Enhancing property tax in Kampala: Successes, challenges, and next steps for increasing municipal revenue

Policy brief Tax and State

  • Property tax is a significant source of municipal revenues in Kampala, making up over 35% of own source revenues for the Kampala Capital City Authority. However, there is significant room for improvement. While legal exemptions and limited means of enforcement require legislative change to enhance revenues, in the short run improvements to valuation and efforts to enhance voluntary tax compliance are key.
  • Simplicity is key: models which include more characteristics do not yield significantly higher accuracy. Instead, collecting comprehensive data on a smaller number of property features is important for accuracy. Improved accuracy from more complex and sophisticated techniques need to be weighed against transparency for taxpayers.
  • It is important to keep in mind the limits to mass valuation, both in terms of accuracy and fairness of predictions. Predictive models tend to systematically overvalue low value properties, and (substantially) undervalue high value properties.
  • Now that the city has successfully expanded the tax net for properties, efforts to enhance compliance will be key for long term revenue gains.