The cost of holding investments in land is set to shoot up as Government pushes counties to raise more cash from land rates.

The State is pushing the devolved units to collect more taxes from land and property rates to reduce pressure on revenues. The National Treasury intends to support Counties to raise revenues through establishment of the Own Source of Revenue Policy and Bill. Taxes based on valuation will hit firms and individuals holding large tracts of land, which according to Treasury; will help bridge the inequality gap by transferring benefits from the rich to the poor. Treasury is currently reviewing on how counties collect rates, how land is valued and will soon create a model that will be replicated across the country.

The County governments enjoy legislative authority in imposing property rates based on area rating/size, site value rate, or a site value plus improvement rate. Possessing an immobile tax base, property rates are suitable for county governments as they have an automatic localization. Therefore, with effective tax administration, property rates have the potential to guarantee county governments a steady stream of revenue to supplement budgetary allocations from the national government. Recently, Kiambu County government increased land rates by up to 300 per cent for home owners and will start levying holders of agricultural land, dealing a blow to real estate developers. The move by Mombasa County government to revise its valuation roll in 2018, by up to 3,000 per cent also caused a major outcry among residents.

According to treasury, County governments can widen the tax base for property rates through digitalization of all land parcels to facilitate updating of valuation rolls to reflect current market prices.