Tax collection in Pakistan is abysmally low. In this context, a really important property tax at the level of local government is under-collected as well. In this article today, we are going to refer to an International Growth Centre’s policy brief on property tax in Punjab authored by Shahrukh Wani and co-authors. Property tax contributes only 6% of the total provincial tax. Punjab has a population of over 100 million, yet Punjab in Pakistan collects less tax on the urban property than Chennai city does in India which only has a population of 10 million people. There are many service delivery problems in Punjab and fixing them needs revenue including property tax. Four in ten households in Punjab lack access to sewer systems-connected toilets. The piped water is available to only 35% of urban households in Punjab. Ten per cent of households lack access to handwashing facilities with soap and water. There is an estimated deficit of 6.4 million housing units in urban Punjab. To address these service delivery deficits, revenue is needed and property tax could be an important source of it but it is under-utilized. Four in ten households in Punjab lack access to toilets connected to sewer systems. Property taxes are about 2% of the GDP of high-income economies of OECD countries. It is equivalent to 0.6% in the emerging markets. While low-income countries collect property taxes worth 0.3% of their GDP. The extent of the under-collection of property taxes in Pakistan is evident from the fact that it only collects property tax less than 0.1% of its GDP. It is indeed a gross under-collection. In general, property and land should offer an efficient, long-term, and significant source of revenue in Punjab. The process of urbanisation increases productivity due to the agglomeration impact of bringing firms and people together in close-knit networks. This agglomeration impact coupled with public investment increases the value of properties and land. This is a continuous process rather than a specific event. With property taxes, cities are able to create a virtuous cycle. An increase in tax revenue from properties and land leads to more value for properties and land which in turn could lead to increased revenue. This virtuous cycle can only be utilized properly if property taxes are efficiently collected and their collection is not under-utilized. Pakistan’s real estate market as per 2017 statistics has an asset value of between $400 and $700 billion. Pakistan is a rapidly urbanizing country. The province of Punjab is in a good position to capitalize on urbanisation gains. Punjab’s five largest cities with a population of more than a million people increased their population by 60%. It has led to an increase in property and land prices. Property taxes should play a leading role in contributing to finances in Punjab’s cities and contributing to the urban transition in Punjab. The urban immovable property tax (UIPT) is applied to both commercial and residential properties in Punjab. The provincial government in Punjab can both levy and collect UIPT in lieu of the local government and the local governments also have the power to fix the rates of the tax. In terms of the share of property tax in the local government’s revenue; it was on average 14% between 2010/11 to 2015/16. It is very low and severely cripples the local government’s ability to deliver public services to the public. Of the total property tax collected, Punjab’s Excise and Taxation Department deducts 15% of revenue in lieu of the collection charge. However, it does not mean that the remaining 85% is given to the local government. The bulk of property taxes is divided amongst many agencies controlled by the provincial government. Only a small amount is given to the local government which leaves it under-financed and hampers its ability to provide service delivery. The urban immovable property tax is made liable based on the annual rental value of the property. It does not imply that the property has to be rented out. This liability is based on the assessment of the presumptive value of the property as if it is rented out and is supported by a periodical properties survey. The Excise and Taxation Department carries out a house-to-house assessment of rental value and then publishes an annual rental value table by dividing tax liabilities into the many clusters. However, there is a long delay in the updating of the valuation by the E&T department. The law stipulates the valuation to take place after every five years but the department does now often follow the law and there is a long delay. In Punjab, the urban immovable property tax is fixed at the 5% rate of annual rental value. Other than the provincial government, the federal government also levies property taxes of two kinds to be paid by the seller at the time of sale. The federal government charges a 1.5% withholding tax when properties are transacted. The federal government also charges capital gains tax at the time of sale of properties. The capital gains tax is time-bound and it increases every year, being accounted for by the time when the owner buys the property and sells it. Punjab collects a very small percentage of tax revenue from property taxes. The annual rental value acts as an imperfect proxy, the tax has a differential in tax rate between the rented and owner-occupied properties, there is a high exemption floor, a long time lag in updating the valuation table, and many enforcement constraints. According to the authors, “With increasing pressure on local government finances, there is greater incentive to overcome the obstacles and disincentives that prevent property tax from working to its full potential. In consequence of all these factors, shifting the tax burden from the more distortive and inefficient property transfer taxes to recurrent taxes on immovable property represents a potential growth-orientated reform for Punjab. For the citizens of Punjab, the financial difference will be negligible. For the cities of Punjab, the economic potential will be huge.” There is a dire need to fully utilize the potential of the urban property taxes in Punjab as well as in the rest of Pakistan. The valuation tables should be regularly updated and the local governments should be given the revenue generated as property taxes to fund the local service delivery for the citizens. The writer is an Islamabad-based social scientist and can be reached at fskcolumns @gmail.com