Why property and private vehicles should be taxed higher in India for equitable urban development

The first, and perhaps most important, revenue source we should augment is property taxes, whose current contribution to public revenues is negligible. In 2016, India’s ratio of property tax to GDP was 0.07 per cent. In contrast, France and the UK generated nearly fifty times more, with ratios of 3.56 and 3.29 per cent respectively. Even among middle-income countries, property tax revenues are around twenty times higher in China (1.53 per cent), South Africa (1.33 per cent) and Brazil (1.47 per cent).

Public welfare will be substantially improved if Indian cities can raise more revenue from property taxes. This aligns with several principles. First, property is not mobile, making taxes easier to collect. Second, property taxes are controlled by local bodies and fund local public services, such as water, sewage, and transit. This clear link between taxation and services provides property taxes more legitimacy than many other taxes. Third, when tax revenue is used to improve local infrastructure, it can boost property values. This can create a virtuous cycle between taxation, provision of public goods, property value appreciation from the higher quality of life from living in that area, and a further increase in tax revenues to provide even better public goods....

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