Land tax is a local tax with rates varying depending on the location of the land.
Land tax applies to land regardless of whether or not income is earned from the land. Land includes: vacant land, including vacant rural land. Land where a house, residential unit or flat has been built.
This is the tax levied on land based on:
1. The market value of land.
2. Value of land increases as it is serviced with good roads.
3. Water, sewage system.
4. Street lights and other security systems.
Once serviced the land is considered usable as zoned for settlements, industrial or agriculture.
Property Rates & Land Market Value
The market value is the price that a willing buyer is willing to pay for a property. Without property rates the market value can often be over exaggerated by seller.
If someone values land property zoned as residential at say Kshs 100 million in Nairobi and the property rate of Nairobi is say the same as Boston rate, then at 1.304% of Kshs 100 million the Land Property would be paying Kshs 1.304 million a year or Kshs 108.666.67 a month based purely on land value before addition of building.
Property rates tend to regulate the prices for buyers and also enable a transaction to be complete. A governor and county legislative wanting to see all land developed may pass a law that based on willing buyer and willing seller if a person whose property is not developed creates a price that no buyer can buy them the County will assess the property at the selling value created by the owner.
Based on this example Nairobi County could have about 120,000 acres of taxable land that could be valued at about Kshs 120 billion assessed rates. Using cities of developed countries, at an average of about 2% the Residential, Commercial or Industrial land could get about Kshs 2.4 billion as land property rates. The second level is the added house valuation and then all the cars for residents of Nairobi.
Even though people want the market value of their houses to go up they do not want the assessed market value that is subject to taxation to be high. This becomes the regulation system. Today this is not in effect. Once property rates are passed this bubble is most likely to occur where the prices of some products sold will fall based on this taxation system?
Any owner could lose their property for default of payments of this Property tax rates.
County Governments through planning powers function 8 will be able to unlock the lands of their county based on small scale farms that would be classified as commercial farms and subject to commercial property rates. County government will also be able to transform settlements to new residential towns.
Currently there are big leasehold farms owned by the government that are not benefitting the County residents with jobs yet the lands can be put to economic use. County Governments can charge a property rate based on an assessed commercial rate for the lands. Since leasehold applies as a right of usage and not ownership, and further based on special conditions, the county can impose property rates on top of leasehold rates. If property rates are not paid then ask the National Land Commission to terminate leases for failure to utilize land.
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