IMPOSSIBLE

Regulations not enough to tax property in Kenya - Treasury

This comes even as President William Ruto has been pushing to introduce the wealth tax first, which was first mooted in 2018

In Summary
  • Kenya Revenue Authority has started collecting data on rental property in Nairobi
  • This comes as good news to property owners even as the taxman moves to strengthen revenue collection initiatives and widen the tax base.

National Treasury and Planning CS Njuguna Ndung'u
FIXING ECONOMY: National Treasury and Planning CS Njuguna Ndung'u
Image: EZEKIEL AMING'A

The government is not mulling taxing property owned by Kenyans since there is no set measure to evaluate how they should be taxed.

This comes as good news to property owners even as the taxman moves to strengthen revenue collection initiatives and widen the tax base.

Treasury Cabinet Secretary Njuguna Ndungu in an interview with Media said that the lack of adequate regulations that govern property ownership and use in the country is making it difficult for KRA to use them as a source of revenue.

“The taxation of wealth will be difficult because you’re supposed to tax flows, not stocks. In any way by the time I accumulated them I paid tax so you can’t come and tax them you can only tax the appreciation of the assets,” said the CS.

This comes even as President William Ruto has been pushing to introduce the wealth tax first, which was first mooted in 2018, to finance his pro-poor plans.

The President told Parliament in his inaugural speech on the floor of the House that his administration will seek to raise taxes from the wealth accumulated by the richest Kenyans over getting revenues from workers and traders.

Last year, the Treasury said they were looking at fiscal changes that would go into the Finance Bill, including discussions over the wealth tax among many other fiscal reforms to boost revenues.

Ndung’u argues that in the case of homeowners the value of the houses may increase but if they are not intending to sell the houses there is no way it can be taxed. 

“Taxing wealth can run into headwinds if you don’t have a measure, benchmark of appreciation of assets several countries have done that so well locally it can be tricky,” he added.

Clifford Otieno an Independent tax expert told The Star that for homeowners it can be difficult but for rentals, he says there is a need to strengthen the regulatory framework to ensure they comply.

With the taxman setting sights on the Sh3 trillion mark for next year revenue collections, Otieno adds that the government should adopt arbitration and self-disclosure initiatives to widen the collections in the property sector.

“They can look into the voluntary disclosure programmes and incentivise those who turn up or even work out formula’s on how they can waive part of the taxes owed thus far,” he added

Already, the Kenya Revenue Authority has started collecting data on rental property in Nairobi and surrounding areas in an effort to boost its collections.

The president recently announced that his administration would seek to strike a revenue balance by removing stamp duty for first-time property owners and raising compliance for other property-related levies like land rates and rent.

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