UGANDA, Mbarara | Real Muloodi News | Businesses along Mbaguta and Markhansingh Streets in Mbarara City have been closed due to unpaid property rates tax.
Many business owners and landlords are puzzled about property rates, wondering how city authorities arrived at what some owners claim as unfair tax rates on their properties.
UPDATE: Businesses along Mbaguta and Markhansigh Street in Mbarara city, are on a standstill after authorities from Mbarara city council closed some buildings due to unpaid property rates.#CroozeFMNews pic.twitter.com/3nSPjoQH6v
— 91.2 Crooze FM (@912CroozeFM) April 27, 2022
Many do not fully understand the tax, or know where and whom to appeal when they have complaints about how their property was assessed for the tax.
Local taxes are levied because there must be funding for any administrative unit to operate well and to provide services that the city’s residents need.
According to the deputy City Mayor, Priscah Mulongo, Mbarara City’s total budget stands at USh45b; a total of USh9b (approximately 20%) comes from local revenue collection realised from trading licenses and other taxes imposed on the business community within the city boundaries.
Much of such funding is collected locally through property tax. Property tax is an annual tax on any commercial property existing within the city.
The Local Government [rating] Act of 2005 provides for the property tax.
The money or tax collected caters for infrastructure development like roads, and services like garbage collection and security, among other services provided through the City Council.
Commercial property owners are charged between 1 and 12% of their property’s ratable value, the exact rate set by each City Council Authority. The rate is currently 6% for Mbarara.
Rateable value is a property’s rental value, minus 22% allowance for expenses. This means after the expense allowance has been deducted, 6% of the remaining valuation amount is taxed.
Confusion often arises when property owners mistake ‘rental value’ to mean the amount of rent one collects, whereas property tax has nothing to do with rental income earned. It is purely a measure of value for the property.
Rental value means how much the property is likely to yield if it was rented according to market rental values, as determined by a licensed and accredited property surveyor. But whether or not a property is actually is rented, or how much it actually collects, is not part of the equation.
Therefore, property rates are levied on any businesses premises, regardless of whether it is rented or not.
Residential rentals are considered a business, so the tax applies to these too on the grounds they are a business, not because they are rented.
However, property tax excludes residential houses where the owner lives, registered worship places, local council offices, recreational centres, and embassies.
If the property is partially residential/commercial, the commercial property tax is paid for the commercially occupied parts.
Any property tax liability not paid within 14 months of billing is in arrears and is subject to an interest of 2% per month for the period it has remained unpaid as provided for in the Local Government (Rating) Act 2005.
Consider this; over a period of 12 months the 2% interest penalties for non-payment add up to 24%; considerably higher than current bank loan interest rates in Uganda.
One method of enforcement is to shut down properties whose owners do not comply, as has been done to the Businesses along Mbaguta and Markhansingh Streets.
Last month, the Mbarara City Council started property valuation of all properties. The Mbarara City Council Head of Revenue, Samuel Tayebwa Rwakinaga, said that the valuation is aimed at recording all old and new properties in the city which will be taxed for the next five years.
According to Samuel Tayebwa, the valuation exercise for the buildings in the city is being spearheaded by the United States Agency for International Development (USAID) in collaboration with Knight Frank Uganda Ltd, one of Uganda’s most respected real estate firms and a qualified valuer in Uganda.
“Under Section 8 of the Local Government Act, it is required that a qualified valuer should be appointed for the purpose of rating and it is Knight Frank Uganda Ltd in partnership with USAID that chose to take up the role where we had gaps of an expired valuation,” he said.
The valuation exercise is part of USAID’s Domestic Revenue Mobilisation for Development (DRM4D) project.
Tayebwa is hopeful that after the valuation exercise, the amount of revenue collected will increase since new developments have come up.
The last valuation exercise of buildings happened in 2015 at a time when Mbarara was still a municipality.
Deputy City Mayor, Priscah Mulongo, says, “Each government entity is supposed to evaluate rates every after five years and ours was last done in 2015. when we were still a municipality. Since we were elevated to a city status, we have to re-evaluate the ratings.”
“We have all witnessed development within a short time regardless of challenges such as Covid-19; new buildings have been put up and others are undergoing construction which are not captured and do not pay property rates,” says Mulongo.
In the case of property owners who are not content with the ratable value that has been assessed on their property, they have a right to complain to the city authorities and be heard in the city’s valuation courts.
Members of this court are appointed by the mayor and approved by the City Council.
Whereas the valuation team gathers information about various properties in the city which then determines the property tax, the law allows property owners to protest if they believe the valuation of their property is unfair.
The valuation court seats to see if the property owners’ complaints deserve a reduction or exemption in the property tax. After assessing their complaints, the valuation court makes recommendations to the city’s technical team.
Property owners can also appeal to the High Court of Appeal if they are not satisfied with the decision of the valuation courts.
Tayebwa confirms that contradictory values for the buildings can be challenged to the city authorities or in the valuation court.
“Values which will be published are subjected to objection so I appeal to the landlords to challenge values of property if they are not satisfied with the valuer. But if you don’t view the list and object, that means you agree with the valuation,” the revenue officer explained.
Aggrey Twijukye, one of the landlords in Mbarara town, urges his fellow landlords to cooperate with valuers and speak out if they levy wrong rates to our structures.
“Why should kiosks operating from behind the buildings be charged the same amount paid by the business people operating from the main street? Is that fair really?”
On behalf of business people in Mbarara, Twijukye also requested the city council to look into the issue of transparency while collecting taxes.
The process of taxpayer notification and payment is as follows;
- All property valuations are displayed in hard copies at the city offices.
- Property owners have one month to object by filling out an objection form and availing it to the City Authority. The burden of proof is on the complainants to prove their list or lack of liability.
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