UGANDA, Kampala | Real Muloodi News | Local Government wants to increase property tax collections in Uganda’s 10 newest cities from USh6 billion to USh26 billion by the year 2025. This lofty goal is critical if the new cities are to thrive, according to a new report.
Mbarara, Hoima, Fort Portal, Gulu, Jinja, Mbale, Masaka, Lira, Soroti and Arua attained city status on July 1, 2020. However, the 10th Parliament created the new cities without a legal framework or budget.
In the absence of a budget, most of the cities have been operating on the original budget allocated to them as municipalities. Yet, more land was annexed to make the cities bigger than the predecessor municipalities, which has meant serving more people on a smaller budget.
Consequently, the new cities have not been able to cope with the demands for infrastructural development and public services that have been placed upon them, which has resulted in disruptions to service delivery and various unforeseen challenges.
Even when the new budgets are implemented, the Central Government transfer of funds to Local Government won’t be enough for the new cities to fully actualise. Therefore, Local Government is looking to raise its own revenue, with property rates (commonly referred to as property tax) being a priority area for revenue generation.
It is for this reason that in early 2022, the 10 new cities embarked on an initiative involving mapping and updating the existing property valuation registers for the purposes of levying property rates, with the support of USAID in Uganda, as part of the Domestic Revenue Mobilisation for Development (DRM4D) project.
Richard Mugisha, the Mbarara City Deputy City Clerk, reports that the property valuation exercise in Mbarara has helped them to identify several properties that had not been paying tax for a long time. He also says that after the evaluation exercise is complete, at least USh5 billion is expected from the local revenue collection.
The DRM4D initiative is a 5-year project with the goal of supporting Uganda in strengthening the tax culture, increasing voluntary compliance, and sustainably increasing domestic revenue mobilisation (DRM), thereby creating the fiscal space for public spending and investments in service delivery in priority sectors such as health, education, and agriculture.
The DRM4D Quarterly Report 2nd Quarter: January 1, 2021 to March 31, 2021 highlights the importance of supporting ongoing updates and validation of property registers, and for the cities to create digital records of the local taxpayer base.
The DRM4D team identified that the property valuation process has been costly and time consuming, because of valuation methods which require each property to be individually valued.
As a result, the DRM4D team is engaging with the Ministry of Local Government on simplified property valuation methods, such as the “points based” mass valuation method that has been successfully used in cities like Freetown, Sierra Leone.
The report acknowledges that Single Property Valuations are appropriate in cases of unique and high value property such as industrial buildings and shopping complexes, where mass valuation cannot be easily employed. Nevertheless, DRM4D believes that simplified valuation will facilitate faster and more cost effective property valuation for sustainable revenue growth.
According to the report, “The targeted cities have a property tax revenue potential of at least USh26 billion by 2025, up from the current USh6 billion. Sustained support for the update of property valuation is therefore critical for sustainable service delivery.”
DRM4D is also supporting other activities to strengthen data collection and the digitisation of revenue register databases in all 10 new cities.
One of the digital technology solutions being implemented to strengthen Local Government’s revenue administration capacity is the Integrated Revenue Administration System (IRAS).
IRAS is a web and mobile application platform that aids municipalities in collection of local revenue from registration, assessment, billing, and payments sensitisation of taxpayers.
The first phase of the IRAS roll out which started on February 2021 included five DRM4D cities; Arua, Hoima, Mbarara, Mbale and Soroti.
DRM4D is supplementing the roll out by initially supporting updates of revenue registers and uploading data onto the Local Government Data Base Management System, installation of enabling applications, and by training users.
The DRM4D report concludes that low compliance in payment of property tax is partly attributable to low access to taxpayer awareness information linking tax payment to service delivery.
It is for this reason that RippleNami Uganda (RNU) has launched a complimentary project in four of the cities; Mbarara, Hoima, Fort portal and Gulu, titled, “Services & Fair Tax for Property Owners”, as part of the DRM4D Activity.
The “Services & Fair Tax for Property Owners” campaign is focused on strengthening dialogue and engagement between the property owners and city administrations, with a view to increase transparency and understanding related to the property valuation process, to the revenue collection process, and how revenues are spent in the local community.
The dialogue helps to increase understanding in how property tax payments are related to services delivery, and encourages property taxpayers to be involved in discussions about in how revenues are allocated to services such as sanitation, street lighting, health, and education.
In speaking about the initiative, Hussein Sekinalya, Director Client Relations at RippleNami Uganda, says “All property owners and residents deserve to be engaged and involved in service utilisation decisions within their community, and to be able to advocate in increased spending, particularly in the areas of health, education and agriculture.”
RippleNami Uganda is extending the campaign reach digitally to the other new cities, through Real Muloodi News Network.
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