Taxes

Most of the taxes are levied and collected by the central government or a state government. In urban areas, municipalities have also been given some powers of taxation. These public authorities have shown themselves to be inefficient tax collectors, resulting in a thriving black economy.

A local community is best positioned to collect taxes on some items from its members with efficiency. In Kaushambi, a middle-class colony in Ghaziabad (UP), the residents’welfare association went house to house and asked the residents to hand over their house tax cheques drawn in favour of Municipal Corporation, Ghaziabad. The RWA discovered that many residents had not paid their house taxes for several years. ‘No one asked for house tax’ and ‘I forgot to pay the tax’ were the commonest excuses. A few residents informed the RWA that a tax collector had visited them and asked them to pay him Rs 2000 for misplacing their house tax file of all previous years! Interestingly, none of these tax defaulters refused to hand over their cheques to the RWA. Each of them readily agreed to pay their house tax.

The RWA realized how the efficiency of tax collection could increase manifold if local community were to collect taxes from its members. And if the local people were allowed to retain a part of these tax proceeds for the development of their areas, there would be greater incentive for the people to pay taxes correctly and on time.

Likewise, the government can entrust the local community with power to collect other fees. For instance, street light poles in interior lanes rarely fetch any advertising revenues for the municipality even though they are quite often full of illegally placed advertisements.

The municipality may find it difficult to check every pole in every street for illegal advertisements, but not the local people. A Mohalla Sabha or Gram Sabha would be able to generate some revenues from street light poles and use them for strengthening their own civic services.

Parking rights may also be handed over to the local community. Currently unauthorised parking is rampant, making a dent in the potential revenues of a municipality. A local community, vested with the ownership of parking rights, can generate revenues for itself as well as the municipality.

Handing over maintenance of all local municipal assets and activities to Mohalla Sabha would reduce the workload of municipality. Handing over the right to levy and collect taxes and fees on certain items would also lessen municipality’s financial burden and increase its revenues. Municipality can use the resources thus freed to ameliorate the poorer areas