TAX NEWS - JUNE 2010

Uganda Tax: Taxing idle land may turn out to be unsustainable

by Hilary Bakamwesiga, 02 June 2010 -- A few days ago, delegates attending the National Land Policy conference at Hotel Africana proposed to impose tax on idle land. On reading their deliberations, I was concerned- not on the taxation issue, but where Uganda is heading with such a proposal.

Several questions came to mind. Had the land experts done research on the impacts of taxation on idle land? How long should an undeveloped piece of land be considered idle? What type of development should be on land to be designated developed; a forest, a building or agriculture? What about leaving the land under fallow or open land? Are experts aware of the benefits of leaving land undeveloped, in their sense of development?

Economic development without environmental considerations is unsustainable. Fallowing aims at leaving land to regain its fertility through carbon and nitrogen cycle. While the developed world and some middle income societies heavily rely on artificial fertilizers to enrich their land, in Uganda we rely on fallowing, crop rotation, agroforestry, strip cropping and others. The latter sustain fertility naturally.

Not surprisingly, from records, environmental and natural disasters have impacted most on high human density regions of Uganda. The impacts are expected to continue, even more viciously. Due to land scarcity, fallowing periods in these high density regions are relatively short. Do the experts propose to tax this land under fallow for a couple or several months?

On the contrary, less densely populated regions of Uganda such as Acholi, Karamoja, Lango and West Nile, apart from protected areas, have been key to conserving biodiversity and ameliorating climate. I consider their large expanse of undeveloped land a blessing to other parts of Uganda in as far as mitigating climate change is concerned.

It follows, therefore, that imposing taxation on land in these less populated regions means that the land owner will be forced to sell it to a potential developer whose interest, most probably, is economic gains. The land experts should endeavour to understand the consequences of losing the countries natural heritage. Of course, the consequences will vary depending on farming practices, tenure system and cultural briefs.

The taxation proposal must factor in the current global environmental trends. Recently, Reducing Emissions from Deforestation and Degradation (REDD+) was designed to benefit poor countries with natural resources. REDD aims to help halt deforestation, which causes more than 20 per cent of the world's carbon emissions. Carbon dioxide is a major green house gas responsible for climate change.

Last year, I visited the biggest Block Island Nature Conservancy. Located 22Km off the US eastern cost in the Atlantic Ocean, the filthy rich island covers an area just about 25 km2, far smaller than Kampala City of 1960s. The Conservancy has successfully conserved the globally endangered American burying beetle and other species and serves as resting place for migrant birds along the Atlantic Flyway.

The inhabitants of Block Island are dedicated to conserving open space (idle space in Uganda) to preserve their heritage and create room for fauna and flora. The Conservancy has expanded and conserved land through conservation easements - the property continues to provide economic benefits for the area while the owner benefits through property taxes.

Finally, whether "idle" land is economic viability is not debatable. The focus should be on how. Critical thinkers should dedicate their time to the means of providing incentives to farmers, improving agricultural extension services, ensuring reliable markets, industrialisation, improving infrastructure to ensure efficient transport network system. That way, you will reap much more than through land taxation.