Kampala Lord Mayor Erias Lukwago has proposed that Kampala Capital City Authority (KCCA) should consider retaining a portion of taxes and fees collected by the authority on behalf of central government as government failed to increase their budget.
In taking such a decision, he said, KCCA would be triggering section 50(3) of the KCCA act, 2010. The section reads; “the Authority may collect fees and taxes on behalf of the Government as its agent; and where the Authority acts as an agent for the Government, a portion of the funds collected shall be retained by the Authority as shall be determined by the Minister in consultation with the Minister responsible for finance.”
Though KCCA collects value taxes and fees which it retains such as property tax, fines, market dues, hotel tax, etc other taxes such as value added tax and pay as you earn are sent to the central government. Mr Lukwago says KCCA should consider retaining a portion of value added tax and pay as you earn taxes. He says transforming Kampala into a modern city requires massive investment.
Government slashed KCCA budget from Shs561.33b in the 2016/17 financial year to Shs337.39b for 2017/2018 financial year. This is 1.16 percent of the 29trn budget passed last week.
The reduction affects works and roads infrastructure improvement sector which will suffer a reduction of Shs 248b in the coming financial year. A number of the ongoing road constructions in Kampala are funded by the World Bank under Kampala Institutional and Infrastructure Development Project (KIIDP) phase two.
Mr Lukwag argued that KCCA should reject government pressure that they should generate revenue to finance projects internally.
“We must guard against the temptation and pressure from central government to always focus on maximising local (retained) revenue collections to finance the KCCA transformation agenda. We must appreciate that the business community is currently struggling to break even as they are chocking on the ever soaring interest rates, rent and power tariffs,” he said.
This year KCCA failed to hit local revenue targets. For instance, between July 2016 and March 2017, KCCA posted a cumulative revenue collection deficit of Shs14.3b.
Tapping potential revenue sources
KCCA physical planning directorate last month tabled before council a list of new taxes it is seeking to introduce. The directorate is also seeking hike fee and tax on a number of exiting services in a bid to tap potential revenue sources.
For instance, some of the new taxes being introduced is a Shs50,000 fee on request to cut a tree within a private property, Shs2,000,000 express permit for illegal construction, a Shs500,000 per square metre fee for cutting through road pavement for installation of utility lines, and Shs100,000 excavation and grading permit among others.
Items proposed for tax hike include; parking yards permit from Shs100,000 to Shs500,000 per year, demolition permit from Shs50,000 to Shs500,000, hoarding permit from Shs 100,000 to Shs250,000 among others. The taxes will be implemented immediately if passed Kampala city authority council.