Panic as KRA deadline on Nairobi home seizures lapses

Panic has gripped home and office block owners in Nairobi after a deadline set by the Kenya Revenue Authority (KRA) and City Hall for payment of outstanding land rates and renewal of business permits lapsed, paving the way for seizure and auction of their property.

The owners of some of the targeted properties were last month served with warnings of takeover should they fail to clear their dues.

“The Nairobi City County Government and KRA do hereby give notice to the public and traders that the period for compliance with payment of land rates and renewal of licences and permits lapsed on March 31, 2021,” the KRA and City Hall said in a joint notice yesterday.

“Consequently, interest and penalties shall be payable for late payments or non-payments of rates, permits and licences in accordance with the relevant legislation."

The KRA said non-compliant property owners now face additional enforcement action, including arrests and prosecution for operating without permits, repossession and auction of property and revocation of development plan approvals.

City Hall and the KRA may also directly collect rent from premises where the property owners have defaulted on payment of land rates and revoke building approvals for non-payment of rates.

The taxman recently announced that taxpayers would get full or partial relief on penalties and interest on the undisclosed taxes under a programme that runs from January 1 this year to December 31, 2023. The Voluntary Tax Disclosure Programme (VTDP) was introduced through the Finance Act, 2020 and seeks to grant relief on penalties and interest on any tax liability disclosed in respect to the period between July 1, 2015 and June 30, 2020.

A City Hall report shows that property owners and businesses owe the county Sh825.47 billion in land rates and Sh904.67 million in unpaid single business permit dues as at December last year.

Faced with the sharply rising debt, the Nairobi County Assembly in 2018 amended the Revenue Act of 2015, empowering City Hall to recover land rates from rental income.

The changed law marked a shift from the previous regime where the county administration was only allowed to restrict access to property whose owners had defaulted on payment. The amended Act now allows City Hall to temporarily repossess such properties and make recoveries of the debt owed through monthly rent.

A recent geospatial analysis conducted by the national government showed that 90 percent of land and property owners in Nairobi had defaulted on rates.

Land rates and single business permits alongside parking fees are the three biggest revenue stream for City Hall.

The county has, however, perpetually missed collection targets due to the high default rate and a lack of resources to pursue those who do not pay.

City Hall commissioned the KRA to collect all the levies and taxes following transfer of four key functions to the national government in March last year.

The KRA now oversees all streams of revenue in Nairobi and administers the taxes through the normal process of assessment, payment, accounting, remission and enforcement through both compliance and debt recovery.

The taxman has dangled waivers on tax penalties incurred over the past five years in an attempt to mop up additional revenues amid a collection crunch caused by Covid-19.

In the financial year to June 2020, City Hall raised Sh1.873 billion from land rates, Sh1.587 billion from single business permits and Sh1.545 billion from parking fees. This helped to lift the county’s overall revenue collection for the period to Sh8.52 billion against a target of Sh17 billion. Recent attempts by City Hall to lower defaults on payments through closure of office blocks have not borne fruit as owners stayed defiant.