Technology and property tax: Raising city revenue in Kampala

Property taxes are a hugely 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. Kampala, the capital city of Uganda, is no exception here – property taxes made up over 30% of the Kampala Capital City Authority’s (KCCA’s) own source revenues (OSRs) in 2018/19. To economists, the appeal of these taxes goes beyond their significant potential for revenue generation. Rising urban land and property values over time are largely driven not by private investments in this property, but by public investments in infrastructure like roads and schools, and by rising demand for space in a city due to urban migration. By taxing properties, cities are able to get a return on the investments they have made into urban areas. Revenues from these taxes can be reinvested into the city, raising property values further – unlocking a virtuous cycle of urban investment. Though promising in theory, implementation of these taxes is a different story. In addition to obvious political challenges to these taxes from wealthy and often politically powerful landlords, the administration of these taxes is extremely challenging. Many city governments are faced with outdated property rolls that limit the tax base, and use valuation systems that are unable to accurately and fairly track property values. Recent reforms in the city of Kampala highlight the promise of technology for leveraging property taxes – and its limits.