The propriety of property rates tax in kampala capital city authority

Property rates tax can be defined as a tax on properties such as private houses, commercial houses, factories and banks paid to local governments based on their rental value. The base for the property rates tax is “real property” defined as land and improvements or attachments to the land. A number of considerations need to be taken into account in designing or scrutinising a tax proposal. Economists have categorised concepts that can be used in evaluation of a tax system in different ways. However, most of the criteria used in evaluating a tax system are founded on the traditional Adam Smiths’ four canons of taxation - equity, that is fairness with respect to the tax contributions of different individuals; certainty, that is a lack of arbitrariness or uncertainty about tax liabilities; convenience, that is with respect to the timing and manner of payment; and efficiency, that is a small cost of collection as a proportion of revenue raised, and the avoidance of distortionary effects on the behaviour of taxpayers (the principle of neutrality). These canons provide a framework within which various tax system proposals may be considered and can also be used to set a basis for assessment of the propriety of property rates tax. Admittedly, it is hard to design a tax system that incorporates all these principles, but there should always be endeavours to ensure that the majority are met. The purpose of this article is to analyse how property rates tax, theoretically and practically (in Kampala Capital City Authority in Uganda) meets these principles. However, not all the canons of taxation are reviewed. The discussion concentrates on those which are considered more critical in the property rates tax system.