Kiambu County Assembly this week moved to reverse its Valuation and Rating Act, 2016 which allowed for rates to be charged on freehold land. This is a significant move in a county known to have significant agricultural land and many smallholder farmers. The 2016 law has been controversial since its inception. Many smallholder farmers and residents with freehold land have expressed concerns about the additional financial burden it places on them, especially in a county with many people who earn their living through smallholder farming. The move to charge rates on freehold land was seen as a threat to the livelihoods of smallholder farmers who operate on tight margins.

Freehold land represents full ownership of the property, including the right to use it indefinitely and transfer it as desired. Some argue that taxing freehold land infringes upon these property rights by imposing ongoing costs on something that is owned outright. In areas with significant agricultural land, such as Kiambu County, taxing freehold land can disproportionately impact smallholder farmers and strain their financial resources, affecting their ability to maintain and invest in their farms. It can also discourage productive use of the land.

In many regions, especially in Kenya, land ownership is also deeply tied to historical, cultural, and familial identity. Taxing freehold land is therefore perceived as unjust, especially among communities that have historically viewed land as an inheritance and a key asset for generational wealth and stability.

Kiambu County and many other counties also levy cess on agricultural produce at the point of sale or during transportation. Cess is designed to generate revenue directly linked to the economic activity of the land, such as the production and sale of agricultural goods. This ensures that the county collects revenue in proportion to the productivity of the land, adhering to the principle that taxes should correlate with the ability to pay and the benefits derived from public services. Consequently, if cess is adequately collected on agricultural produce, imposing additional taxes on the land itself would be redundant and place an undue burden on landowners who are already contributing to the county’s revenue through cess. This approach would not only overtax the productivity of the land but also potentially discourage agricultural activities, as it would strain the financial capabilities of farmers, especially those operating on smaller scales.

Taxing freehold land in addition to cess and service-related fees introduces a layer of taxation that could be perceived as double taxation. Landowners were effectively paying both for the output of their land (through cess) and for the land itself, without a clear corresponding service or benefit. The principle of equity in taxation also argues against taxing the same economic base (agricultural productivity) twice, particularly in ways that could undermine the sustainability and viability of small-scale farming.

Legal provisions for cess and service fees are based on revenue collection that aligns with service use and economic activities. Levies on freehold land without a clear service or productivity linkage are inconsistent with these legal frameworks.

Looking ahead, the reversal could set a precedent for other counties. It could also spark discussions on broader land reform issues, including the fair valuation and rating of land in a way that supports sustainable development without overburdening landowners.