Ruto plots land rent reforms to boost revenue

Annual fees paid by leaseholders on land have long faced low collection rates, outdated valuation records, and mounting arrears. [File, Standard]

President William Ruto’s administration expects ordinary revenue to shrink as a share of the economy in the next financial year and plans to reform land rent collection to offset the resulting budget shortfall.

Critics, however, warn the move could plunge the government into one of the most politically sensitive issues in the country’s history.

In budget projections for the 2026/27 financial year, the National Treasury forecasts ordinary revenue of Sh2,985.7 billion, or 14.3 per cent of Gross Domestic Product (GDP) —down from 14.9 per cent of GDP this year. 

Total revenue, including ministerial collections, is projected at Sh3,629.7 billion, down to 17.4 per cent of GDP from 18.2 per cent in the 2025/26 cycle.  “This projection assumes a lower revenue base to adjust for a projected underperformance of 147.4 billion shillings in FY 2025/26,” Treasury said.  

“On that base, we factored in additional revenue yields from the Finance Bill 2026 and administration reforms implemented by Kenya Revenue Authority (KRA).

Further, we have factored in revenue yields from reforms of the land rent regime and expected yield from instant fines.” 

The Treasury attributed the lower revenue-to-GDP ratio to non-repeating inflows. It cited a one-off Sh40 billion advance dividend from Safaricom and a sharp drop in Central Bank of Kenya dividends to Sh6.5 billion next year, down from Sh30 billion.  

While economists and Ruto’s Treasury mandarins view property as an undertaxed sector, the Treasury’s new focus on “reforms of the land rent regime” has raised concerns among property owners. 

Annual fees paid by leaseholders on land have long faced low collection rates, outdated valuation records, and mounting arrears. 

Indeed, local authorities are struggling to recover these debts. As of June 2020, Nakuru County reported property tax arrears of Sh3.7 billion while Kisumu County has Sh12 billion in uncollected rates. KRA officials recently noted that Nairobi County collects under 15 per cent of its property tax potential due to obsolete valuation records. 

The World Bank has supported these types of revenue overhauls, advising Kenya to maximise domestic funding to improve public finances.

The multilateral lender noted earlier that expanding property and land taxation remains a critical step for urban fiscal policy.  

The Bank estimated that modernising property taxes and boosting overall compliance could help generate an additional four per cent of GDP in revenue over the medium term.  

However, critics argue that aggressive enforcement could provoke public backlash.  

Land remains a sensitive economic issue in Kenya, tracing back to colonial-era displacements that fuelled the Mau Mau uprising in the 1950s.  

Analysts say post-colonial elites took over large agricultural tracts, leaving structural grievances that make land taxation controversial today. Critics argue that property tax crackdowns mimic historical patterns of economic exploitation. 

Past efforts to raise property taxes have triggered lengthy court battles.

In 2020, the Environment and Land Court halted Mombasa County’s attempt to raise property rates by up to 400 per cent. 

In Kisumu, residents legally challenged a valuation roll that proposed steep rate increases on both freehold and leasehold properties.

Similarly, in Kiambu County, enforcement of a rating law that treats all private land as taxable led to resistance after residents faced major demands for accumulated arrears plus three per cent monthly interest. 

“We are already choked by the housing levy, health insurance, higher pension contributions, and now expensive fuel,” said James Mwangi, a small-scale farmer in Naivasha.