Bhubaneswar, Sept. 9: The state cabinet okayed the proposal to amend the Orissa Municipal Act and Orissa Municipal Corporation Act last night to replace holding tax with property tax to augment its tax base.

While the current holding tax collection is based on the annual rental value of a household, the property tax, on the other hand, will use the unit area method for assessing properties. The net value of a building will be decided on the basis of its location.

Director of municipal administration Sanjib Kumar Mishra said following the cabinet nod to the proposal, a bill has to be introduced in the Assembly. Once it is passed and gets the governor’s assent, rules under the new Act will be framed and notified in the gazette.

The bill will have provisions such as self-assessment of the property tax and community participation to ensure transparency. The Centre suggested the provision of community participation in the proposed bill. Gujarat, Delhi, Tamil Nadu, Andhra Pradesh, Madhya Pradesh and Bihar have adopted this approach for better and effective urban governance through better collection of tax.

Former chief secretary S.B. Mishra said: “With the introduction of property tax, urban development and growth will get a momentum with greater infrastructure support. The present tax base is grossly inadequate to manage the costs of urban development.”

Senior lawyer Manas Mohapatra said: “There is a suggestion for categorising the city into highly developed, developed, developing, underdeveloped and rural areas to decide property tax by a valuation committee, but I am sceptical about how the officials of Bhubaneswar Municipal Corporation (BMC) are going to do this.”

Elaborating, Mohapatra said: “Even when one thinks of highly-developed areas such as Nayapalli, Forest Park and Saheed Nagar, there many problems in these areas that the civic body needs to address. So how they are going to divide the areas according to the development index?”

“We are happy that the government is going to have more development activities through the property tax, but there should be quality civic services in return,” said chartered accountant Anil Agarwal.

Managing director of Metto Super Market in Nayapalli Md Azim said: “As entrepreneurs, we are already overburdened with huge hidden costs in the form of donations to social functions and seasonal celebrations. So, the civic body should try to strike a fine balance while enhancing the taxes on the business organisations.”

Mayor Ananta Narayan Jena said the civic body was already facing a huge shortfall of funds for its development projects. “Once the property tax gets the nod, we can have more money to take up more and more people-oriented projects,” he said.

“We are still getting less as compensation for the abolition of the octroi or entry tax by the state government. Once the property tax come into force, our financial situation will change,” said municipal commissioner Krishan Kumar.

The BMC has roughly 1.5 lakh holdings, but only 87,000 are under the holding tax net and the rest are yet to be assessed.

Experts are of the opinion that once the property tax is in force and the civic body manages the tax net through a remote sensing and geographic information system (RS-GIS), tracking the un-assessed holdings will be easy.