Urban Immovable Property Tax (UIPT)

Nabi, I. & Sheikh, H. (2011).Reforming Urban Property Tax in Punjab. International Growth Centre.

The authors highlight that the property tax collected by Punjab is roughly one fifth of the collection by provinces in other comparable countries. They suggest that the collection can be increased to 25 billion after reforms. The 18th amendment should result in a change in the motivation of the provincial governments to collect their taxes efficiently since it has given greater provincial autonomy and responsibility. Following the Local Government Ordinance (LGO) 2001, UIPT has become a local government tax, in reality however it functions as a provincial tax subject to revenue sharing with City District Governments (CGDs) and Tehsil Municipal Corporations (TMAs). These district and tehsil institutions are notoriously inept in collecting the tax. UIPT is only one tenth of one percent of the GDP. Various reasons identified for this in the policy paper include; the lack of growth of the property tax base and undervaluation of property base by 45% to avoid being fairly taxed, tax administration needs to be strengthened and new rating areas need to be notified. The current tax rate on property, twenty five percent, is considered too high creating incentive for evasion and the differential in tax rate between owner- occupied and rented out properties in Punjab (1:10) is argued to be the most important source of corruption. The provinces have to tap into under explored sources of provincial revenue including importantly the urban property tax.

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