Scrapping of integrated property tax leaves local units in confusion

Published On: June 11, 2018 05:30 AM NPT By: Rohit Rai

DHARAN, June 11: Local units across the country are worried that their revenue might be affected once the new policy on taxation of land and property comes into force.

Officials of local units say the new policy could result in lower revenue mobilization.

Local units are also confused over implementing the new tax policy as they lack technical knowhow on calculating the tax as per the new financial bill which the finance minister introduced in the parliament while tabling the budget two weeks ago.

The bill, among others, has revised the existing taxation system on land and property. It has amended Clause 55 of Local Government Operation Act, 2017. The previous Clause 55 on Integrated Property Tax states that rural municipalities and municipalities will implement integrated property or real-estate tax on their area of authority. However, the new provision requires local units to collect land and property taxes separately from July 17.

Local units were prepared to tax service seekers based on the Integrated Property Tax. The amendment has left them in a state of confusion. “The government itself had brought the integrated property tax policy. But the financial bill has scrapped that clause and included a new clause, imposing separate taxes for property and land,” Bhesraj Adhikari, director of Revenue Policy and Economic Administration of Dharan Sub-metropolitan City, said.

Earlier, the government used to give high marks to municipalities that had imposed 'Minimum Conditions and Performance Measurement' (MCPM) in order to promote integrated property tax. Following this policy, all the local units had already made needful preparation to collect integrated property tax. The Ministry of Federal Affairs and Local Development had even provided training of trainers to make employees of local units familiar with integrated property tax.

Dharan is the first municipality in the country to implement Integrated Property Tax. It started implementing Integrated Property Tax more than 15 years ago. Most of the metropolitan cities and sub-metropolitan cities are implementing this tax.

“The bill is still under discussion phase. We have already presented our point of view to the finance ministry on the issue,” said Dinesh Thapaliya, secretary of Ministry of Federal Affairs and General Administration. “The major concern of the ministry is that area of taxation should not be reduced.”

Thapaliya also claimed that the finance ministry did not hold any discussion with them before changing the taxation system.

Knowledgeable sources say that the chances of finance ministry backtracking on the provision appear slim.

Local units so far have been levying integrated property tax based on market price. If the bill is endorsed, they will have to collect land and property taxes based on government's valuation. Similarly, local units have to calculate separate taxes on land covered by the house and remaining spaces.


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