Local bodies to start collecting property taxes
The World Bank is going to fund a detailed survey of properties in Karachi as the government moves to empower local bodies to collect property taxes.
The Bank is helping the Sindh government start this work as a five-year Rs33.6 billion Competitive and Livable City of Karachi project from next year. The project will support the Karachi Metropolitan Corporation, the six District Municipal Corporations, District Council Karachi and the excise & taxation department.
“I am keen to financially strengthen the local bodies in the city so that they emerge as self-sufficient organisations,” said Chief Minister Murad Ali Shah on Wednesday July 17, according to a press handout. Under the project, local bodies would be made more capable of collecting property tax.
The chief minister directed the chief secretary to hold a meeting of the KMC, DMCs, District Council and Excise & Taxation department to plan to devolve the collection of property tax.
This decision was disclosed in a meeting the chief minister held with a two-member WB delegation led by Acting Country Director Melinda Goods and Senior Operation officer Amina Raja at CM House. The meeting was attended by Local Government Minister Saeed Ghani, Chief Secretary Mumtaz Shah, P&D Chairperson Nahid Shah, Principal Secretary Sajid Jamal Abro, Local Government Secretary Khalid Hyder Shah.
Property tax is crucial as a source of revenue for city governments across the world. In Karachi, KMC would fervently want to be able to collect property tax as it is eternally cash-strapped. The same would apply to the DMCs.
Part of this effort is the Karachi Urban Management Project (KUMP) which has been renamed the Competitive and Livable City of Karachi (CLICK). It is a $250 million project and to be completed within five years. The project has three components such as performance-based block grants to Karachi urban local councils worth $120 million; strategic infrastructure investment and capacity building in integrated storm water drainage and solid waste management worth $50 million and support for urban immovable property tax reform and institutional capacity building worth $30 million.
The tax reform component includes a support for improvement and devolution of urban immovable property tax (UIPT). The fourth component is worth $50m.
Support for Urban Immovable Property Tax reform and institutional capacity building is a $30 million component. It will be a support for improvement and devolution of Urban Immovable Property Tax (UIPT). This sub-component will support the devolution of administrative functions of the UIPT to local bodies of Karachi.
A phased roadmap to implement the administrative improvements and devolution of urban property tax and its respective institutional model have been developed with the objective of substantially increasing public revenues through UIPT reform.
Reform in phase-I includes a comprehensive all-Karachi property survey to update the property tax database and fiscal cadaster and digitization of the property tax base for all six districts in Karachi. IT system upgrades, training and capacity-building support, and implementation of a revised institutional structure are part of it.
Phase II may focus on deeper reforms in the property tax system. The collection function may be devolved to DMCs in a phased and gradual manner, whereas a number of options are being considered for provincial-level management of an ICT platform that manages the fiscal cadaster/property register.
The performance-based block grants to Karachi urban local councils have been approved at $120 million. They will pay for formula-based block grant to KMC and the six DMCs when they achieve results by providing incentives to urban local councils to improve their performance and capacity in investment planning and execution, financial management, procurement, social and environmental, business environment, and citizen engagement/accountability.
The grants would be used to fund local infrastructure and municipal services within the mandates of KMC and the DMCs to improve Karachi’s livability and competitiveness. Indicative eligible investments may include small secondary/tertiary drainage works, municipal roads, street lighting, parks and other public spaces, public buildings and markets.
Support for an enhanced regulatory environment and infrastructure financing for a competitive Karachi is a $50 million component. This will support development of a strategy, a roadmap and institutional architecture for an infrastructure financing model and enhancing the regulatory environment for improved competitiveness in Karachi.
The main activities to be financed include technical assistance and feasibility studies for developing and setting up a proposed Karachi Infrastructure Fund (KIF) and a technical assistance program targeted at KMC and DMCs to pilot public-private partnerships for service and infrastructure provision. This component will finance improving regulatory and doing business environment by simplifying, streamlining, modernizing and automating regulatory governance, and improving commercial dispute resolutions, particularly related to property rights.
*Correction: The handout was said to have been released Tuesday. It is in fact Wednesday, July 17.