Property tax was first introduced in Kenya in 1900 in Mombasa, and the basis used was the annual rental value. In 1901, the tax was introduced in Nairobi using the same basis as Mombasa. In those years, few properties were developed.
Later on, in 1928 unimproved site value rating was applied. Dating back to the beginning of the 20th century, Kenya fully adopted a land value taxation that was influenced by the British colonial administration as it is presently practiced. Before independence 1963, the city of Nairobi accumulated 45 per cent of its revenue from rates. The revenue collected from rates continued to increase slowly until the period 2013-2015 when it began to decrease.
The property tax has been a contributive source of income to the Kenyan local authorities. It was only recently that the contribution of property tax has been surpassed by personal income tax and other taxes on goods and services.
Ways We Can Address the Issue
- The Kenyan government should work on providing a national blueprint act or legislation that the counties can adjust. Unlike previously when the counties relied on existing legislation (that were void) and on their own to draft their valuation and rating laws.
- The Kenyan government should consider contracting valuation service providers. These can befrom either the private sector or the MLPP. These providers will provide year-long supplementary valuations to ensure a balance within the property rating system. This move will encounter the lack of valuation resources within the counties.
- The Kenyan Government should deploy enough capacity at the county levels that will maintain and regulate the updating of the county level valuation rolls. This move will counter the problem of inadequate capacity, incompetent and poorly applied enforcement mechanisms and a lack of willingness to pay tax.
Challenges in the Process
Despite the challenges the Kenyan government is facing, they are working with other authorities to combine administrative components such as billing, property identification, valuation, collection and enforcement with other revenue sources such as single business permits and user charges.
Kenya Revenue Authorities (KRA) is working with various counties to take over their collection of property rates and single business permits. This move is meant to improve the collection and enforcement of property tax at the county level.
To succeed in addressing challenges of property tax in Kenya the politicians should be prompted in participating and contributing to property tax. Also, taxpayers should be enlightened on the benefits of paying tax to improve local infrastructure and amenities.
To ensure certainty, it’s important tax payers are assured of efficient and fairness when collecting tax. Assurance that penalties will be imposed on non-compliant taxpayers who enjoy public services at the expense of others.
In conclusion, national and county level government in Kenya must work together to regulate efforts to increase the capacity and capability of county governments to manage the property tax to achieve realistic collection and compliance rates.