Experts raise alarm over huge tax rises

By KEVIN OGUOKO

Property experts have raised an alarm over the huge rise in property taxes charged by county governments.

Under the umbrella of the Institution of Surveyors of Kenya (ISK), the experts say recent increases in the taxes in all the 47 counties are causing public outcry.

Recently, Nairobi’s City Hall increased property taxes by over 100 per cent to 34 per cent, up from 17 per cent of the property value.

The move has caused jitters between property developers and authorities and has been the subject of debate among the real estate stakeholders.

While Article 29 of the Constitution gives county governments power to impose taxes such as land rates and property transaction taxes, Article 201 of the same Constitution provides that county governments have to consult the public on all financial matters.

Outcry

“Public outcry has met the enactment of most of the Finance Bills. This raises the question of whether Article 201 of the constitution was observed,” ISK Chairman, Collins Kowuor, said at a press conference on Monday.

Nairobi County is not alone. Mombasa County has also increased its land rates by 100 per cent in its Finance Bill. Nyandarua has increased rates by 200 per cent.

To add to the burden, other administrative charges have been levied to land owners and investors.

Change of user, for example, which is primarily changing the deed of the land to reflect a different land use, say from residential to an amalgamation of residential and commercial, has been set at two per cent of the value of the property. This is in addition stamp duty one has to pay to the national government.

Nairobi Governor Evans Kidero had previously defended the extra charges, citing high cost of services and that land rates and other forms of expenses should reflect the true value of properties.

Land values

The current land values are based on a 1982 property valuation roll. A hectare of land in Lavington is currently valued at Sh100 million compared to the 1982’s value of about Sh304,000.

Currently, the Ministry of Land is second to Kenya Revenue Authority as collector of revenue for the national government.

It collected Sh9.6 billion in the 2012/13 financial year through stamp duty fees and other fees it levies on land and property owners.

The county levied fees are, however, nothing strange in world-class cities with a booming property market such as Nairobi. However, the kind of services offered in return in those cities is incomparable to what the various county governments are offering or proposing to offer.  There is still no development or at least a proper development plan by a majority of these counties.

“There is no problem with the new taxes but the increase of these fees should match development projects,” noted Kowuor.

He added: “We urge county governments to be sensitive to the impact of these taxes by either reviewing them or ploughing back into development projects.”

This comes at a time when reports show Sh48.5 billion of the total Ksh108 billion sent to counties is still lounging in banks.

Developers put the cost of infrastructure at 20 to 30 per cent of the total construction cost, a bill, which is essentially supposed to be footed between the county and national governments.

— koguoko@standardmedia.co.ke