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Improving property tax collection in South Delhi

Leadership Team:

  • Yusuf Neggers, Wendy Wong & the South Delhi Municipal Corporation, Property Tax Department

Countries:

  • India (South Delhi)

Research Themes:

Institution Types:

Project summary

Improving property tax collection in South Delhi: Reducing property owner and monitor incentives to misreport

Issue:

Increasing tax revenue can improve the ability of public institutions to finance services for citizens. However, a fundamental constraint common in developing countries is the absence of high-quality administrative data on the set of properties eligible to be taxed. Only an estimated 37 percent of properties in South Delhi are formally registered and paying property tax, and the South Delhi Municipal Corporation (SDMC), which serves more than 3 million people, heavily relies on this limited source of revenue. The prevalence of tax evasion relates to the financial benefits of tax avoidance for owners who misreport or avoid inclusion in property censuses altogether, and the potential willingness of state surveyors to allow such inaccuracies in exchange for bribes.

Questions:

  • To what extent does altering the probability that surveyors’ reports are monitored reduce the incidence of misreporting? Are there additional impacts when citizens are informed about the aforementioned surveyor monitoring policy?
  • Could assessing surveyor-reported data in comparison to details detected with satellite imagery further improve monitoring policies?

Abstract:

SDMC is conducting a property mapping survey to build a database of taxable properties, and the research team is working with the agency to experiment with monitoring policies to study whether the interventions increase the likelihood that surveyors collect accurate information on property details. The interventions to be piloted will test fixed and randomized probability monitoring policies where property owners are informed of these policies or not; the approach is based on theoretical work by Chassang and Ortner (2017). In the long-term, this pilot study will help inform design of incentives for tax inspectors for which SDMC is interested in full-scale experimental collaboration to learn how to improve tax payment outcomes through inspector performance incentives.

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