New Delhi, Nov 17 (PTI) Municipal corporations should impose adequate user fees for essential services like water supply and sanitation to increase non-tax revenue and provide quality public services , according to a report by the Reserve Bank of India (RBI).

The “Municipal Finance Report” examines the financial position of 232 municipal corporations (MCs) from 2019-20 to 2023-2024 (budget estimates), with a focus on the theme “Own sources of revenue generation in corporations Municipalities: Opportunities and Challenges”.

“Member countries can significantly increase their (non-tax revenues) by applying appropriate and adequate user fees and charges for essential services such as water supply, sanitation and waste management, while ensuring continued availability of high-quality public services,” he said.

These measures, combined with more transparent and accountable governance practices, can help strengthen the financial health of member countries, triggering a virtuous cycle of better public services, higher incomes and continued improvement of urban infrastructure, a he added.

Major sources of non-tax revenue include user fees, business license fees, development/construction approval fees, development fees, improvement fees, sales and marketing fees. rental, market fees, slaughterhouse fees, parking fees, birth and death registration fees.

Sources of tax revenue include property tax, tax on vacant land, tax on water services, tax on advertising, tax on sanitation services, tax on animals and taxes on cars and carts.

“Non-tax sources are particularly important in the context of constraints on tax revenue. MCs in India earn 66.5 per cent of non-tax revenue from fees and user charges,” the report said.

He noted that user fees and charges represent important sources of revenue for all civic bodies, particularly in Maharashtra, Rajasthan, Gujarat and Tripura, where their share of own revenue exceeds that of taxes land.

According to the report, this can be attributed to various factors, including a high degree of urbanization, tourist destinations and the subsequent expansion of the provision of essential municipal services such as water supply, waste management and transportation.

The report further states that their own revenue sources (tax revenue, non-tax revenue and other revenue) provide municipalities with increased financial autonomy, stability and increased capacity to strategize and execute urban development initiatives in a manner more efficient and effective.

Municipal corporations must increase their own revenue sources for greater operational and financial flexibility. “By optimizing property and water taxes, increasing non-tax revenues, and adopting transparent governance practices, urban local governments can improve their finances,” the report said.

Leveraging technologies like geographic information system (GIS) mapping and digital payment systems can improve property tax collection, it says.

Periodic reviews of water and drainage taxes, as well as user fees and charges, coupled with the use of technologies to plug leaks, can also help improve their revenues, he adds.