How World Bank's Proposals on Land Taxes Will Impact Land Owners 

The World Bank has proposed a set of land reforms to enable the Kenyan national and county governments to raise more revenue from land owners.

As detailed in the Public Finance Review report released on May 27, the global financial body proposed an end to all amnesty programs usually initiated by governors to encourage defaulters of land rates to pay their dues.

Equally, the Bretton Woods institution called on the county governments and the national government to digitise land records, a move that will make it more efficient for the collection of land rates.

On the other hand, the World Bank is proposing the introduction of zoning in urban areas, which will see the devolved units set aside areas where it is permissible for Kenyans to undertake development projects such as building residential units.

"Properties in the top counties (for example, Nairobi City, Kiambu, and Mombasa) account for more than half the total value of properties in the country, while the combined total value of properties in the bottom ten counties is much lower, accounting for only 2 percent of the total property values in the country.

"Consequently, own-source revenue collection is dominated by those counties with the largest urban areas. Property tax reforms in Kenya could help improve own-source revenue collection at the county level and reduce the counties’ reliance on intergovernmental fiscal transfers," read the report in part

‍Change of Rates for Leaseholders 

According to the World Bank, the rates charged for leasehold holders by the national government are, in most cases, below the current market rate.

As proposed, the rates should be reflective of the current value of land as parcels of land gain value over the years due to several factors, including infrastructural development.

"First, data from the leasehold databases show that land rents in Nairobi account for only a fraction of land parcels captured in the system, indicating significant potential to expand coverage and capture a larger number of eligible properties in the system," read the report in part.

"Second, many of the rents have been set at nominal ‘peppercorn’ (very low) nominal levels that bear little relation to the current market value of the land."

‍Idle Land

Through the implementation of differential tax rates for vacant land, the World Bank believes that many landowners will be forced to undertake projects on their land and discourage the ownership of idle land.

"Even without differential rates, assessing urban land at or close to market value incentivises denser development as property owners seek to maximise their return on outlay (including land-based taxes) - urban density is associated with higher productivity," read the report in part.

"A dense urban form can be further supported by spatial planning regulations and by the efficient operation of property markets. Informal transactions of uncovered properties distort the property market, and improving coverage will also discourage this practice."