Local govts want to tax farmers

By Sylvia Nankya

THE Local government finance commission has advised the Government to introduce taxes on commercial farmers, idle land and on residential houses.

In 2010, local governments only collected sh7b out of the expected sh70b, Johnson Bitarabeho, the commission chairman, said.

He was on Friday presenting the annual report of the local government finance commission to the speaker of Parliament, Edward Kiwanuka Sekandi.


Bitarabeho argued that the current local service tax and the hotel tax were not viable and their performance has remained extremely poor.

He noted that the two taxes introduced in the 2007/2008 National Budget were not properly studied to ascertain their effectiveness prior to implementation.

As a result, they could not effectively bridge the gap arising from the abolition of graduated tax.

Graduated tax collections were above sh80b at the time they were abolished.

“The hotel tax, in particular, was not feasible for rural areas because many of them lack hotels which can contribute revenues. So, we realised this could only benefit a few districts, not the entire country,” Bitarabeho said.

The commission has the constitutional mandate to advise the President on matters relating to the distribution of revenue between the Government and local governments and advise local governments on the suitable tax to be levied.

There are many commercial farmers earning close to sh10m a month, but remain untaxed yet they equally require service delivery from the districts, according to Bitarabeho.

“What is the rationale of taxing teachers, who earn less than sh200,000 a month, yet farmers who earn between sh8m and sh10m enjoy a duty-free regime?” he asked.

“We can collect money targeting the poor,” Bitarabeho added.
He said the tax on residential houses would help local government’s obtain the resources they require to maintain areas where the tax is collected, while the tax on idle land would encourage production and have a multiplier effect when the land is eventually utilised.

“Low collection of local revenues implies that many key programmes of local governments under funded.

These include co- financing of development projects, supervision and monitoring of government programmes and holding council meetings, among others,” he said.