The government's decision to suspend the property tax increment and to consider a possible reduction not only eases long standing issues around the rates deemed too high for the common man, but is also the right move in steering the post-pandemic recovery.
Already, players in the property segment, like in many sectors, have and continue to endure financial losses after months of pandemic-induced closures, non-payments on rentals and exit of tenants. Luckier landlords managed to retain clients after reducing rent, but even this has not saved either from accumulating arrears, and the situation doesn’t seem likely to get any better until things return to some sort of normalcy.
Indeed, it is such bad timing to expect property owners to carry the burden of increased tax rates, and this is worse in instances where even compliance with the existing tariffs was already a problem. This is largely because under the existing legislation, councils in decentralised entities doubled, tripled and quadrupled land tax rates based on the level of urbanisation and infrastructure access, among other things.
The rates, combined with attached punitive taxes on undeveloped land parcels, and those exceeding the standard buildable size, were termed too high for the ordinary citizen making no substantial return on what they own.
Some by now could be reeling from the pandemic impact on their incomes and livelihoods and are without means to meet their tax obligations even when the rates keep unchanged. They are mostly the families depending on small land parcels obtained largely through inheritance who, unlike their counterparts in the rural settings where agriculture land is not taxed, found themselves surrounded by settlements and now are subject to higher tax rates.
Without protection, most of them could unwillingly be forced out of their property for failing to foot taxes set in these upcoming urban commercial, industrial and residential areas. This constitutes a real threat to property tenure security and it could have far-reaching effects.
This therefore requires that as the government ponders bringing the contested tax rates within affordable levels, there is a need to devise exemptions for the poorest of the poor and the vulnerable who rank among those who found even the existing rates beyond reach.
For instance, what about offering partial or total exemption to owners with lower value land or property? This could double up as efforts to check inequality. What about exempting some of these vulnerable families from tax or devising other ways to cushion them.
It is easy to identify them. They are mainly women, men or orphan-headed households whose living conditions were exacerbated by the Covid-19 pandemic.
While this may seem as likely to lead to a shortfall in revenue collection for decentralised entities, it actually enables mobilisation of revenue without compromising pro-poor and equitable pandemic recovery.