Municipal taxes and urban service delivery

June 30, 2024

A proposal to collect municipal utility charges and taxes through electricity bills is drawing criticism from some Karachiites who are also demanding greater transparency

Municipal taxes and urban service delivery


arachi, a sprawling metropolis of 30 million, finds itself trapped in a cycle of neglect and crisis. Its streets are riddled with potholes and exposed manholes, public transport is inadequate and air quality ranks among the worst. Frequent heat waves exacerbate the suffering of its residents.

The city’s water supply is unevenly distributed, its sewerage system is failing and electricity blackouts last up to 14 hours a day. Rainfall brings further chaos, flooding streets and disrupting daily life. Amid these challenges, people survive by arranging their own essential services—procuring water, managing electricity through alternatives, handling waste disposal, seeking private healthcare and opting for private education due to the dismal state of public schools.

Against this backdrop of crisis and self-reliance, Karachi’s citizens face yet another demand: Municipal Utility Charges and Taxes imposed by the Karachi Metropolitan Corporation and local government. This call for additional taxes has sparked deep scepticism and frustration among many who question the justification for this tax collection.

Despite paying taxes and rates, they cannot count on the city government for water supply, law enforcement, education and healthcare. Many rely on expensive tanker water due to a dysfunctional supply system, contend with lawlessness on poorly maintained roads and make do with private services over public ones. The recent 300 per cent increase in gas tariffs has added to the financial strain, compounding the challenges faced by a population grappling with rising costs, unemployment and environmental degradation.

In Karachi, where daily life is a testament to resilience amidst adversity, the debate over MUCT has underscored broader issues of governance, urban planning and public trust. As the city struggles to address its myriad crises, the effectiveness and fairness of tax policies and their impact on everyday life remain pressing concerns for its embattled residents.

In big cities around the globe, Municipal Utility Charges empower local governments to support a wide array of essential services and infrastructure crucial for urban functionality. These charges encompass diverse levies imposed on residents, businesses and property owners, funding critical areas such as road construction and maintenance, water supply, sanitation services, waste management and energy infrastructure. From sustaining police and emergency services to nurturing parks, schools and community centres, these revenues play a pivotal role in urban management, governance and the upkeep of public infrastructure.

Cities manage these funds through mechanisms like property tax, utility fees and business levies, ensuring equitable service delivery and sustainable development. There is a strong emphasis on transparent financial stewardship and inclusive community engagement to shape urban futures.

However, Karachi is exceptional in terms of its challenges. In 2009, under the leadership of Mustafa Kamal, the City District Government of Karachi introduced a contentious ‘infrastructure tax’ aimed at residential and commercial property owners. This tax was intended to finance the maintenance and development of essential urban infrastructure including roads, bridges, parks and streetlights. Yet, the rollout of this tax was met with widespread public opposition. Many refused outright to pay the tax, citing a lack of prior consultation and historic record of failed service delivery by the municipal administration.

The controversy surrounding the infrastructure tax underscored broader issues of governance and public trust in Karachi’s local government. It raised fundamental questions about the transparency and effectiveness of municipal services, prompting scrutiny over how such funds are managed and whether they genuinely serve the public interest.

The episode highlighted the importance of not only financial accountability but also meaningful community consultation in shaping policies that impact urban residents’ daily lives. As Karachi continues to grapple with its urban challenges, the legacy of the failed MUCT is a cautionary tale in balancing fiscal responsibility with public trust and effective governance.

15 years later, Karachi Metropolitan Corporation leader, Murtaza Wahab is arguing for collecting MUCT through electricity bills, citing efficiency and higher compliance rates due to electricity’s essential nature. KMC clearly lacks the capacity to handle this collection effectively. That is why it is opting for an easier method to bolster finances and fund infrastructure projects.

Meanwhile, the current economic recession has intensified financial strain on citizens, raising concerns over the fairness and feasibility of new levies. Public scepticism has grown amidst ongoing service delivery issues and a perceived lack of improvements. This has highlighted challenges in enforcing and gaining acceptance for these measures.

The collection of MUCT has become a contentious issue in Karachi, raising significant questions about both service delivery by the Karachi Metropolitan Corporation and the methods used for tax collection.

The decision to collect the MUCT through Karachi Electric bills has sparked widespread criticism. Many residents are questioning the transparency and effectiveness of this approach. The lack of public access to the MUCT Act itself has added to the scepticism. Many Karachiites are calling for greater transparency from the KMC, urging the municipal authority to publicly disclose details of the MUCT Act and provide a comprehensive account of its utilisation and impact over the past decade. As frustrations mount, residents are demanding clarity on how these funds are being managed and whether they truly contribute to improving the city’s infrastructure and services.

Various citizens’ groups in Karachi have raised significant objections to the collection of the MUCT through electricity bills. Poor service delivery, marked by frequent power outages and inadequate water supply, is fueling opposition, as residents question the fairness of additional charges. Critics argue that without substantial improvements in infrastructure, imposing these taxes is unwarranted. Many view access to essential services as a right rather than a privilege subject to additional fees.

Political opposition from parties like the Jamaat-i-Islami has intensified, leading to protest demonstrations and legal challenges that reflect broad discontent. In the past, judicial intervention by the Sindh High Court had halted the levy’s enforcement via electricity bills. Together these factors shape public opinion, fostering widespread resistance against the proposed MUCT collection method amid Karachi’s infrastructural challenges and economic pressures.

The implementation of MUCT in Karachi has sparked concerns about exacerbating socio-economic divisions across the city. Critics argue that the policy is likely to prioritise affluent neighbourhoods and commercial areas for infrastructure development, potentially leaving low-income and irregular areas neglected. This selective spending could widen disparities in access to essential services like water supply, sanitation and transportation, compounding the challenges faced by residents already grappling with economic instability. As affluent areas benefit from increased investment, marginalised communities may experience further neglect, deepening social inequalities and posing risks of social unrest. A more equitable approach to municipal taxation and resource allocation is seen as crucial to addressing these disparities and ensuring that all residents benefit equitably from urban development initiatives.

Proposed alternative methods for funding urban infrastructure in Karachi aim to address longstanding challenges in revenue generation and equitable development. These include enhancing property tax collection through accurate assessments and improved enforcement, regulating water supply billing to capture informal arrangements and strengthening motor vehicle taxation systems. Introducing a non-utilisation fee on vacant plots and revisiting road user charges are also part of strategies to boost municipal revenues while ensuring fair distribution of costs. Additionally, advocacy for an equalisation fund underscores efforts to redistribute resources from affluent to less developed areas, prioritising critical infrastructure projects like water supply and waste management in underserved communities. Such measures not only seek to alleviate disparities but can also promote inclusive urban growth and public participation in Karachi’s development trajectory.

The importance of considering the nature and scale of users when imposing new levies lies in ensuring equitable distribution of financial burdens and targeted investment for fair resource allocation. By aligning charges with users’ capacity and benefits derived from municipal services, authorities can enhance compliance, improve service delivery and sustain urban development more effectively. The current focus on road infrastructure often sidelines pedestrians, exacerbating traffic hazards and neglecting low-income areas, which perpetuates urban inequalities and poses environmental and social costs. To promote sustainable urban growth, a balanced approach that integrates pedestrian needs alongside road development is crucial. Such an approach can foster nsafer, more inclusive cities while mitigating adverse impacts on communities and the environment.

Stakeholder participation holds paramount importance in Karachi’s urban governance, particularly in setting tariffs and charges for municipal services and taxes. By involving diverse community interests and perspectives, this approach ensures fairness and equity in financial burdens, avoiding undue hardship on vulnerable populations.

Local stakeholders, including residents and businesses, contribute invaluable insights into local needs and preferences, enhancing transparency and building trust in tariff-setting processes. Their involvement not only improves service quality and operational efficiency but also addresses specific local challenges and realities, fostering sustainable urban development. Moreover, engaging stakeholders in planning and implementing infrastructure projects promotes community ownership, supports innovative solutions and reduces resistance, ultimately ensuring that urban initiatives align closely with the city’s social, economic and environmental contexts while enhancing overall governance transparency and accountability.

The contributor is a Karachi-based urban planner and geographer

Municipal taxes and urban service delivery