Thika Road example.

The Government has spent over KES 30B to improve Thika road into a super highway. In between Nairobi CBD and Thika town, there are many vacant lands. These lands are not giving Kenyans the opportunity to utilize Thika road effectively. If they are developed into housing for example, Kenyans will enjoy advantages of living next to a superhighway and will be more productive due to ease of transportation.

This improved productivity will result into more production of goods and services hence an increase in economic growth.

Also, the KES 30 B investment in the superhighway has resulted in land values along Thika road rising.

5 Years ago, a ¼ acre plot at Kahawa Sukari costed KES 600,000. It now costs KES 5,000,000, representing an 800% increase.

All this profit goes to the land owner.

This profit has been created by the Kenya Government in laying the infrastructure as opposed to the land owner’s sweat.

Its only fair that such profit should be shared by the creators of it i.e. the Government through Thika Superhighway investment.

Through the Land Value taxation, the Government will collect higher Land Value taxes along such a road since the Land Value tax is based on the value of the land. The higher the value of the land, the higher the tax.

Difference between Land Rates and Land Value Tax.

The difference between the current system of Land Rates and the Land Value tax is in that Land rates are not pegged to the maximum potential land rent value. Land Value tax is pegged on the maximum rental income that a land can achieve. The current Land Rates along Thika road are a few thousand shillings per year. With the Land Value system, this amount will be valued as a % of the maximum rental income the land can achieve.

Kahawa Sukari.

A house in Kahawa Sukari for example attracts a rental income of say kes 20,000 per month =240,000 per year. Assuming a Land Value tax of 10%, this works out to KES 24,000 per year. The Landlord will not pay any other tax such as VAT, Income Tax e.t.c which he currently pays at 16% for VAT and between 10% to 30% for Income Tax. The 24,000 a year fee will not be bad considering he will get better roads, security, schools, and hospitals in return.

With such amounts of money, the Government will be very liquid and infrastructure costs will be catered for very easily. There will be money to hire more police, doctors, build roads, schools and other developments without the expensive World bank/IMF loads.