Jammu & Kashmir government’s move to introduce property and sanitation taxes in the cities of Srinagar and Jammu is being received with skepticism by the inhabitants of the two cities. That these taxes were coming was known since long. But that these are coming at a time when this state remains in the grip of an unstable economy because of the raging conflict and political uncertainty is questionable. Jammu & Kashmir has been borrowing from international multilateral funding agencies like the World Bank and the Asian Development Bank for quite some time now. Some of these borrowed funds have come directly to the state, while some have come packaged as central schemes like the Jawahar Lal Nehru National Urban Renewal Mission (JNNURM). Although the state’s ruling establishment has been quite excited about these loan packages, something quite important has skipped the public debate on the issue – that is the conditionalities attached to these loans.
Throughout the world such loan packages have come with mixed results. At one level, these loans have helped sovereign states in improving their infrastructure and taxation systems because of the linked structural adjustment programs, while at another level such loans have played havoc with the lives of the ordinary people in many countries. Worse, such loans have aggravated poverty by denting the capacity of local communities in improving their earnings, and, at the same time, burden them with greater taxes. That is what our state is poised for. It is being said that by imposing sanitation and property tax in the state’s urban areas the government intends to make urban local bodies self reliant. It, in other words, means that local bodies like Srinagar and Jammu’s municipal corporations would impose certain taxes which would help these corporations generate greater financial resources. Throughout the world, loan supports from institutions like the World Bank and the Asian Development Bank (ADB) have a basic condition: governments are required to impose greater and newer taxes to make them enhance their overall tax revenues. But the question is: is it the right time for such taxes in J&K? Now that the Department of Urban Development is already working on a “concept” to identify areas of taxation in our urban areas as per the guidelines issued by the Union Ministry of Urban Development and World Bank, there is a need for re-examination of the whole idea and its impact on the overall economic growth and general growth in the state’s tax revenues.  In practical terms, the imposition of property and sanitation taxes in Srinagar and Jammu would mean that the existing slump in real estate sector, especially in Srinagar, would aggravate. During the last two decades of conflict in Kashmir, Srinagar’s real estate has remained in a sort of a flux. People do own buildings and big houses, but they are not necessarily productive. Property tax makes sense in an environment when people’s properties make money. In case of Srinagar - and even in Jammu to some extent - properties do not make money necessarily. There are families which own buildings and big houses but their livelihood condition is bad. Because of social reasons, many of such people are not in a position to sell off their properties and start some business venture. Even as such a proposition may have been viable in a normal situation, in Kashmir, where investment environment is very risky, property tax idea needs a re-look. Looking at it from a macro perspective, introduction of property tax may impede the state’s economic growth and the handsome growth in tax revenues as well. Imposition of property tax may also impede nascent economic activities based on venture capital and micro enterprises. It is understandable that the commitments made to the World Bank by the government of India under the JNNURM scheme would not be possible to reverse. However, this moment offers an opportunity to the government in J&K to evaluate the merits of blindly borrowing from multilateral institutions and state in taking up central schemes whose rationale has been developed for different political and socio-economic environments.

Lastupdate on : Fri, 18 Jun 2010 21:30:00 Mecca time
Lastupdate on : Fri, 18 Jun 2010 18:30:00 GMT
Lastupdate on : Sat, 19 Jun 2010 00:00:00 IST