A typical city resident pays a number of taxes and user charges to different agencies of the Government. Though these levies are predominantly charged and collected by Government agencies, increasingly private agencies are sharing or taking over some of these functions. All these agencies devote considerable human and financial resources to billing and collecting these charges. In fact, in many utilities tax collection becomes the de facto immediate and primary goal, at the cost of even the basic objective for its existence. The most common and most regular form of payments are the user charges levied for delivery of civic utility services.
Let us list out the common payments periodically made by the citizens to Government (and now increasingly private) agencies. The direct tax payments include Income Tax, Wealth Tax, Gift Tax, Property Tax, Vacant Land Tax, Motor Vehicles Tax, Profession Tax, etc. User charges collected include water, sewerage, electricity, telephone, Cable TV and bulk garbage generation charges, road tolls, and even insurance premiums. These taxes and user fees are collected by agencies as varied as Municipal Councils, Government Departments and Corporations, Utility Service Providers, and private agencies. While the direct taxes are generally collected semi-annually or annually, the user charges are usually collected monthly or bi-monthly.
Yhis multiplicity of revenue streams and collection agencies are a massive drain on resources and represents an economically inefficient system. The basic service of billing and collection of the billed amounts, is common to all these revenue streams. It is therefore an ideal setting for clubbing the multiple collection streams and having a single, unified system. The respective agencies will continue to administer the details of each connection or user, add new connections or users, and set the user tariffs or taxes. This unified collection has many advantages.
First, typically every service provider has a separate and dedicated or clearly demarcated user charge or tax collection establishment. Considerable amount of man-hours and resources are spend in administering these collections. By having a unified billing and collection machinery we can avoid the massive duplication of this more or less common administrative machinery. Second, the transaction costs associated with each utility payment is significant for both the individual and the utility. A single bill and payment mechanism can help eliminate this. Third, it will help link up the databases of all the different utilities. The benefits from such a unified database are manifold. For a start, it will help detect pilferage and evasions. Thus any house with an electricity connection, but not yet assessed for Property Tax, would immediately get detected.
Fourth, certain utility payment streams are more assured and collection mechanisms are robust. In contrast, the billing itself of many other services are suspect and less said the better about their collection. By bundling other payments, we can bring in more discipline to the more inefficient utilities. Fifth, enforcement machinery becomes more effective. Some utilities like electricity have considerable leverage over the consumers due to their immediate importance for them. An economist would say that the payment elasticity of electricity tariffs is very high. Thus a threat of disconnection of electricity can be an effective tool in collecting other more inelastic dues like Property Tax.
Sixth, all agencies conduct periodic surveys to take stock of their consumers. A single comprehensive survey is much more effective and cheaper than separate surveys by individual agencies. Seventh, a separate billing and collection mechanism would also serve the useful purpose of insulating the collection from political and other pressures which are responsible for poor collections in many utilites and local bodies. Eighth, the service provider or utility can concentrate on its core objecive of delivering certain civic services, without being sidetracked by the downstream collection problems. Ninth, it would also be to the benefit of the citizens that they can pay all their dues in a single transaction, instead of having to make multiple visits to different payment centers. Finally, a unified billing and collection machinery would make the entire system more professional and efficient. It would also willy-nilly distil into the citizens the civic responsibility to pay all their taxes and user charges.
There could be an opinion that since many of these utility services are being privatized or are being already delivered by private agencies, it may not be appropriate to bundle the collections from all utilities. I differ, for precisely the same reason. Administering the billing and collection of any revenue stream is perfectly amenable to being outsourced. The billing and collection services of many private service providers are already outsourced. It becomes all the more financially attractive for private outsourcing agencies to tag on other revenue streams into their collection mechanism. Bundling revenue streams would be a compelling imperative for even the inefficient agencies to improve their collection efficiencies or even outsource these services.
The more ideal solution would be for the Government to bundle all the payment streams from its citizens into a single billing and collection outsourcing contract. This would straight away free up substantial resources which can be better utilized elsewhere. While the respective utility or civic service provider will continue to administer the service upto billing and collection of charges, the contracting agency will be the single point node for billing and collection. It would make the billing and collection machinery much more professional and efficient.
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