esidential properties <strong>and</strong> 25 percent for non-residential properties. In addition, a 34 percent surtax was levied on the total property tax liability <strong>and</strong> earmarked for specific social services. If a taxpayer chooses not to self-assess,” the city will assess the value of property. For those who do comply, a 5 percent tax rebate is given. The new system also provides for a change <strong>in</strong> payment procedure. <strong>Tax</strong>payers may pay directly at a bank, <strong>in</strong> designated payment boxes, or at the electric utility. The net result of this process is that there is no longer any need for contact with the tax<strong>in</strong>g authority, <strong>and</strong> taxpayers have many more options for easy payment of their property tax bills. The first years of experience with the new property tax system showed some encourag<strong>in</strong>g results. The revenue <strong>in</strong>crease was due to several factors: an <strong>in</strong>crease <strong>in</strong> the collection rate from 64 to 79 percent, a 4 percent <strong>in</strong>crease <strong>in</strong> the number of properties on the tax roll, <strong>and</strong> an <strong>in</strong>crease of about 28 percent <strong>in</strong> the amount of tax payment per property. Bangalore city officials estimate that one-third of the revenue <strong>in</strong>crease was due to revision <strong>in</strong> value, <strong>and</strong> that about three-fourths of all property owners paid higher property taxes. Another success of the reform was a reduction <strong>in</strong> compliance costs. The city offered its taxpayers a lower cost of compliance <strong>in</strong> return for a higher payment. Apparently, property tax <strong>in</strong>spectors regularly harassed taxpayers. It was reported that <strong>in</strong>spectors came on the property, sometimes unannounced, <strong>and</strong> oftentimes “negotiated” the property tax liability with the owners. Apparently, taxpayers were will<strong>in</strong>g to pay more under the new system to elim<strong>in</strong>ate this type of <strong>in</strong>formal contact with <strong>in</strong>spectors. Phase III: Revaluation under an area-based system The flaw <strong>in</strong> an area-based system is that it does not provide for automatic revenue growth unless there are discretionary changes <strong>in</strong> assessed value per square foot. The Bangalore model seems to have resolved this issue through a program of de facto revaluation. The tax officials have carried out a revaluation by assign<strong>in</strong>g many properties a different zonal classification, i.e., mov<strong>in</strong>g about one-half of all properties from a lower to a higher tax zone (Bruhat Bangalore Mahanagara Palike, 2008). The justification for do<strong>in</strong>g this is that the quality of public services has improved s<strong>in</strong>ce the orig<strong>in</strong>al zonal classifications were assigned. In this way, an automatic revaluation <strong>and</strong> a revenue <strong>in</strong>crease were built <strong>in</strong>to the system, help<strong>in</strong>g the government avoid an unpopular, discretionary <strong>in</strong>crease <strong>in</strong> the tax rate. The result was strik<strong>in</strong>g. Between fiscal years 1999-00 <strong>and</strong> 2000-01, property tax revenues <strong>in</strong>creased by 33 percent. Between 2007 <strong>and</strong> 2009, follow<strong>in</strong>g rezon<strong>in</strong>g of properties, property tax revenues doubled. In addition to the above measures, the city government has been mov<strong>in</strong>g to complete its fiscal cadastre. Among others, a GIS system has been <strong>in</strong>stituted, based on satellite photos <strong>and</strong> field-based tax mapp<strong>in</strong>g. This will have the effect of exp<strong>and</strong><strong>in</strong>g the tax base by add<strong>in</strong>g new properties. References Bruhat Bangalore Mahanagara Palike (2008). “<strong>Property</strong> <strong>Tax</strong> Self-Assessment Scheme H<strong>and</strong>book: 2008- 2011” (Bangalore: Government Press). Rao, Vasanth (2008). “Is Area-based Assessment an Alternative, an Intermediate Step, or an Impediment to Value-Based <strong>Tax</strong>ation <strong>in</strong> India” <strong>in</strong> Mak<strong>in</strong>g the <strong>Property</strong> <strong>Tax</strong> Work, edited by Roy Bahl, Jorge 34
Mart<strong>in</strong>ez-Vazquez <strong>and</strong> Joan Youngman (Cambridge, Mass: L<strong>in</strong>coln Institute of L<strong>and</strong> Policy). World Bank (2004). “Urban <strong>Property</strong> <strong>Tax</strong>es <strong>in</strong> Selected States” Energy <strong>and</strong> Infrastructure Unit, South Asia Region (Wash<strong>in</strong>gton: World Bank). 35