Framework for a Strategy of UP Revenue/Resource Mobilisation ...

official formula. 6 However, in many cases this assessment are quite abbsent. In many cases,
arbitrary adjustments are made, whether on the basis of assumptions of household income or for
other reasons, so that the final assessments bear little relationship to the formula. In other places,
UPs are making much simpler assessments based on the number of rooms, type of construction and
facilities (water supply, sewerage etc.). These assessments may be sufficiently fair, especially, if
they are made in a transparent way. However, the problem with either arrangement is that
assessments are often not made systematically and adjustments for household income or poverty
may not be made transparently. As a result, there may be significant inequities in the assessment
system. This can undermine people’s trust in the system, and therefore their willingness to pay.
The calculation set out in the Ministry’s 2003 guideline (but which is based on established practice
and applies also in paurshavas and cities) contains a number of anomalies. Firstly, it gives a
reduction on the assessment for the interest costs where a property is subject to a loan or mortgage.
This is not appropriate, since it creates an inequity simply according to the method of financing. It
is also likely to benefit the better off who are more likely than the poor to use loan finance for their
house. Secondly, it gives a 25% reduction for owner occupiers, on the grounds that they are not
earning income from the house. However, in principle, the type of tenure is irrelevant to the value
of the property, or to the costs to the local government of providing services to that property. This
creates an inequity between types of tenure, benefiting owner-occupiers. 7 If the holding tax is to
remain the main source of UP revenue, it is suggested that these anomalies be removed.
In practice, few UPs appear to be using this method of assessment, whether for lack of
understanding of the rental value method or lack of data, or simply because it seems unnecessarily
complicated. Even where UPs attempt to use the method, the final assessment is usually adjusted
(often without any clear relationship to the original figure) on the grounds that the household cannot
afford to pay, or for some other reason. The resulting, adjusted assessments are generally much
lower than the formula would have suggested, especially for the more valuable properties. There
are, therefore, some doubts about the validity of the assessment, even when the official method is
applied.
6 An NGO, Comilla Shastha Sheba Foundation, has started offering a service to UPs in one district (perhaps more) to
make assessments of holding tax. They offer to compile the UP’s assessment register using the proper ARV method,
at no cost to the UP. They generate some revenue by offering to households a plot number plate, but this is optional.
From the one example seen, it appears that the assessment register is properly compiled, although how accurate or
uniform are the valuations is difficult to tell. Such a service could well be appropriate for UPs to use, although it is at
present only available in a limited area
7 Nor can it be assumed that the resulting higher tax for rented housing is born by the landlords: as with any tax, the
burden is shared between buyer and seller according to the elasticity’s of supply and demand; thus at least part of
the burden of the high tax – and probably the majority in the case of rented housing – will be borne by the tenant.
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