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Property Tax Reforms




I would like to share my idea regarding property tax reforms. There is a need for Property Tax Reforms in developing and under-developed countries, because without proper policies in place, people pay less tax, while buying and selling property, by showing low sale price for the property to avoid stamp duty.

Purpose

We will examine it with a general scenario. Suppose a person declares the price of a property to be INR 10 lakhs when he bought it. He would have paid the tax for that amount in the past. The declared property price may not be the real valuation. Fine, we can't go back in time to change that. But in the future, suppose he sells the property, we can make that person pay tax, correctly based on appreciation. Suppose, a person buys property for INR 10 lakhs in the past, he would have paid less tax. But when he sells for INR 60 lakhs now, with proper property tax with the correct higher value, it will automatically compensate for the tax not paid in the past.

Bidding

Whenever someone sells a property, to anyone, even to his relative or friend, he should register with the Government Property Sale website or licensed private players for auction to the public. All property sales will have auctions, before being sold.

Scenario

Let's consider a scenario, where a person sells his property for INR 60 lakhs. But claims that he has sold it for INR 15 lakhs and pays property tax, only for INR 15 lakhs.

Plot

All property sales should be through auction. During the auction, if somebody is ready to buy it for INR 16 lakhs, you are obliged to sell him, as it is higher than INR 15 lakhs. In this scenario, the person who agreed to pay INR 60 lakhs will not accept the deal, as he can buy the property from the auction at a rate, slightly above INR 16 lakhs, why pay INR 60 lakhs?  

Selling only to the maximum bidder

You have to sell the property to the maximum bidder, even if it is your friend or relative. She has to win the bid. If you want to help her, pay gift tax or whatever tax is applicable and pay her separately. But registration, is only for the highest bid amount, be it relative or not. Friends and relatives can get the property, after paying the tax for the highest bid amount and registering with that price.

Bid at will

There will be no obligation on anybody's part to buy the property, simply because she bid for it. You can bid for any number of properties. The auction can be closed only by the seller, when he thinks, he is satisfied by the price. Suppose X bids for INR 10 lakhs, Y bids for INR 12 lakhs, and Z bids for INR 13 lakhs. When the seller is satisfied by INR 13 lakhs, he can ask Z to buy the property. In case, Z withdraws from the bid, automatically, the seller can approach Y. If he also withdraws. The price will become INR 10 lakhs. In this case, the seller may accept X's bid for INR 10 lakhs or simply wait, as he is not satisfied with the price. Since anybody can withdraw from the bid at any time. There is no need for anyone to quote the price only above the maximum. You can bid at your will, whether highest or not. Or the seller may set a little penalty price beforehand at the time of bidding itself, in case the buyer withdraws afterward after putting in his bid. This avoids unnecessary delays in selling the property.

Payment and Assistance

Government agencies interested in implementing this method can contact me for assistance with the full implementation of this policy. I will also give lectures on economic policies like this one on request from Government Agencies. If you find this method useful to you, you are obliged to donate as per the benefit you obtained and the impact this method has had on your Government agency.


Photo Courtesy: bethandryan.ca

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Location: Chennai, Tamil Nadu, India

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