An Evaluation of Property Rates Collection and Enforcement in Devolved Systems of Governance -a Case Study of Nairobi City County

Abstract

The problem of poor property tax collection and enforcement is rampant in developing countries including Kenya. This is evidenced by the following: poor contribution of property rates to local/devolved governments’ revenue; insignificant contribution of property tax to GDP; increasing rate of defaulting in payment of property rates; low collection ratios; and high level of intergovernmental transfers. The poor collection and enforcement of property rates is worrying, thus necessitating the need to evaluate policies and practice of property rates collection and enforcement in devolved systems of governance in Kenya. The study sought to determine property tax Collection Ratio (CR); identify property rates collection and enforcement tools in Nairobi City County; establish effectiveness of the property rates enforcement tools in ensuring fully compliance; and establish challenges facing property rates collection and enforcement in Nairobi City County. The study focused on property rates collection and enforcement in Nairobi City County which hosts Kenya’s capital. The study focused on Westlands, Njiru, Starehe, Makadara, Dagoretti, Embakasi, Kasarani, Langata and Kamukunji sub-counties which are divided into 20 zones. Rateable properties were sampled using stratified random sampling. All rateable properties within the city boundaries were placed into groups (strata) depending on the zones. Stratification was important because of non-homogeneity of rateable properties by zones. Each zone was considered as a stratum. The researcher considered a sample of Four (4) zones consisting of Two (2) commercial zones (Central Business District (CBD) and Upper Hill) and Two (2) residential zones (Makadara & Buruburu; and South B, South C & Lang’ata) to be good enough. A total of 40 samples were randomly selected from each of the Four (4) zones resulting into a total of 160 samples which was considered to be good enough. Other respondents included chief accountant in charge of rates and land rates collection and enforcement officers (debt collection unit). The study involved the use of a semi-structured questionnaire which contained open and close-ended questions for collection of primary data. Secondary data was obtained from published text books, unpublished scholarly works and papers from real estate journals. Data analysis was done using SPSS and MS Excel. The descriptive statistics selected for this study included the mean, standard deviation, frequencies, maxima and minima. In addition, z-test was performed on the data. Data collected was represented in form of tables, charts and percentages. xi From the data analyzed, the study concluded that collection ratio has been reducing over the last couple of years. Collection ratio dropped from 16.93 percent in 2011/2012 to 6.65 percent in 2014/2015. The study also identified property rates collection and enforcement tools utilized in Nairobi City County. They included the following: provision of discounts and waivers on property rates interest; sanctions and penalties; and social pressure eg publishing names of defaulters. Provision of improved public services; operational debt recovery; sanctions and penalties; provision of discounts and waivers on interests & penalties; social pressure; and reducing compliance cost as tools of enforcement were found to be effective in ensuring compliance in rates payment. Challenges hindering compliance in property rates payment in Nairobi City County include: negative attitude of the public towards property rates and rates officials; unfair administration; discontentment with property rates administration; and complexities in understanding tax system and payment procedures. In order to improve compliance in rates payment, the study recommends the following: provision of improved public services to boost rateable property owners’ morale; use of an integrated computer assisted property rates administration system; capacity building of the administrators; and elimination of political intervention in the administration process