By John B Monteiro
Mangaluru, Dec 23: On Thursday December 22, Mangaluru City Corporation (MCC) approved a hike of 15% in the property tax under self-assessment scheme (SAS) effective from April 1, 2017. SAS is a soothing phrase, giving the tax payers an illusion that they decide what they pay. In effect, in its implementation, SAS has turned out to be a Self-torture Tax. But, we must start at the beginning.
SAS has its imprimatur in Karnataka Municipal Corporation Act, 1976. It was introduced by MCC effective April 1, 2008. Prior to this, on January 27, 2008, Sameer Shukla, then MCC commissioner, announcing the imminent tax had told presspersons: "To help tax-payers MCC has made arrangements at the nearest ward offices and at sub-offices of MCC in the city...In those areas the tax-payer can obtain property-tax details, fill them up, pay the tax directly to the bank and obtain receipt and submit to the Corporation office against acknowledgement". Sounds simple! Before I come to the "simplicity" of the tax, it is relevant to make some observations on tax in general.
"The art of taxation consists in so plucking the goose as to obtain the largest amount of feathers with the least amount of hissing." - Jean Baptist Colbert. MCC, far from following Colbert’ advice, seems to revel in inflicting maximum torture on its tax-paying citizens as reflected in the administration of the so-called SAS property tax. The need for, and inevitability of, taxation has been for long and well recognized. As Jay Franklin had said long ago, in this world nothing is sure but death and taxes. And as for expecting reasonable taxes, Edmund Burke had said that "to tax and to please as much as to love and be wise is not given to mortals".
So, we have to grin and bear what cannot be avoided. But the burden of taxes can be lightened through thoughtful administration of taxes, especially in its mode of collection. As noted earlier, the term self-assessment has an inviting democratic flavour about it. You are lulled into thinking that you are your own boss; decide what you pay! In practice a raw half-baked temporary inductee, sitting in a bleak, poorly ventilated sub-offices of MCC, like the one I encountered, at the commencement of the tax, at Kavoor junction, decides what you pay, depending on the off-the-cuff answers you blurt out – with dozens of others jostling you and breathing down your neck. In the result, it is neither self-assessment nor fact-based scientific and rationally derived tax amount.
On the other hand, the self-assessment bit could be a trap as it is possible that at a later date, on the basis of spot inspection, the tax-payer is liable to be penalized for giving wrong data or suppressing data initially. Such penalty situation has also the potential for blackmail for bribe to regularise the lapse off the record by confirming the original submission.
Now, I will take you through the time and labour one expends in the self-assessment avatar of the tax. You go to the sub-office and get hold of a booklet from a permanent employee of MCC. Then you join a group of a score of persons pushing their way to catch the attention of the (apparently temporary) "writer". When your turn comes, depending on your jostling power, the person fills in the form that has ten pages, including the cover jacket. The person calculates the figures, on the basis of your answers, on a mini-calculator the size of a mobile phone. Then you go to the designated bank, pay the cash and return to the sub-office. The permanent staff stamps the booklet, teares out and returns pages meant for you, and the transaction is over.
The next time around, the same drill continues; but on the basic data in the copy they issued to you the first year (2008). So, the tax can vary for three reasons – allowance of depreciation, as happened; increase in the tax rate as happened in in 2011 and 2014 (15% each) or increase in the guidance value as is likely to happen in the coming years – in sympathy with rise in real estate prices. Also, after the first year, you have to attach a photocopy of the previous year’s bank payment receipt – perhaps to satisfy MCC that previous payments have been settled.
What does all this translate in terms of torture to the tax-paying citizen? Take my own outings. I go to the sub office at about 10.30 am. The basic booklet (mercifully free) is not available because, apparently the permanent staff have not arrived. I am advised to come later. I go again at 11 am. The booklet has come; but there is a jostling crowd. This time around there an empty chair in front of the writer and I sit on it. But, the writer is bullied by poor ladies who have perhaps to go back and cook lunch for their families or do paid cleaning work for other households. Then there are (apparently) agents or touts, who front for people like me who value their time, who thrust a bunch of booklets and promise to return later. I could not get the attention of the writer for the one hour I sat on the chair. Then, pitying my grey hair, she offers to take my booklet home and bring it back the next day. So, the next day the drill repeats and the transaction is over.
That brings me to the cost of tax collection. The cost of collection has to be reasonably low compared to the amount collected. That is why over the years some taxes have been abolished. For instance, India has no estate tax (also dubbed inheritance tax or death duty) now. A tax on transfer of property, financial investment and stakes in companies upon a person’s death was abolished in 1985 as it was not bringing in the expected revenues in relation to the cost of administering it to justify it continuance. In the case of MCC’s SAS, the cost to it may be negligible because the tax payer bears the cost of Rs 25 charged by the temporary inductee writer for filling up the booklet. In other words the cost is passed on to the tax-payer. That Rs 25 cost is only the tip of the iceberg. The hidden cost to the taxpayer is the monetized cost of the time involved in paying the tax and the transport cost of the tax-payer.
In the corporate sector, employees have an hourly cost which is billed to the client – as in the case of IT companies. It was Rs 1000 for me when I was at the peak of my career. It does not mean that if you are not formally employed, you have no time cost. There is an opportunity cost. If I write this article, it takes me three hours of research and drafting and If I am paid Rs 400 for this, my hourly opportunity cost is Rs 200. Over two days, I spent 8 hours in paying the MCC tax, making the lost opportunity cost of Rs 1600.The petrol cost (real) was Rs 150. So, the total cost of tax collection borne by me is Rs 1775 (including Rs 25 for the writer). The tax paid by me is Rs 1888 in 2008. Thus the notional cost of collection works out to more than the tax amount – but it is not borne by the tax collector but by the tax payer. In other words, effective tax paid by me was Rs 3663. Today, the tax is much higher, with garbage tax riding on it. Imagine the total cost to 1.96 lakh property owners who fall into the SAS tax net.
Can this cost to tax-payer be reduced? Send computerized bill as was sent, six-monthly, before the self-assessment regime and now being sent for water tax. In such an event, a high-cost person like me, need not go personally but send a low cost helper in a bus. This is being done for water, electricity and telephone bills. But, MCC will have to do the initial home work like surveying the properties on one-time basis. This has been done in the case of land records, taking the outsourcing route, and now one can get RTCs at the click of a button. It is a one-time enumeration, like the ten-yearly census work, and developing user-friendly software. Officials at the sub-office level rue the current system (or lack of it?) but have no clue on what is being cooked for the future – a poor case of internal communication in MCC.
At the MCC meeting on December 22, the Commissioner said: "We have roped in Diya Systems to ensure that the property data information for 25 wards is readied on a pilot and collect the data for the remaining 35 wards later on a priority". The mantra today from Prime Minister downwards is to go digital. DK does not lack IT facilities, including Diya, to handle this assignment and, thus to end the torture of SAS tax-payers.
Finally, the mode of payment. Again, the new Mantra is cashless transactions. The exclusive attachment to cash is reflected in the anonymous epigram: In God we trust; others must pay cash. Another such epigram says: Plenty of people are willing to give God credit, yet few are willing to give him cash. A sign in a restaurant reads: If you are 80 years old and accompanied by your parents, we will cash your check. But, the scenario is now so much changed that the two most beautiful words in English language are: "Cheque enclosed". This raises the question as to why not accept cheques for payments for property tax? The world has moved from cash to cheques to credit cards to electronic payment. Why persist with outmoded method of cash payment, risk robbery and deny tax-payers the choice of payment modes? The telephone and electricity departments have no problem with cheque payment. Or, is MCC bent on torturing its SAS tax-paying citizens?
"What is the difference between a taxidermist and a tax collector?" asked Mark Twain and answered: "The taxidermist takes only the skin". Chew on this!