Wrong to tax freehold land

Through the Land Laws (Amendment) (No 2) Bill of 2023, the government intends to have owners of freehold land within urban or city areas pay an annual land levy on freehold property.

Sitting right inside the plethora of amendments proposed through the Bill, this seemingly mundane clause is easy to miss, but yet has grave implications to the affected property owners. Section 51 of this Bill seeks to amend Section 54 of the Land Act by inserting a new section 54A with this new requirement.

MPs must beware the implications of this provision to themselves, and Kenyans with freehold properties within urban or city boundaries. They must reject the proposal. This is why.

According to the Urban Areas and Cities Act, an urban area means a municipality, town or market center. While only Nairobi, Mombasa, Kisumu and Nakuru enjoy city status, the wide bracket of municipalities, towns and market centers includes most of the developed areas in Kenya, most of which are constituted by freehold properties from ancestral lands.

Many Kenyans who own these freehold properties are unaware that they are within city or urban boundaries. Many struggle to maintain basic livelihoods, and would be hard pressed to afford the proposed annual tax.

With the enactment of such a radical provision, MPs risk rattling and antagonising this category of citizens. The probability of default on the payment of such an annual levy en masse is high, hence defeating its very purpose.

The proposed charge appears to undermine freehold land rights since it’s a tax on freehold land only. It’s discriminatory because it is not applied on all categories and interests on land.

The holders of freehold land pay all other taxes including rates, stamp duty, capital gains tax, income tax, rental income tax, VAT just like the holders of leasehold interests.

Any value gains arising from land transactions such as planning, development or provision of government services is already charged for through these taxes.

Holders of freehold land are absolute owners in perpetuity and therefore cannot be charged rent in the name of an annual levy for their own land.

Mr Mwathane is a licensed surveyor and consultant on land governance: [email protected]; Dr Makathimo is a land economist and an environmental policy expert: [email protected]