The Independent Uganda: You get the Truth we Pay the Price
Kampala, Uganda | THE INDEPENDENT | The idea by the Kampala Capital City Authority- KCCA to waive property tax for the low value property has been welcomed as a progressive move.
Albert Oduman Okello, an economist and former shadow finance Minister, told URN that this was a way to go for KCCA to get more revenue fairly from those who are able to pay.
The proposal by KCCA council led by the Kampala Lord Mayor Erias Lukwago states that property owners with a taxable value below five million should be exempted from tax. Those with property whose value is between Shs 5m and 20 million shillings pay 3% while those above 20 million shillings are taxed at 5%.
Currently KCCA charges a uniform rate of 6% on ratable value. The rateable value is 74% of the profit earned from a rentable property.
Progressive tax enables those who earn higher to pay a higher percentage from their earnings. Okello explains that progressive tax is a good practice of taxation and enables the tax collector to get more money.
Paul Lakuma, a tax researcher at the Economic Policy Research Centre (EPRC) says the proposal is progressive but cautions that property owners might under declare the value of their property. Lakuma says KCCA would have to properly value property and also map areas to know the values of properties in different locations.
KCCA anticipates to collect about 112 billion shillings from all taxes this financial year with property tax as one of the highest contributors.
Ag. Executive Director Andrew Kitaka says the tax waiver would cost KCCA about Shs 30 billion which shall be a big set back to the Authority.
He previously suggested to the council that property tax on residential property be introduced. Kitaka’s proposal has been opposed by a number of political leaders at KCCA who say that would be unfair as residential houses generate not revenue to the owners.
However, according to a 2017 study by Lincoln Institute of Land Policy on Property Tax in Africa, the exemption of owner-occupied residential property not only significantly erodes the potential tax base but also is inequitable and violates the benefit principle.
The benefit principle of taxation states that people should be taxed in proportion to the benefit they receive from government and that taxes should be paid by those people who receive the direct benefit of government program and projects out of the tax paid.
Albert Oduman Okello says KCCA extends services to both residential and commercial properties. KCCA like other municipalities and local government extend services like access roads, garbage system, waste management, electricity and other utilities to housing facilities be it in commercial or residential areas, he explains. Okello however says tax on residential property should be at a flat rate.
Okello adds that KCCA also needs to enhance its ability to raise revenue in other areas like transport and market. He says research to identify who is not paying tax and how can they be compelled to pay tax is important. Also, that KCCA should be effective and display proper use of tax through service delivery.
Vincent Agaba, the Chief Executive Officer of the Association of Real Estate Agents of Uganda (AREA-Uganda says that paying the tax is not bad for as long as it translates into service delivery. Agaba says KCCA needs to improve sewage management, lighting, road infrastructure and accessibility and drainage system among others. Here, there can be no complaints when there is value for money, he says.
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