ISLAMABAD: The prime minister has approved a summary to increase property and water taxes in the urban areas of Islamabad.

However, a final decision will be taken by the federal cabinet.

After the approval by the cabinet, property tax would be increased by 100 per cent for commercial buildings. But tax for small residential units would be increased by around 20 per cent.

Sources in the civic body told Dawn that the average increase in the property tax would be 60 per cent.

“However, combined additional collections from water and property taxes would be up to Rs500 million per annum,” said a senior official of the finance department.

Tax for commercial buildings to go up by 100pc

But even CDA officials expect a strong reaction from the business community in the wake of the increase in the property tax, especially at a time when the CDA is set to take action against businesses being operated in residential areas.

Fearing a similar backlash, the summary to increase the property and water taxes was turned down by the federal cabinet in 2011 and in March 2012.

“There is a need to revise taxes which were set in 2001,” said member finance Sher Bahadur Arbab.

However, there would be an exemption in the raise for the owners of plots of up to five marlas.

The increase in water tax is proposed to be 100 per cent.

Under the new proposal, the annual property tax on a house constructed on a 40×80 square-foot plot will be around Rs25,000 against the current Rs15,000 per annum.

At the current rate, water bill for a similar size of house is around Rs300 monthly.

The member finance said the reasons for the increase in water charges was that the cost of supplying water had gone up since 2001 mainly due to higher electricity charges.

The annual water tax collection by the civic body is around Rs120 million, and the revenue department expects that this amount would double by the end of June 2015. But the idea has been disputed even by officials of the CDA.

“Increasing customs duty actually gives rise to smuggling. The same way you increase water taxes, the number of people paying the water bill will decrease,” said an official of the engineering wing.

The civic body is also facing a controversy over the rights to collect water bills, which is currently being done by the revenue department.

However, the engineering wing had requested the previous chairman CDA that the responsibility to collect water bills be shifted to its water directorate.

“This will streamline the financial input and output balance, as there will be a clear efficiency of the water supply department,” said an official of the water directorate. “At the moment, we are not aware of the real cost of supplying water to the city.”

Published in Dawn, July 12th, 2014