Civic agencies are recording a demonetisation windfall as people are taking advantage of schemes to clear longstanding tax dues with abolished 500- and 1,000-rupee notes.
But experts believe the returns don’t reflect improved efficiency in tax collection.
Figures provided by 47 urban local bodies to the Union urban development ministry show their tax collection increased by 268% in November 2016 compared to the same period last year.
These municipalities collected Rs 3,607 crore last November. But the corresponding figure till November 22 this year is Rs 13,192 crore already.
A majority of this tax has been collected after November 8, the day Prime Minister Narendra Modi announced scrapping of the high-value notes. The collection figures for the preceding months were far less.
Mumbai municipality’s tax collection has been Rs 11,913 crore this month, which way better than the Rs 3,185 crore it collected last November. Surat’s municipal revenue increased from a mere Rs 7.19 crore to Rs 100 crore.
The fantastic returns could be attributed state governments’ special schemes for taxpayers to pay their dues — some of which are said to have been unsettled for years — with the demonetised notes.
“This is the positive effect of demonetisation. People are clearing up their old dues, paying with Rs 500 and Rs 1,000 notes. For the urban local bodies, it has meant substantial mopping up of tax collection,” urban development minister M Venkaiah Naidu said.
But expert Srikanth Viswanathan, the CEO of advocacy group Janagraaha, called the increase in municipal revenue a reflection of people using up their defunct notes, rather than an indication of improved tax efficiency.
“The municipalities’ own revenues continue to be in the range of 1-1.5%, far less than in countries such as Brazil and South Africa. But the increase does reflect the huge potential from such revenues once the entire property tax administration is overhauled across urban local bodies,” he said.
Viswanathan said municipalities could transform the system by levying property tax on rational market-oriented base capital values, ensure a good tax assessment register and significantly improve their collection efficiency through spatial analytics and outsourcing.