Sindh plans steps to devolve property tax collection to DMCs

The Sindh government, in collaboration with the World Bank (WB), has decided to devolve the collection of the property tax to the district municipal corporations (DMCs), for which the preparation of a proper database and the capacity building of local bodies’ staffers will begin shortly.

This decision was made by Chief Minister Syed Murad Ali Shah on Thursday in a meeting with a World Bank team, led by senior economist Yoonhee Kim, and comprising urban development specialist Shoaib Athar, public sector specialist Irum Touqeer, urban development specialist Takaaki Masaki and other officials.

The provincial government delegation included Minister for Local Government Jam Khan Shoro, Karachi Mayor Wasim Akhtar, Principal Secretary to CM Sohail Rajput, excise secretary Haleem Shaikh and chairmen of DMCs.

The chief minister said he had already devolved the task of the property tax collection to the local bodies in the case of the Karachi Metropolitan Corporation, but the corporation had yet to develop a system in this regard. He added that a property survey of Sukkur had been conducted, and it was interesting to note that earlier there were only 35,000 households registered for the collection of the property tax, but the fresh survey had revealed an amazing figure of 65,000 houses obligated to pay the tax.

The World Bank team, through a presentation, said that the current collection of the property tax in Sindh was Rs2 billion, but the revenue from this source could be increased to Rs7.2 billion. Citing the examples of Punjab, they said that the neighbouring province collected $88 million during 2015-16, Chennai in India collected $90 million, the Indian Hyderabad $179 million, Banglore $201 million and Mumbai $373 million. “These figures are enough to assess how much Karachi in terms of its size and households could collect the property tax.”

The World Bank delegation said that the tax base had been eroded by very generous exemptions. It was also pointed out that the administration of the property tax was based on an old system technology, and the current billing system was not fit for the purpose. They recommended that a self-assessment and self-payment platform for property tax customers was the need of the hour. The property tax arrears constituted a major problem and caused a significant loss of revenue, they remarked.

The WB team suggested devolution of the Urban Immovable Property Tax (UIPT) to the DMCs. On this, chief minister said the local councils of Karachi – DMCs – did not have the capacity yet to perfume the UIPT collection functions in the absence of trained staff trained and required procedures. He added that he had already issued directives to the local bodies to develop an efficient system.

It the meeting, it was agreed that immediate measures would be taken within the next three months for the purpose. The measures would include agreements and legislation about the UIPT devolution road map, institutional arrangements, and survey preparations and their launch.

The bank also suggested Phase I (July 18 to June 2020) in which the survey would be completed along with the preparation of a property tax database. An improvement would be done in tax payers services. Training and capacity building of DMC staffers, and identification, procurement and pilot deployment of the ICT system for the DMCs would be undertaken.

In Phase II (July 2020 to June 2023), legal reforms and the introduction of a self-assessment and self-payment system undertaken. The valuation methodology and updating valuation table would also be made and the exemption and relief system would be reformed. It was agreed that the enforcement powers would be strengthened. It was decided to undertake a full survey of all buildings in the six DMCs of the city; collect qualitative and quantitative data for each building, including property use, to collect the GPS co-ordinates for each building, including digital image, and to build upon the experiences from Sukkur. The meeting decided to establish an IT Revenue Management System for the DMCs.