The Senate has been told that the inter-county taxes popularly known as cess are illegal and unconstitutional and should be done away with immediate effect.
According to former Senator Billow Kerow, the Constitution did not recognize the taxes which had adversely affected traders working in different counties.
This emerged during the ongoing induction of Senators at Sawela Lodge in Naivasha where the issue of pending bills and rising wage bill dominated the workshop.
Currently, counties have pending bills of Sh150b with Nairobi leading a situation that has adversely affected and impoverished hundreds of suppliers.
Addressing the senators, Kerow noted that the Constitution had mandated parliament to collect taxes through Kenya Revenue Authority and not county governments. He pointed to branding taxes where companies ferrying goods from one county to the other were forced to pay a tax for their branded cars.
“The so-called taxes by the counties are illegal and unconstitutional as they are not recognised anywhere in the law,” said the former Mandera senator.
In his presentation, Kerow noted that double taxation was a major blow to investors, a move that was killing the spirit of inter-county business.
“Many investors working between various counties have to pay cess as they enter one county to the other and this erodes investor confidence,” he said.
However, Uasin Gishu Senator Jackson Mandago defended the county's move to charge the cess noting that county Assemblies had the power to come up with trade regulations. The former governor noted that the only source of revenue for counties lay in cess and trading business after the national government failed to remit rates.
“Under the municipalities and county councils, State departments were paying rates but since devolution, the treasury has refused to remit these taxes affecting revenue collection,” he said.
Mandago at the same time noted that running hospitals for the county was becoming a major challenge as small fees collected from patients were being remitted to the Treasury. This, he said, meant the health facility had to requisition the funds to run their services, a move that was long, tedious and at times unfruitful.
“For years, hospitals have run their services through the small fees collected from patients but this is no longer possible as all the collected funds go first to the Treasury,” he said.