Assessing the impact of the loopholes in the current property rating system on revenue collection

Abstract

The main objective of the study was to assess the impact of the loopholes in the current property rating system on revenue collection using Nakawa Division as the case study. The objectives that guided the study included; identifying the loopholes in the current property rating system, establishing the sources of the loopholes in the property rating system, and analysing the performance of the current rating system in Uganda. A self-administered questionnaire and face to face interview were used to collect data from respondents. The research findings showed that the major loopholes in the system included; failure to update the valuation rolls on time as provided by the local government rating act of 2005, limited number of skilled valuers to do rating for the division, ignorance among taxpayers as to why they need to pay property rates, corruption and bribery amongst officials, exemption of vacant urban land from paying rates, exemption of residential owner occupied properties from paying taxes. This has led to loss of 45% revenue (SEATINI, 2013), high cost of tax administration, lack of political will to enforce penalties by the government among others. These loopholes greatly reduced the revenue collected by the division. The findings showed that the loopholes are mainly as a result of inadequate funding by the central government to facilitate updating of valuation rolls and recruitment of more permanent valuers by the division, limited sensitization that has left taxpayers ignorant to an extent that some don't know how to calculate the rates levied on their property, weak measures put in place to fight corruption, irregularities in the local government rating act of 2005 which exempts some properties from paying rates hence limiting the tax base. The study further showed that there's an improvement in the revenue collected by the division from the year 2004 to 2018, and this is because of the increase in the number of taxable properties as seen in 2017 from 6,000 to 75,000 properties. But the performance would be more than that if the loopholes are handled in a timely manner. From the findings, the suggestions to overcome these loopholes were; revising or amending the current local government rating act to accommodate some properties, regular updating of valuation rolls every 5 years as provided by the local government rating act of 2005, regular training of tax payers on property tax collection, feedback on taxpayers’ queries be provided in a timely manner, strong political will to handle the corrupt and enforce penalties on evaders of property tax, among others as discussed in the last chapter. It can be concluded that more still needs to be done to viii eliminate the loopholes in the current rating system, and to strengthen the collection of property tax so as to overcome the challenges faced by the council in the collection of property rates.