CRA wants counties to get Sh407 billion in shareable revenue

Lineth Oyugi (right) Director of Economic Affairs at the Commission on Revenue Allocation accompanied by other commissioners appear before the Senate Standing Committee on Finance and Budget on February 23, 2023. [Elvis Ogina, Standard]

County Governments could receive Sh407 billion in sharable revenue for the 2024/25 financial year should a proposal by the Commission on Revenue Allocation be adopted by Parliament.

This, after the CRA which was appearing before a House Committee, recommended that counties allocation allocation be increased to Sh407 billion from the current Sh385.4 billion.

The funds will comprise Sh396.05 in equitable revenue and Sh10.95 in conditional grants. Equalization fund has been allocated Sh8.37B while the projections for Road Maintenance Levy Fund has been capped at Sh11.37 billion.

The National Government will also receive an allocation of Sh2.4 trillion which translates to a Sh17 billion increase from the current Sh2.1 trillion in the current financial year.

CRA chairperson Mary Chebukati submitted to the Budget and Appropriations Committee (BAC) that the Sh396.05 billion is equivalent to 23.7 per cent of the most recent audited and approved accounts and that the amount was arrived at after a comprehensive audit projected collections by Kenya Revenue Authority (KRA) to hit the Sh2.89 trillion mark in the 2024/2025 fiscal year.

According to article 203(2) of the Constitution, counties are entitled to at least 15 per cent of the national revenue.

A spot check also revealed that the total revenue to counties since the advent of devolution in 2013 to 2023/24 financial year totaled Sh4,123.1 trillion. Equitable share accounted for Sh3,726.4 trillion conditional grants from National Government Sh170.8 billion while loans and grants from development partners amounted to S 225.9 billion.

The Kiharu MP Ndindi Nyoro-led committee also heard that deficits in revenue allocations could however distort the projected numbers and that should the national and county governments miss their targets, the government will be forced to increase public debt.

Documents tabled before the committee also show that KRA missed its revenue collection target by Sh107 billion in the fiscal year ending June 2022. The tax agency was only able to collect Sh2.166 trillion out of a target of 2.273 trillion.

CRA is now banking on the Finance Act 2023 which has introduced a series of tax measures that they are hoping will help KRA achieve its targets.

The committee however sought to know why the commission had increased the revenue allocation to the national and county governments for the next financial year despite the tax man missing the targets.

“How are we spending money that we do not have. Just because the tax on goods was increased it does not mean we are going to see an increase in revenue collection because what a price hike does is to lower demand of that product?” Posed Embaksai MP Babu Owino.

Commissioner Chebukati revealed that the arrears to counties for the fund between the 2021/2022 financial year to the 2023/24 amounted to Sh22.23 billion

She said that for the situation to improve counties needed to increase their own source revenue collections.

Data provided by the commission indicates that county governments collected a total Sh 344.4 billion between 2013/14 and 2022/23 financial years in own source revenue. Chebukati was however concerned that the collections were below target and faulted committees for spending more than they had collected.

“We have to remedy this situation and make sure that as counties we stick to the allowable ceilings especially when it comes to issues such as the wage Bill,” she said.