In Part 1 and Part 2 of our present focus on Municipal Finance, we learnt about the sources of funds for the Greater Chennai Corporation (GCC) and the strategies adopted by the civic body recently to increase the collection of property tax in the city.
Property tax is a complex subject. In 2018, citizens strongly opposed the property tax revision that was done after two decades. Why was this revision important?
How is GCC meeting the increased expenditure needs (due to COVID-19 and Cyclone Nivar)?
We spoke to Deputy Commissioner (Revenue & Finance), Meghanath Reddy to understand more on the subject.
People in the newer areas of Chennai are upset that they lack basic amenities while they pay the same, or in some cases, even more tax than those in the city. What’s the reason behind it?
Property tax in Chennai is charged based on the rules of the Chennai City Municipal Corporation (CCMC) act. This is a scientific and non-questionable act. It treats everyone equally. Basic street rate, usage and the area are the three determined factors for property tax. When you say it has to be according to the amenities, who decides it?
But when an entire locality has no facilities, how fair is it to charge them at par with other developed areas? For example, sewage facilities are absent in many areas including Porur and Thoraipakkam, yet they pay more tax than those in Teynampet.
They don’t live in extended areas alone. They come to other areas of the city where we have created roads, bridges, dynamic lighting, smart city solutions etc. Development will occur in extended areas. In fact, massive focus is being given to these areas now. These areas were not part of GCC a decade ago. We are making efforts to develop these areas. It is a flawed approach to charge taxes based on localities.
Shouldn’t the increase in property tax be done gradually rather than doing it all at once, like it was attempted in 2018?
CCMC Act mandates the revision of property tax once in five years. There was an attempt to revise it in 2018, which is now under consideration.
How does GCC plan on augmenting its revenue?
A growing city like Chennai cannot always depend on loans. The first goal is to increase the revenue from existing own-sources (Own source revenue or OSR is the revenue generated from collecting taxes or other commercial charges) and identifying more such sources. A city should try to do its best to cover all gaps in own source revenues.
Non-assessment/ under-assessment of properties is a challenge. We could multiply the revenue just by assessing properties correctly. We are currently plugging these leakages.
Does GCC depend on loans and grants for most projects?
No. Like any local body, GCC relies on loans for high ticketing (high monetary value) projects only.
Is GCC considering other avenues to generate income parallely?
Many such projects are in progress currently. Multi-level car parking with commercial utilisation is one such project we are working on, in a Public-Private Partnership (PPP) model. Digital advertising and collecting user charges for Solid Waste Management are the other options we are mulling over.
Hyderabad is raising money through municipal bonds. Is GCC looking at such sources?
We are mulling over a few options. The liabilities associated with municipal bonds should be thought through. How much can you raise? A good chunk of the money goes towards interest payments.
We are looking at creating more potential through advertisements. Increasing property tax and professional tax base can be a game-changer. We are primarily looking at it as a huge reform area.
There was a jump of Rs 350 crore when the property tax was revised in 2018. Though it was eventually rolled back and adjusted, those 350 crores could have take care of the salaries of the GCC staff (18,000 permanent and 10,000 temporary workers) for five months. The state government is strongly looking at ways to increase the property tax. There is a committee looking into it.
What’s your take on the overall current financial health of Chennai?
It is not worrisome or alarming. We have strong control over our expenditures. However, COVID posed new challenges for us. GCC granted a four-month moratorium on tax payments for citizens during the pandemic. Cash inflow took a toll; expenditures rose. We were punched from all sides.
How do you plan to deal with the situation?
We are back on track now. Through creative methods and targeted approaches, we have collected almost 40% of the property tax due in the city.