New taxes being imposed by counties are keeping investors from setting up new businesses in the devolved units. Potential local and foreign investors have expressed displeasure over a raft of taxes that have recently been pursued by majority of the 47 counties, saying it is a deterrent to new business set-ups.
“The 2014 Brand Kenya audit survey revealed discontent among potential investors over the new taxes and other charges that are being levied by counties,” said Chief Executive Officer Mary Kimonye.
The taxes, according to Ms Kimonye, only leave counties without growth opportunities. “We have engaged the counties in these matters and we hope no heavy taxes will be imposed to make the counties attractive for business which overall will grow the image of the country,” she noted.
Property rates
The Constitution affords the devolved units leg-room to levy property rates and entertainment taxes. Counties also have the authority to impose any other tax that they are legally mandated to impose by an Act of Parliament.
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The tier-two levels of government have powers to impose charges (utility taxes) for their services such as water supply and garbage collection.
Just last week, the Mombasa County government surpassed the Kenya Ports Authority by trying to impose its own levies for all cargo passing through the facility. Through its 2014/15 Finance Bill, the county government has proposed a Transport Infrastructure Development Levy of $2 (Sh174) per metric tonne to be remitted by all ships docking at the port. Nairobi, Kiambu and Nyandarua counties have already doubled land and buildings’ taxes and fees as they seek to finance deficits in their annual budgets.
Busia county assembly members protested a clause in its Finance Bill last year that proposed to charge people seeking HIV testing services Sh500, boda bodas Sh2,000, Sh500 per acre of idle land and hawking Sh2,000, among other charges. However, the Senate in January declared tax measures introduced by county governments illegal, opening a window of relief for businesses and ordinary citizens who have been feeling the weight of devolution in recent months.
The Senate Finance Committee said the levies were unconstitutional because they were being enacted without consultations with the Treasury and the Commission on Revenue Allocation (CRA) as required by the law.
Treasury PS Kamau Thugge says Public Finance Management Act looks at how to enforce Article 209(5) of the Constitution and requires county governments to consult Treasury and CRA while imposing taxation.
