7 March 2018

Kenya: Counties Burden Treasury as Revenue Collection Reduces

Photo: Jeff Angote/Nation Media Group
National Treasury Cabinet Secretary Henry Rotich, centre, with other cabinet members before presenting the 2016/17 budget (file photo).

Counties are increasingly becoming reliant on the State after failing to meet local revenue targets, thus continuously putting a strain on the Treasury to provide development top-up funds.

The latest report by the Controller of Budget Agnes Odhiambo says the 47 counties collected only Sh4.82 billion in the period between July and September 2017.

The amount is 8.6 per cent of the annual target of Sh55.92 billion.

An analysis of the first quarter report of the Financial Year 2017/18 shows a decline of 47.1 per cent compared to the Sh7.09 billion generated in a similar period of FY2016/17, which was 12.3 per cent of the annual target, raising serious questions about counties' ability to raise their own revenue.

REVENUE STREAMS

According to the Fourth Schedule of the Constitution, counties get their revenue from market and trade licensing fees, parking fees, liquor licensing, county parks, beaches and public cemeteries.

They also control licensing of domestic animals, ferries, tourism and casinos.

"The local revenue collection was below the expected performance of 25 per cent of the annual target, and implies that some planned activities may not be implemented due to insufficient funding.

"Counties should therefore develop and implement strategies aimed at enhancing local revenue collection," Mrs Odhiambo recommended.

She said that during the period under review, the Nairobi County generated the highest amount of local revenue at Sh1.49 billion, followed by Narok and Mombasa at Sh692.38 million and Sh307.91 million respectively.

CONFLICTS

Counties that generated the lowest amount were Tharaka-Nithi, Lamu and Tana-River at Sh6.14 million, Sh5.45 million and Sh3.95 million respectively.

Revenue collection in the 2016/17 financial year fell below target as counties collected Sh32.52 billion, representing 56.4 per cent of the annual target of Sh57.6 billion.

This was a reduction of seven per cent compared to the previous year where Sh35.02 billion was collected.

Lack of public participation has been blamed on the failure by the counties to minimise conflicts in county taxation and revenue collection, legislation and business as witnessed in the first years of devolution after the 2013 General Election.

TAXES

While taxes imposition and charges for provision of services are constitutional obligations, counties have been encouraged to make themselves financially independent.

The findings by the CoB come at a time the Council of Governors has opposed a proposal by the National Treasury to have a say on how county governments generate revenue through taxes.

The proposal by the Treasury is contained in the proposed County Governments (Revenue Raising Regulation Process) Bill of 2017, which the governors say reviews how counties levy their taxes.

BILL

Section 4(1) of the Bill states: "Where a county government intends to impose a tax, fee or charge, the county executive member for Finance shall, 10 months before the commencement of the financial year, submit particulars of the proposal to the National Treasury and the Commission on Revenue Allocation."

According to the Treasury, the net effect of this provision is to cushion the people from being subjected to arbitrary local levies.

But CoG chairman Josephat Nanok says Treasury should be concerned with developing regulations that can help counties identify revenue sources as well as assist in curbing double taxation.

The Bill also requires county executives in charge of finance to justify imposition of the taxes, fees, levies and other charges.

Additional reporting by David Mwere

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