be a further increase in rents, which are already high.

The provision will also lead to confusion in calculation of tax as it will involve multiple variables and grey areas. The notification empowers the BBMP to increase property tax by 5% on April 1 every year, starting 2025. This will also lead to an additional hike in rents each year. The move will hit tenants badly.

In another decision, one that appears to be at cross-purposes with the overarching need to mop up revenues, the government has brought in an amendment to reduce the penalty on non-payment of property tax by 50%.

This “taxpayer-friendly amendment”, as Deputy Chief Minister D K Shivakumar described it, will leave the BBMP poorer by some Rs 2,700 crore. The logic behind burdening citizens by effecting a rise in property tax, on the one hand, and rewarding defaulters, on the other, is difficult to understand.

In another controversial move, the legislature passed a bill that allowed premium floor area ratio (FAR), which lets builders to add floors over and above what is permitted by paying an additional sum of money for the privilege.

The piecemeal and self-contradictory approach to revenue collection, while incentivising defaults and rule-breaking, spell disaster for the city, which is already crumbling. 

Worryingly, vital decisions about the city and on taxes are being taken at a time when it does not have an elected local administration and citizens do not have elected councillors to represent their views on these taxation proposals.

The state government does not have the moral and political authority to impose these decisions on citizens. The Siddaramaiah government will do well to hold off on notifying these bills and rules and rethink them.