The future of local taxes in Kochi

[Barnes41]

The defects in local property taxes – particularly their lack of buoyancy – have led to frequent demands for their abolition or augmentation from other sources of revenue, e.g., increased government grants, charges for certain services such as education, new local taxes, particularly a local income tax, sales tax or motor-vehicle-license tax. Alternatively, the central government could have accepted full financial responsibility for services of national importance, such as education, policy and social services.

The real difficulty of abandoning the local property taxes is due to the difficulty in finding and generating revenue from other sources with a comparable yield. For instance, the property tax in some areas of Kochi is equivalent to a whopping 10 percent of the income tax. Increased government grants or the switching of financial responsibilities for certain local services to the central government would greatly undermine local autonomy and accountability. Imposing charges will also be politically difficult. Introducing new local taxes would either deprive the government of its own much-needed revenue through an increase in the tax rate on total income and it may also curb customer spending to certain limits.

Thus the local property taxes levied on Builders in Kochi are therefore likely to continue for some more time. The most that can be hoped for is that local authorities are given some additional income to relieve the ever-increasing tax rate burden, for then, the deficiencies of the tax will become less acute. The only other alternative is to reduce the scope and scale of services provided by the state in general and local authorities in particular.

Perhaps in no other city in Kerala can you see such a high cost of living and a higher costs for all other living amenities. One reason for such a situation is mainly due to the high tax regimen in vogue Kochi. This city has already earned a name as a high cost destination.