Local bodies starved of funds, shows audit

THIRUVANANTHAPURAM: The Fifth State Finance Commission, after assessing the fiscal position of selected local self-government institutions, has said that a majority of them were on the brink of a major financial crisis. Along with stagnation in tax revenues, LSGIs have shown alarming laxity in the collection of taxes.

“The tax and non-tax revenues of local self-government institutions have not been revised for two decades,” said B.A. Prakash, the SFC-V chairman.

The most important tax of LSGI, property tax, has not changed for 25 years. There was a minor increase in 2013, but even this was partially rolled back.

The second most important tax, employment tax, has not been increased since 1988. The 14th Central Finance Commission had directed that the ceiling for employment tax should be raised from Rs 2500 to 12,000. But this has been ignored.

When property tax was increased in 2013, the tax revenue of grama panchayats had increased by 100 to 300 percent.

“However, the decision to exempt houses with a built up area of 660 sq ft and the move to withdraw the increase in the tax of 2000 sq ft houses will undo the gains of grama panchayats,” the chairman said.

The government’s arbitrary move to withdraw the increase in taxes will pose logistical problems, too. To implement the increase in taxes, the LSGIs will have to undertake an assessment process that will extend for one-and-a-half to two years. “The work they had put for the 2013 increase in property tax has now been wasted,” the chairman said.

Project implementation is the other casualty. “Less than 50 percent of the plan outlays of LSGIs are being utilised and more than 50 per cent of the utilised funds are spent in the last month of the fiscal,” he said.