Taxing Rental Income: An Analysis of the Outcomes of Legal and Administrative Reforms in Uganda

While there is an increasing body of research on property taxation in African countries, there is scanty literature on rental income taxes in particular. Taxing rental income promotes more equitable taxation, particularly since those who own taxable properties are likely to be wealthy. Starting in 2014, the Uganda Government and Uganda Revenue Authority (URA) introduced various legal reforms and administrative measures to improve the performance of rental income taxes. These reforms have led to a significant expansion of the taxpayer register, with the number of registered rental taxpayers increasing from 10,651 in Financial Year (FY) 2013/2014 to 220,120 in FY2023/24.

Similarly, the introduction of a web-based rental tax return has simplified filing, while data-sharing arrangements with third parties have improved the process of identifying properties and property owners. However, the expansion of the taxpayer register has not translated into improvements in filing tax returns or paying taxes. Meanwhile, constant amendments to the law have resulted in uncertainty for taxpayers, tax administrators, and even policymakers. And the introduction of a cap on allowable deductions from rental income has resulted in inequity between taxpayers that engage in rental business and those engaging in other businesses.

Three main messages can be drawn from these findings:

1. Taxing rental income in a context like Uganda is difficult.
2. The methods that have been used to expand the taxpayer register have rendered URA prey to the ‘registration obsession’.
3. The constant changes to tax laws are perhaps more than one would expect if the government had been experimenting to find the best methods.