Stamp Duties in Indian States: A Case for Reform
The authors review the options for reform of stamp duties on immovable property transfers collected by Indian state governments. After briefly reviewing some of the many administrative difficulties experienced with the tax, they turn to an examinat...
| Main Authors: | , , |
|---|---|
| Format: | Policy Research Working Paper |
| Language: | English en_US |
| Published: |
World Bank, Washington, D.C.
2013
|
| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/2004/09/5168252/stamp-duties-indian-states-case-reform http://hdl.handle.net/10986/14240 |
| Summary: | The authors review the options for
reform of stamp duties on immovable property transfers
collected by Indian state governments. After briefly
reviewing some of the many administrative difficulties
experienced with the tax, they turn to an examination of its
economic impacts. A review of stamp duties internationally
indicates that Indian rates are exceptionally high, at rates
often above 10 percent. Most countries' rates are less
than 5 percent, including a number of low and middle-income
developing countries. With these high rates, the authors
find that while the tax has become the third largest revenue
source for many Indian states, it imposes high compliance
costs on taxpayers, has been subject to a good deal of
evasion and fraud, and the distortionary impacts appear to
be large, reducing the responsiveness of real estate markets
in Indian cities by discouraging transactions essential to
the efficient growth of cities. The authors then study the
revenue implications of lowering stamp duty rates, which
need to be understood if reform is to be viable. Evidence
indicates that the current high duty rates, coupled with
weak tax administration, lead to widespread evasion of the
tax through under-declaration. This under-declaration of
property values directly affects collection of other taxes,
among them, property taxes and capital gains tax. Moreover,
it indirectly affects the collection of all taxes through
the impact of under-declaration on the circulation of black
money. Simulations indicate that revenues lost due to a
lowering of stamp duty rates closer to international levels
are quite likely to be recovered in higher collections of
other taxes. However, these taxes would at least in part be
collected by other levels of government. So reform could be
made a more viable option through appropriately designed
intergovernmental transfers. |
|---|