Why MPs should reject the push for annual tax on freehold land

Parliament in session. FILE PHOTO | JEFF ANGOTE | NMG

From routine enquiries, one appreciates that some leaders aren’t yet sufficiently informed about the proposed annual levy on freehold land in the amendments pending enactment into law.

Let’s close this gap. Holders of leasehold properties in rateable jurisdictions in Kenya currently pay annual rates. In addition, those who are lessees to the government, meaning that they have been leased the land for a term of years by either the county or national government, pay an annual rent.

This is the rent that they pay to the government every year as the owner of the land, or the lessor, under a mutual contract.

A freehold landowner within a rateable jurisdiction also pays annual rates. Such rates are desirable for the provision of services to everyone, regardless of the nature of their land tenure rights. Under our Constitution and laws, freehold landowners hold absolute rights in perpetuity and are therefore not obliged to pay any annual rent to anyone.

However, the proposed amendment under the Land Laws (Amendment) Act (No 2) of 2023 seeks to moderate these rights without justification. It requires the owner of any freehold land situated within the jurisdiction of any urban area or city to pay an annual land levy equivalent to the land rent chargeable on a piece of leasehold land or property of the same size within the zone. However, owners of freehold land under agricultural use may be exempt from paying the annual land levy.

In other words, this will burden the targeted freehold tenure landowners annually, just as it does the leasehold tenure holders. But the question is why? Why should they pay an annual land levy equivalent to the land rent payable by the holder of a leasehold piece of land of similar size yet they aren’t anyone’s lessees?

Burdening such landowners to pay annual rates, and, in addition, an annual land levy, amounts to double taxation. Other than trying to draw some extra revenue out of such land, the requirement carries no constitutional justification and is, therefore, discriminatory. To illustrate, in a place like Nairobi, several landowners within the Dagoretti zone, who prevalently use their ancestral freehold land for residences, will take a hit.

In a county like Kiambu with many gazetted urban areas, landowners with freehold land under residential use will similarly bear this extra annual payment.

The National Assembly Lands Committee consists of seasoned legislators and professionals. This committee has received plenty of stakeholder presentations opposing this proposal. This perhaps implies the lack of adequate stakeholder pre-consultations on such a radical proposal.

I suspect that members of this committee may have got convinced that the proposal is inappropriate. They, however, retain the discretion to decide and accordingly guide the whole House. Let them be bold enough to advise that the provision completely subverts our tenure doctrine, and will burden many freehold landowners who, until now, have been happily enjoying their ancestral rights without minding such annual payments.

The writer is a consultant on land governance. ([email protected])

PAYE Tax Calculator

Note: The results are not exact but very close to the actual.