South Delhi Municipal Corporation (SDMC) has introduced a new professional tax for self-employed professionals such as doctors, lawyers, chartered accountants, architects, and those with office spaces in the SDMC area.
SDMC passed the proposal to this effect earlier this week, which will now go to the Delhi government for notification. In the case of employees of private firms, the companies will deduct the tax amount from salaries, while self employed professionals will have to pay online or at zonal offices of the South corporation.
How much will the tax be?
As per the proposal, those earning less than Rs 50,000 a month are exempt, while those earning Rs 50,001-Rs 75,000 will be taxed Rs 100 per month. Those earning Rs 75,001-Rs 1 lakh per month will have to pay Rs 150, and those earning above Rs 1 lakh will be taxed Rs 200 per month.
Self-employed individuals earning up to Rs 6 lakh per annum are exempt. Those earning between Rs 6 lakh and Rs 9 lakh will have to pay Rs 1,200 per year; for income levels between Rs 9 lakh and Rs 12 lakh, and above 12 lakh the tax will be Rs 1800 and Rs 2,400 respectively.
Will areas under the jurisdiction of the other municipal corporations be taxed as well?
The North Corporation brought a similar proposal on Wednesday (July 29), but could not get it passed due to opposition from the opposition AAP and Congress in the civic body, as well as pressure from the BJP’s own leader in the state, who is not in the favour of the tax. However, should the proposal of the South corporation clear all hurdles and be notified, the leadership of North body will make another attempt to bring the proposal.
And, since all three civic bodies in Delhi are ruled by the same party (BJP), and follow the same model of governance, the East civic body can be expected to attempt to replicate this fundraising model.
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What is the SDMC’s argument for imposing the tax?
The civic body argues that when a person works in or opens an office, they use the civic infrastructure of the area and increase the load on sanitation services, etc., for which they should be prepared to pay.
Also, this tax is not new, and is already levied in at least 12 states across the country, including Maharashtra, West Bengal, Bihar, and Gujarat.
And while taxes have not been increased since 2004, the value of office space in the corporation’s area has risen more than a hundred times.
But isn’t it unfair to introduce this tax at the time of the pandemic, when people’s incomes are generally down, and have in some cases vanished?
While that is true, the corporations themselves are not immune to the impact of the crisis. The North and East corporations have remained financially unstable ever since the botched trifurcation of the original Municipal Corporation of Delhi (MCD).
SDMC, which has many rich neighbourhoods in its jurisdiction, was until last year the only corporation that did not have a deficit. But corporation officials say that this year a deficit is anticipated if things do not improve soon (which they are unlikely to). In terms of numbers, consider this: the SDMC has until now collected Rs 250 crore from around 2 lakh properties, which in the corresponding period last year was Rs 350 crore from 3 lakh properties.
Corporation officials blame the Covid-19 crisis for people not coming forward to pay property tax, and for the fall in health trade licence fees and other fees, as the pandemic has hit businesses badly. Also, the Delhi government’s share of Rs 300 crore remains pending, and this has further hit revenues, officials say.
So why is there opposition to increasing the tax?
The AAP and Congress believe that putting extra burden on the people is unfair — and it is the easy way out for the corporation, which should begin by plugging leaks in its own system before levying new taxes.
Congress vice president Abhishek Dutt, who is also a councillor in SDMC, said that the civic body should first extract property tax to its potential rather than looking elsewhere for money. AAP leader Durgesh Pathak said that the problem is not increasing tax, but the fact that it has been increased at a time when people’s incomes have been hit badly. If more people are brought into the tax net, the SDMC’s income will automatically increase, but the corporation has failed to do that.
OK, but why are MCDs not able to widen the tax net?
The politics of handouts and populism has always been a major roadblock in the path of tax collections. Eight out of the 12 lakh properties in South MCD alone do not pay taxes. They are mostly unauthorized colonies and villages, where people hardly pay any taxes.
The councillors often do not allow officials to collect taxes from these areas, saying that the civic bodies do not provide enough services in these colonies. Officials, on the other hand, say that they need the money to even begin providing more services. As it is, they say, there is outgo on sanitation, cleaning of drains, anti-mosquito operations, and in the running of dispensaries and schools in these areas.
Another reason is the poor execution of projects for the enforcement of tax collection measures. A project launched in 2015 to issue unique property identity cards (UPIC) to property tax-payers is yet to be completed. The civic bodies are yet to bring all properties under its ambit. The idea was to compile records of all properties, geo-tag them, and then issue UPIC for better monitoring.
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