Solution to civic tax system continues to elude parties

Published: Dec 01, 2014, 07:49 IST | Ravikiran Deshmukh |

When successive governments fail to resolve vexed issues, it raises questions over the efficiency of democratically elected governments

When successive governments fail to resolve vexed issues, it raises questions over the efficiency of democratically elected governments. Today, one raises this issue with the Congress and NCP, which ruled the state for 15 years, as well as the new government run by the BJP, over the question of local body tax (LBT), which is crucial for the running of 26 municipal corporations of the state.

The introduction of LBT by replacing octroi has been pending since over a decade, and the government has failed to introduce a new system in place of octroi and convince civic bodies about it.

The state had, in the past, set up more than 20 different committees to study the issue of octroi, which is being collected by civic bodies for 125 years. These committees have one recommendation in common and that is to abolish the octroi. But, they have failed to recommend a viable substitution in its place.

A committee of bureaucrats appointed in 2006 by the Congress-NCP government then also recommended doing away with octroi collection and introducing general entry tax, municipal profession tax, additional value added tax (VAT) and reforms in property taxes.

The state had, in the year 2009, amended the Maharashtra Municipal Corporations Act, 1949, to provide a substitute to octroi. LBT was introduced in some municipal corporations the year after. At some places the system proved as good, but in others traders began opposing it, and soon, they came together to resist it.

In between came the Lok Sabha elections and the landslide victory of the BJP, which confirmed Congress and NCP’s belief that traders played an important role as far as the parties’ miserable poll performance was concerned.

NCP chief Sharad Pawar was quick to say that the state’s insistence on LBT proved counterproductive. He opposed further insistence on the system.

Prithviraj Chavan, who was the chief minister then, was firm on LBT. He was forced to dilute his stand and say that municipal bodies should be allowed to make the decision. The deviation was perceived to be a rethink by the traders, and bolstered their confidence to oppose LBT.

Political flip-flopping on such an issue weakens the decision-making powers of political parties, particularly the elected governments. The system was not altogether ineffective, and proved successful in a few civic bodies. A rethink solely because of traders’ opposition and a drubbing in elections shattered the confidence of the parties.

Meanwhile, buoyed by its victory in the Lok Sabha elections, the BJP added fuel to fire by giving in writing that it would stop LBT and find a substitute to octroi.

After winning the state assembly elections and assuming power, BJP fumbled on announcing an immediate substitute to the system, even though it had adopted a pro-traders stand long back.

It’s ironical that the party that adopted a solid stance failed to provide an alternate to LBT, and instead decided to take more time. According to BJP Minister Sudhir Mungantiwar, a new system would hopefully be introduced in the coming two months. He has also said that the state was going to wait for a draft of the goods and services tax (GST) to be introduced by the Union government.

The statement is surprising, as Maharashtra has not been in favour of clubbing octroi with GST. And even GST, devised by the Centre, does not take any responsibility of a new system of civic taxes.

Such things do not augur well for the strength of democratically elected governments. A report by Maharashtra Economic Development Council has supported additional levy of VAT in lieu of LBT, which has been welcomed by traders. But, it’s not that easy, since the sales tax department will require additional staff and an altogether new system to collect additional VAT for civic bodies, which is not effortless to implement.

In a city like Mumbai, octroi collection has been a major source of revenue and a hotbed of corruption. The new system can hurt vested interests of certain parties. And the BMC is not in favour of a new system.

The writer is Political Editor of mid-day

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