Private owners of residential houses will start paying property tax on their houses if the Local Government Rating Act is amended.
The city executive director, Jennifer Musisi, said KCCA proposed that people owning big residential houses would start paying property tax as soon as Government approves it. She said she will need the help of the MPs to amend the Act.
"Affluent neigbourhoods like Naguru, Kololo and Nakasero have huge homes that generate a lot of garbage, but they neither contribute to keeping the city clean nor maintaining the roads. And yet they are need these services," said Musisi.
KCC used to tax residential houses, but the Act was cancelled by the president in 2006. He ordered that people who live in their own houses and not using them for income generation should not be charged. The Act was amended to exempt owner occupier residential houses from paying property rates.
However, that might change if the proposal is passed. Phoebe Lutaaya Kamya, KCCA director for revenue collection, said KCCA has petitioned Parliament through the minister in charge of Kampala, Frank Tumwebaze, to amend 2006 Act. "We forwarded our proposals to Government and the council headed by the Lord Mayor Erias Lukwago," she said.
This comes on the heels of dismal revenue performance by KCCA in the first financial quarter where they collected only sh16b against the targeted sh24b. KCCA's revenue sources include advertisement, local hotel tax, local service tax, markets, land fees, park fees, street parking, rent and rates, property rates and migration permit. Others are miscellaneous income, penalties, registration fees, sale of drugs and other taxes on specific services.
Kamya said to handle the revenue shortfalls, KCCA is tightening on revenue leakage with zero tolerance to corruption.
"We arrest and dismiss staff who connive with tycoons to evade dues, we have cut down expenditure and we are scaling down funding on such non service items as advertisements, foreign travel, workshops and meetings."
KCCA is also appealing to corporate companies to pay local service taxes for their employees, who reside in Kampala city. In it's first financial quarter, KCCA collected about sh1.5b from local service tax instead of the targeted sh4.5bn.
According to the financial report, seen by NewVision, property rates was among those items which performed poorly, collecting only sh437m, about 18% of the total revenue.
Bad tax laws or system?
Kamya blames the regulations that govern property rates. "KCCA cannot close premises of defaulters as it is done to license nonpayers. The law says we must write to them three times reminding them and when they still fail to pay, drag them to court. The case may take decades to be disposed off," she explains.
Property tax is paid by commercial, industrial and residential (both rented and owner occupied) buildings.
The only exemptions right now are people who stay in their own residential houses, religious institutions, Presidential property, houses of cultural leaders and not-for profit organisations.
According to Ezra Ssebuwufu, the manager revenue at KCCA, the authority collects on average sh7.2b annually from property rates, but the figure is expected to rise greatly when the new valuation is carried out. Currently, property rates are paid by buildings which are used for commercial purposes (including residential rented properties, factories, hotels, owners rented houses, commercial schools and all government owned properties).
Top payers of property rates According to the list obtained from KCCA, the five top most payers of property rates are Workers House which pays sh183.2m per year, followed by Sheraton Hotel, sh177.9m, Crested Towers, sh163.6m and Bank of Uganda, sh157.5m.
The list is based on the 2004 general valuation and 2009 supplementary valuation.
However, Property taxes did not feature among the best performing income generators for KCCA. The best was revenue from the taxi business.
KCCA collected sh3b from taxis in three months although the target was sh4b.
Bernard Bidong, KCCA's revenue manager, attributes this to tough enforcement exercise.
"From the 15th of every month, we impound all defaulting taxis," he said.
"Drivers can use their mobile phones to pay taxi fees. The electronic payment system has been such a success that KCCA will apply it in other revenue sources next year. We also use their structures. Every taxi stage has a chairman, hired to work with KCCA. His main task is to remind drivers to pay the fees on time."
City division performance In terms of how much revenue was collected from each city division, the report shows that Central division has the highest revenue, scoring 36%. Kawempe division was the worse at 5%.
Bidong says Kawempe would have performed well if Government had not scrapped business licenses and introduced other form of taxes.
This, according to Bidong, was a setback in collecting revenue in areas like Kawempe, where there are many small scale firms.
"These are other form of taxes are remitted to ministry of trade. KCCA was left to levy local service tax," he explained.
However, the report shows a slight improvement in revenue collection in comparison to the same period last year. Between July and November, KCCA collected sh15b.