Public reporting and property tax compliance: A field experiment in Kampala, Uganda

Property tax, as collected by the Kampala Capital City Authority (KCCA), is a tax on the rental income of property in the city of Kampala, Uganda that can be applied to commercial, institutional and rented residential properties across the five urban divisions of the city. Property taxes are a key source of revenues for the Kampala Capital City Authority (KCCA), accounting for over 35% of own source revenues in FY 2018/19.

However, there is significant room for improvement in property tax revenue collection; only 30% of properties complied with the tax in FY 2018/19. Ongoing discussions with the Kampala Capital City Authority as well as preliminary administrative data analysis highlight that limited tax compliance is a key constraint to enhancing revenues in the city and may reflect low citizen satisfaction and tax morale. This is not a problem unique to Kampala – in many developing cities, property tax compliance is low despite city officials being able to identify tax liabilities of citizens, while at the same time the threat of legal action is hindered by overburdened courts. In order to raise revenue for urban public services in the medium term, policies are needed to encourage tax compliance without relying on judicial procedures.

To provide insights into policy options in this context, we are working closely with the KCCA’s Directorate of Revenue Collection in designing an experiment based on public reporting of individual tax compliance. Public reporting of compliance to other taxpayers offers a potential alternative to conventional information experiments and may lead to a meaningful shift in tax behaviour, while also improving transparency and perceived fairness of revenue collection. We consider the impact of publicly listing high property worth individuals; not only can these taxpayers offer the greatest potential in revenue gains (the top 5% of properties in Kampala represent the same potential revenue as the bottom 95%) – but by increasing compliance of high-property-worth individuals, there may be significant knock-on effects to tax morale more generally. Based on the results of this project, the KCCA will design policies to enhance voluntary compliance with property rates.

Outputs

  • Publication - Policy Brief

    Enhancing property tax compliance in Kampala

    Property taxes are an important source of revenue for Kampala Capital City Authority, making up over 30% of own source revenues in 2018/191. Recent reforms to collect data on all properties in the city have expanded the tax net considerably. Now that the tax net has been expanded, the city faces a new challenge – raising compliance with property taxes. Currently,...

    25 Jan 2021 | Jones Ahabwe, Henry Kikonyogo, Priya Manwaring, Robert Mugangaizi, Julius Mutebi, Daniel Nuweabine, Tanner Regan

  • Blog post

    The compliance challenge: Raising property tax revenues in Kampala

    Property taxes are an important potential source of revenue for cities. Faced with limited municipal revenues and rapidly growing populations, taxes on the value of land and property can offer a significant source of funding for cities to provide local services and to tap into financing for larger investments. Recent improvements to the tax administration system in Kampala...

    28 Jan 2021 | Priya Manwaring, Tanner Regan

  • Publication - Project Report

    Property tax compliance in Kampala: Preliminary evidence from taxpayer feedback and administrative data

    29 Jan 2021 | Jones Ahabwe, Henry Kikonyogo, Priya Manwaring, Robert Mugangaizi, Julius Mutebi, Daniel Nuweabine, Tanner Regan