11 March 2018

Kenya: Policies, Rules Blamed as Counties Miss Revenue Targets

When county governments came into being in 2013, they introduced various revenue measures, some eliciting concerns about their formulation, application and sustainability.

Some measures were viewed as punitive, with the potential to stifle economic activity, especially through double taxation.

Compliance was and still is a problem when fees and charges are not commensurate with services offered.

The Constitution says taxation and other revenue-raising powers of a county shall not be exercised in a way that prejudices national economic policies, economic activities across county boundaries or the national mobility of goods, services, capital or labour.

DECLINE

Analysis of Controller of Budget reports since devolution began (2013/14 through 2016/17 financial years) shows when revenues fall in one year, they are likely to jump the next, and vice versa.

Twenty nine counties raised less in the 2016/17 Financial Year than in 2015/16. Biggest collectors that have registered declining revenues include Nairobi, Kiambu, Nakuru and Narok counties.

PRIVILEGES

International Budget Partnership-Kenya country manager Abraham Rugo blames operational and policy factors for the dismal performance in local revenue collection.

"Counties like Nairobi, Nakuru, Mombasa and Narok enjoy privileges and have lots of revenue potential. Other counties do not enjoy the kind of economic activity that is easy to profitably tax," Mr Rugo told the Nation.

He also cited lack of capacity to set, review and report on realistic targets where most counties forecast collections based on budget deficit gaps in relation to what they receive from the Exchequer.

REGISTERED WRONGLY

While a key source for counties is property, rates have not been reviewed for long, thus denying them profits.

In Nairobi, only 120,000 properties are ratable yet the county has more than 1.6 million buildings.

The city county levies rates on land without accounting for the value of the buildings that occupy the property.

For business permits, some commercial activities are not registered or are registered wrongly.FISHERMEN

"Counties should have updated registers of properties to reflect current market values. Only Kwale county has such a register," Mr Rugo said.

In Lamu, Governor Fahim Twaha said the county only has two main urban centres - Lamu and Mpeketoni - and admitted that most of the properties were yet to be rated for tax collection.

Most of Lamu's inhabitants are farmers and fishermen and are not rated for levies.

UNREALISTIC

"In addition, our key sources of revenue - tourism and fishing - have been down for years due to the state of security," Mr Twaha said.

Council of Governors chairman Josphat Nanok proposed a review of property taxes for counties to collect more revenue.

But while the county bosses have been accused of setting up unrealistic targets, they argue that most of the problems are structural "which we are addressing".

Some have blame interference from the national government.

SABOTAGE

"We want guidelines from Treasury on collecting of these taxes and not control," Mr Nanok said.

Former chairman of the defunct Transition Authority Kinuthia Wamwangi blamed the low figures on a sabotage by local leaders and MPs as well as the fact that a number of governors have opted to go slow on the drive to avoid confrontations with voters.

Mombasa Governor Hassan Joho attributed the county's performance to automation systems he engineered in his first term in office.

CORRUPTION

His Nakuru counterpart Lee Kinyanjui said a tough stance against corruption in collection procedures had improved revenue collection while Tharaka-Nithi trade chief officer Aggrey Karani blamed theft by collectors as one of the main hindrances to meeting targets.

Tana-River Governor Dhadho Godhana said since the onset of devolution, the county had not raise the annual Sh40 million the defunct county council collected.

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