KCCA says it collects about Shs57.6b, which is at least 67 percent of the Shs86b targeted revenue.
A World Bank report says Uganda, like many African countries, has failed to fully exploit the potential of property tax as a source of revenue.
In details contained in the Leveling the Playing Field report, the World Bank, which references a study by Jones Ahabwe, Priya Manwaring, Julius Mutebi, and Tanner Regan on Public Disclosure and Property Tax Compliance: A Field Experiment in Kampala, says that collection of property tax or rates, remains low at between 10 and 20 percent of existing potential, partly because of low capacity.
However, the World Bank notes that there was growing evidence suggesting that even where there is weak capacity, slight changes such as use of technology could salvage the collections.
“Recent research shows that local government officials often underestimate the value of the wealthiest properties, [but] technology can address this, which increases revenue,” the report notes.
Property rates are largely assessed and collected by local governments.
Details from the Local Government Finance Commission indicate that out of the Sh250b generated from property taxes annually, just 20 percent or Shs50b, is collected outside the Kampala Metropolitan Area.
However, the Shs250b, the Commission indicates is just a small portion of the existing potential.
In the Kampala Metropolitan Area, according to the Public Disclosure and Property Tax Compliance: A Field Experiment in Kampala study, Kampala has the largest collection with value preposition of Shs85.9b annually.
This, however, is only 12 percent of the 223,329 properties, which the study indicates are potential revenue sources.
Mr Cliff Edyegu, the KCCA manager research and business analyst, yesterday, however, said the World Bank date could be lacking some updates, noting that during the 2022/23 financial year, KCCA collected between 60 and 70 percent of its property rate portfolio, which returned Shs57.6b.
However, he noted this was 67 percent of the Shs86b projected portfolio.
“We could not reach 100 percent because a number of properties [in Kampala] are partly owner-occupied and also, government institutions that the [Attorney General] guided that we should not collect property tax from such as [Makerere Univeristy]. So, we lost close to Shs21b,” he said.
Central Kampala, which has 14,947 properties has the biggest share of compliance of 33 percent, followed by Nakawa and Makindye at 14 percent and 13 percent, respectively, which have 52,784 and 51,985 property tax-rated properties, respectively.
Rubaga and Kawempe, which have 49,986 and 53,627 properties, respectively have the lowest compliance of 8 percent and 7 percent.
Property rates are the single largest source of own-source revenues, accounting for more than 38 percent of KCCA’s own-source revenues.
The study - Public disclosure and property tax compliance: A field experiment in Kampala – which was commissioned by the International Growth Centre, further notes that the low compliance results from, among others perceived overvaluation of properties, poor relationship with (local governments), the weak link between property rates and services, and misinformation on factors such as exemptions.
However, Mr Edyegu said KCCA has both short and long-term plans such as amendment of the Rating Act, 2005, particularly regarding enforcement mechanisms that are not clearly stated, to improve compliance.
“It requires us to go to court, yet this is a lengthy process that can take about five years. By the time all this is done you find we are in a new year,” he said, noting that in the short-term KCCA will continue to engage and sensitise property owners, especially those who have been finding it hard to pay comply.
He also said KCCA was in the process of evaluating and reviewing properties in Kawempe, Rubaga, Makidye and Central Kampala, which is done every five years.
OUTSIDE KAMPALA
Measures to increase
Outside Kampala Metropolitan Area, according to the Local Government Finance Commission, Jinja City generates the largest share of revenue from property taxes, averaging Shs1.6b, followed by Gulu City at Shs1.1b and Masaka City at Shs900m. Government has previously deployed several measures to improve collections in the above cities and others such as Mbarara, Mbale, Lira, Arua, Fort Portal, Soroti, and Hoima. Property tax is managed under the Local Government (Rating) Act, 2005, and has been earmarked as a major revenue source for local governments, especially in urban local governments.
