Counties should stop punitive licensing fees on businesses

The newfound legitimacy to self-governance at the local level as manifested by the institution of county governments is threatening certain businesses and the overall economic well-being of the counties and nation at large.

Instead of being enabling blocks that ensure businesses located within their jurisdictions grow, certain county governments have become a hindrance to economic progress by stifling and even killing small and medium enterprises (SMEs) and large corporations with all manner of taxes and license fees.

Lately, like some sort of fashion show parade, county governments are falling over each other to be the first to announce a raft of unpopular measures for raising revenue from the business establishments without the slightest regard that the proposals are economically sound.

None of the county government announcements have been welcomed with open arms by business owners.  Instead, the selfish, money-minting declarations have left businesses crying and some even contemplating closing shop as taxes and levies eat up all their income.

Nairobi County is still in the news—negatively—after massively increasing basic fees and licenses needed by City Hall for a business to open their doors and operate. That was quickly followed by Kiambu, Mombasa, Kisumu, Bomet and Nyamira and a host of other counties. Kiambu County even went ahead to tax the dead.

Public participation

While county governments must generate income for their day-to-day operations, such fees and the untamed clamor for fees should not be so punitive that it kills businesses. To be seen to be accountable, counties must conduct proper public participation to secure the endorsement of all stakeholders. It is clear that some adjustments have been done without consultation with the public and the businesses owners. This is wrong.

The latest such cash cow for county governments is land rates and rents. Take the example of Nandi and Kericho Counties that have revised land rates and rents upwards without consulting tea firms and local businesses.  The Nandi County Finance Bill 2018 proposes that land rates be charged at 3 percent of the market value of the land per acre for Kapsabet Municipality and its environs, and 2 percent for Nandi Hills and its environs.

This is despite the fact that the county governments has not involved the tea firms and other stakeholders in coming up with a valuation roll. A valuation roll is a legal document that consists of property information of all rate-able properties within the boundaries of a political dominion.

How will the county covernment determine the value of lands to be able to charge fair levies? Aren’t we opening the floodgates to a host of ills, including corruption and witch-hunt? The status quo, as per the previous agreements, which provides a clear way of paying and reviewing the rates whenever necessary, should be maintained until a proper and verifiable valuation roll is undertaken by the relevant agencies.

Other stakeholders

The Nandi County Government is also proposing to charge a Cess or market fee for tea to reach the market. The proposal is a standard rate of 1 percent of the prevailing tea market-rate prices for large tea producers who on their part urge for the charge to be reviewed based on weight which is easier to calculate.

There are a number of administrative declarations that have been proposed without undertaking public participation. Obviously such proposals will run against the grain of many in those counties.

For example, contained in the Nandi Finance Bill 2018 is a clause stating that the executive can appoint any person to be the agent of the county for the purposes of collection or recovery of charges, fees, rent, rates or Cess.

Now, tea farms and small businesses are required to make all payments immediately, a time limit that the other stakeholders say is too squeezed for all logistical and practical purposes. In addition, the county has revised upwards up to 30 other basic licensing fees for various business and household operations.

Let us re-think taxes, levies and fees at county levels. Let us also put emphasis on public participation while arriving at some of these figures. It is paramount for sustainable socio-economic growth as this is how other successful jurisdictions have managed.

Unless stopped, pressure on industry to pay punitive levies and the trade union resistance to innovation in blatant disregard of the right of property are eroding investor confidence. Unfortunately, this is all happening within a context of a very depressed global tea market in which the Kenyan produce is no longer competitive due to increasing production costs.

Mr Aron is a [email protected]

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