Property Tax Hike in Tamil Nadu – What Should We Expect? 

Property tax hike

The State Government in Tamil Nadu recently raised property tax in various corporations, municipalities, and panchayats from 25 to 150 percent. According to the new amendments, Property tax will be levied at 50 percent for spaces under 600 square feet, 75 percent for 600-1,200 square feet, 100 percent for 1,201-1800 square feet, and 150 percent for places beyond 600 square feet in the Chennai Corporation. 

The increase in property tax is being justified by the administration as a means of complying with the Center’s requirements and obtaining funding for the state. The officials claim that most people live in homes that are smaller than 1200 square feet. Therefore the raise will have little impact on them.

The revision became a necessity when the growth criteria increased, but the property tax remained the same. In recent years, the civic body’s expenditures have also increased, despite the fact that local bodies’ own sources of revenue were limited, putting the municipal finances under strain.

At the outset, increased taxes look like a great move considering that it didn’t increase in over 24 years, and the taxes paid are peanuts compared to the cost of the property. I used to think that it was just a matter of time before the property tax increased. The Government has increased it now. 

What is the problem though?

The problem lies in the usage of these taxes. We always complain about an age-old problem – the taxes being paid are not effectively being used. This problem is still to be addressed. For example, a certain neighborhood pays Rs. X in taxes – how is the same being utilized? Is it being spent in a transparent manner?

One thing which concerns me is the fact that there is a perception that as long as things get done, it is okay if there is a conflict of interest – it is okay if things do not get done in a honest manner.

Tweet By World Bank on Taxation

The priorities of a country alter as it develops. India is no different. India’s tax structure will undoubtedly undergo more adjustments as the country develops. The quality of a country’s tax structure determines its economic power. A fair tax system can help fuel a country’s economic growth and success. A healthy tax policy promotes GDP growth. To make the taxation more receptive, our authorities need to become more transparent and accountable to achieve public trust and improve the taxation system in a fair, transparent, and efficient manner.  

How do property tax work in the US?

 There is much more transparency in how things get done in the States? If one buys a property in a particular neighborhood, they are clearly aware of the property tax percentage. You can key in any address and find out what is the property tax owed on the property. Even better, if I pay more taxes, it is also clear where the money is being spent. People are okay with buying properties in richer neighborhoods, and to a great extent, they are aware that the taxes are being put to work efficiently. They are able to send their kids to great public schools for free. 

I believe that before the increase in taxes, the Government can and should show more accountability, transparency and avoid conflict of interest in what it does. This will encourage people to pay more taxes, and the increase will also be justified. 

As the taxes have not been increased for over 20 years, I do think it is a good idea to increase the tax rate. However, there is clearly a problem with accountability – not to mention the 11% tax one would pay when registering property and more. We do not see enough in the ground to justify the increase in taxes. There are a lot of inherent problems which continue. As the Government has said that it does not intend to recall the rise, I hope that the taxpayers’ money is put into good use and the concerns on accountability, conflict of interest, and transparency are addressed efficiently. All the very best with execution. 

Thanks for reading. 

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Karthik Chidambaram