December 08, 2019

TAMIL NADU: People’s Struggle Compels Govt to Revoke Property Tax Hike

N Gunasekaran

A YEAR-long, statewide struggle has compelled the Tamil Nadu government to revoke a steep hike in property tax implemented last year. The minister for municipal administration, S P Velumani, has announced that the existing property tax collection will be discontinued and the old rates levied before April 2018 will continue.

Since the tax hike was announced last year, a series of protests have taken place across Tamil Nadu. The CPI(M) vehemently opposed the announcement. The Party insisted that the steep hike should be withdrawn. In the absence of elected local bodies, it was undemocratic to make such decisions unilaterally. The local body elections have been delayed for the past three years. Demanding the tax hike withdrawal, agitations were held in June and October in 2018 in all corporations, majority of municipalities, and in town panchayats. During the protest movements, thousands of petitions were presented to officials on behalf of the people.


In April 2018, property tax revision estimate was carried out across Tamil Nadu. Receiving information from house owners about their home, the raised amount was determined. This resulted in various types of mess. Though the government informed that it had issued orders to raise tax for all rentals and non-rented buildings by 50 per cent, the tax was raised indiscriminately. The tax was levied in many places at a rate ten times more than the existing levy. It was 700 per cent in some places. The rise was enforced without any scientific approach. In the new taxation policy also, it was announced that the housing tax was determined on rental basis. However, the rental value is determined on the basis of commercial value of each street. Hence, they changed the policy from that of tax based on the rental value as per the structure of the building to that of the rental value based on the commercial value of the street.  There is no transparency on which basis the commercial value is determined. No expert committee was formed to determine the commercial value. Hence the commercial value varies from 30 paisa to 3 rupees per square feet. The new tax policy, which was based on the rental and commercial value, had a number of internal contradictions. The administration's inefficiency and the ruling AIADMK’s indifference to the welfare of the people manifested in the policy. 

The CPI(M)’s subcommittee prepared a campaign note detailing the alternatives to be pursued by the government on the tax revision, without much burdening the people. To meet the financial requirement of municipalities substantially, the tax policy could be changed by a proposal of appointing an expert committee for determining the rental value. This policy should be taken into consideration by the municipal council of elected representatives and the opinion of the people should be ascertained to take the final decision.

As house taxes have not been hiked for decades and many large companies have been remitting lesser taxes by manipulation, the CPI(M) is not completely opposed to tax increases. But without any formal accounting policy, unmindful tax hike would impose heavy burden on the people. Already people are suffering because of the increased deposit for drinking water, water tax hike and sewerage connectivity fee, etc. So, the urban dwellers, particularly the lower middle classes, are suffering a lot. In the absence of elected representatives, policy changes should not be done. Local bodies’ elections should be conducted.


To justify the tax-hike, the authorities cited the paucity of funds in local bodies. The fact was that the distribution of funds to local bodies in Tamil Nadu has not been fair since the globalisation policy came into effect. The basic logic of globalisation is the concept of “user pay”. All public-owned public resources have been privatised and the policy of “user pay” was put into place. For more than a year, the public rallied not only against the tax hike but also against the increased amounts. People held signature campaigns and demonstrations. The urban committees of the Party spearheaded these movements in many places and mobilised people, particularly the economically weaker sections.

In the new urbanisation policy announced by the central government, it is urged that the central and state governments should largely abstain from funding the public services. This policy has been conceptualised as “self-sufficient local councils”. That is to say that local councils have been guided to increase their revenues independently through heavy tariffs. The new urbanisation policy has been loud enough to say that the government should impose taxes on the people in various forms such as property taxes and drinking water cess and that the state should not be dependent upon the central government. The neoliberal urban policies adopted by both the central and state governments in the past have been severely affecting the common people in the urban areas. It is against this backdrop that we need to look at property tax increases in Tamil Nadu. Politically also, the AIADMK dispensation in the state is submitting itself to the central government headed by the BJP.

Though the state government has now announced that the tax hike will be cancelled and the old taxation will continue, it has not backed down from its worst urban policies. There is popular opinion that the decision to withdraw the hike has been made in order to gain electoral advantage. Though there was struggle across Tamil Nadu against the tax hike for the past one year, the government was then adamant and it was stubborn despite sections of the business community, the middle class and the poor petitioned for cancellation of tax hike. Though the hike has been withdrawn now, the dissatisfaction is deep-rooted among the people. The government cancelled the tax hike because of fears that it could result in a turnaround during the local body election if it continued to stick to its stand. Therefore, it is a victory for the people's struggle. As a party that has struggled in this issue, the CPI(M) urban units have played a major role in this victory.

However, the challenges posed by urbanisation are many in the state. Local bodies continue to get pressure from the officials and also from the World Bank for drastic tax increases to free themselves from financial crisis. Increasing attacks, including tax hikes, will only get accelerated as globalisation policies become more severe. A determined urban mass movement must be built to addresse the coming challenges. 

Minister Velumani has announced that a three-member committee, including the chief secretary to the finance department, will be formed to review the increased property tax. How will this committee undertake the consideration of taxation proposal? The minister did not make this clear. There is also the question of whether the tax hike will be re-imposed on the people after the local body elections. The CPI(M) stressed that it is important to listen to the people and get suggestions from people's organisations. Discussions should be properly held in elected local bodies. The pillars of the local democracy are transparency, democratic functioning and de-centralisation. Leaving the issue to the authorities and the government sitting idle is not fair for local democracy. Statistics show the declining consumption of the urban poor middle class. In such a situation, indiscriminate tax and tariff hike will further burden the people. As the central and state governments are trying to put the people into misery and turn the cities into profit centres for corporate capital, the people have to be vigilant and strengthen the urban working people movement.