Why counties should generate own revenue
By Ibrahim Alubala
The ongoing debate around the division of revenue between the national and county governments is an eye-opener and a stark reminder to the counties that they should begin to think about generating their own revenue as anticipated by Article 209(3) of the Constitution.
While the Constitution anticipates that at least 15 per cent of the most-recently audited accounts of government revenue should go to counties to support their operations, many devolved units are still in a financial limbo, unable to pay workers and run their affairs.
But what can counties do when most rely on national government remittance to support their operations? It is noteworthy that own-source revenue for most counties averages less than 10 per cent of their overall budget.
The National Treasury, in its budget policy statement last year, observed that administrative inefficiencies and gaps in policy and legislation contributed significantly to the low levels of own-source revenue in the counties.
President Uhuru Kenyatta recently urged counties to reap where they sow, saying there is no more money to allocate to their increasing needs. How do counties begin to look internally to collect their own revenue?
Foremost, they need to carry out a comprehensive revenue mapping exercise to identify their revenue streams and income. The low-hanging fruits could include maximising collection of property rates, entertainment taxes, outdoor advertisement, market entry fees and parking fees.
Secondly, they should develop policies and legislation to assist in revenue collection. A number of counties are yet to legally institutionalise revenue collection mechanisms within their jurisdictions, for example by developing revenue administration legislations to establish boards or even directorates to streamline the collection of revenue.
We have witnessed cases where counties collect licence fees, cess and other forms of levies without requisite legislations. Any spirited taxpayer within the county can legitimately challenge that.
Thirdly, it is imperative to enhance public participation on matters of revenue allocation. Bungoma County, for instance, involved local boda boda riders in their Finance Act 2018. The riders, who initially found it problematic to pay daily operation fees of Sh30 to the county government, opted for a Sh500 annual fee. This year, Bungoma has experienced an increase in compliance from the riders, who now say they enjoy paying for the licence and anticipating services from the county. Public participation is a national value as stipulated by Article 10 of the Constitution.
Fourthly, counties should automate revenue collection to minimise ‘leakages’ caused when people handle money. When I recently visited Uasin Gishu, I was able to pay my parking fee through a paybill.
Lastly, they need to step up enforcement against tax and rate defaulters. The process can be incentivised through waivers for a limited period to allow the affected to comply.
Own-revenue will allow counties to sustain their operations and ultimately inch towards greater development.