One of the recent developments in the area of revenue of local governments is that octroi is on its way out. A vigorous drive is on to locate a new tax to compensate the urban local bodies for the loss of octroi revenue. Tax supplements to sales tax in the form of entry tax and surcharge/additional sales tax have been employed as a substitute measure to restore local fiscal balance in the absence of octroi. These present study evaluates these tax supplements in-terms of their impact on resource allocation, equity and local fiscal autonomy. Surcharge/additional sales tax has been argued to be better than entry tax. However these taxes being state levies are found to be contradictory to the objective of local fiscal autonomy.
Shyam Nath and Sen, T. Kumar, “Business Property Tax as an Alternative to Octroi”, Economic and Political Weekly, vol. 24, pp. 473–478, 1989.