One key concern reported by taxpayers and tax authorities in Uganda is ‘double taxation’ on different sources of income from local and national revenue authorities. One example is rental income in Kampala city, which is taxed both by the Uganda Revenue Authority through rental income tax, and by the Kampala Capital City Authority in the form of property rates. Not only can this ‘double taxation’ result in a significant tax burden for citizens, it can also reduce tax compliance with each tax levied.
Based on a request from the Uganda Revenue Authority to better understand the stagnation of rental income tax in Uganda, this study examines the extent to which introducing a new property rate roll for local taxation in Kampala city has affected rental income declarations for national income tax.
Exploiting the staggered roll out of the new property tax roll in the city, the study will use using national and subnational tax data on rental income declarations and assessments to examine:
- The extent to which assessed rental income for the purposes of property tax differs from self-declarations for national income tax (and whether compliance with property taxes is higher when these are similar)
- The extent to which stagnating rental income tax revenues are the result of taxpayers adjusting their behaviour due to new local taxes
This study will allow us to shed light on the relationship between national and subnational taxes, and the extent to which ‘double taxation’ results in lower tax take by government authorities. If double taxation is lowering tax compliance amount citizens, it could be beneficial to consider combining national and local taxes on the same source into one payment and/or lower rates of each.