Registered valuers play a crucial role

A discussion has ensued since the publication of a five percent withholding tax on gains earned from the sale of land in cities and municipalities and the sale of rental property. With all the valid points raised, one factor was overlooked: the mode of assessment of such an increment and by whom.

A gain is usually in value. There is a difference between value and price, the value being the perceived worth of the product or service to the buyer and the price being the amount that a buyer must pay to purchase a product.

There was mention of relying on sales agreements instead of valuations by valuers registered by the Surveyors Registration Board.

Several value-determining factors are considered by a professional with academic and professional experience to avoid transferring the burden to an unsuspecting property owner. We have seen cases where a compensation award includes a disturbance allowance of up to 30 percent is taken as the market value. Imagine the tax burden a tax-compliant property owner will carry in such a circumstance.

An example is the property tax levied by cities and municipalities based on assessments in a valuation roll compiled by registered valuers. The proposed tax should rely on professional valuations.

We make valuations for purposes of sale and purchase and other purposes like secured lending, compensation, financial reporting, and many more. Each has the rationale and basis of valuation as well as validity. A valuation report bears the stamp and name of a registered valuer who can be called upon to defend his/her value.

But often, sale agreements for land involve hidden payments to brokers and village chairmen that do not go to the owner. Relying on them as a basis for taxation would add salt to injury to the bruised buyers and sellers who have only received a portion of the said figures. Besides, there are no rules governing a sale agreement and adherence to the correctness of sales figures.

This is where a registered valuer in Uganda comes in. This tax should rely on an assessment by a registered valuer who can be in both private and public practice since professional competence is not a preserve of government employees. Some people will talk of delays and the number of valuers.

However, the effectiveness of a tax is felt over time. It might take a while. This is enough time to roll back some gains made in access to housing, land ownership, and the broader real estate sector if the tax is based on figures that carry speculation and misrepresentation.

Several people out there will get worried about the additional cost of a valuation report yet they are not worried about the fees for a signature and stamp of a commissioner of oaths.  Valuation reports can be of different formats and sizes as long as they meet the intended purpose and include elements of a report that make it valid.

Why do I propose the reliance on professional valuations and the input of registered valuers? Sales prices will find their way into a database and will distort the property market under the weight of speculation and misinformed purchases.

It would only be fair to require every property sale or purchase to follow a valuation report.  Sale agreements will not capture the time value of money or the effect of market forces on the same price. The effect of such distortions can be misinterpreted as gains in value and translated into an additional tax to the taxpayer. This is why professional input by a registered valuer is very important.

What happens when the change in sale price on a property is a result of renovations made? What if the land value increased after the land that was previously untitled got a certificate of title? Such aspects need to be taken into account. That is why a registered valuer can not be cast aside.

The writer, Ivan M Mulumba, is a valuation and real estate consultant, the principal of Corundum & Associates. [email protected]