Smart cities require smart public finance and a sound property taxation regime is vital for India’s urban future, the Economic Survey said on Friday.

“Property taxation needs to be developed. The very fact that systematic data on property taxation across the country is so sparse is a measure of just how little attention has been given to this tax,” the Survey noted.

Property taxes are progressive, buoyant, imposed on non-mobile goods, hence difficult to evade, and can be relatively easily identified given the technology today.

“Higher rates, with values updated periodically, can be the foundation for local government’s finances, which can thereby provide local public goods and strengthen democratic accountability and more effective decentralisation,” it added.

The government’s flagship ‘smart cities mission’ targets promoting cities that provide core infrastructure and give a decent quality of life to its citizens, a clean and sustainable environment and application of ‘smart’ solutions.

Aimed at 100 cities, the distribution of smart cities will be reviewed after two years of the implementation of the mission. In the first phase of implementation, 20 cities have been shortlisted.

Operated as a centrally sponsored scheme, the Centre has proposed a financial support of ₹48,000 crore over five years, i.e. on an average ₹100 crore per city per year. States have to match this amount.

Higher property tax rates would also put sand in the wheels of property speculation, the Survey added.

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