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Counties can net Sh173 billion in revenue - report

By Domnic Omondi | April 14th 2020

Controller of Budget Margaret Nyakang’o in a recent memo to staff said payments to counties were suspended. [Boniface Okendo, Standard]

Counties have the potential to increase their own-revenue source five-fold to Sh173 billion.

According to the study by Adam Smith International, a global advisory firm, the huge amount would take care of close to half of the total county budget based on the figures for financial year 2016/17.

This would be a marked increase from Sh35 billion that was collected in financial year 2016/17.

“While data gaps hinder revenue gap analysis for most counties, where data was available, estimated potential compared to actual collections show gaps between 35 per cent and 94 per cent for different county revenue sources,” read part of the report.

Such an increase in counties own revenues would come as a huge relief to the 47 regional Governments which have severally disagreed with the National Government over the disbursement of shareable revenue.

This comes a few weeks after the Controller of Budget Dr Margaret Nyakango, in an internal memo to her staff, said the Government has suspended all payments to devolved units except salary payments until further notice.

In the last financial years, for example, counties went for two first months without getting money from the National Treasury. The report dubbed, Own-Source Revenue Potential and Tax Gap Study of Kenya’s County Governments, has highlighted some revenue streams for enhancement.

They include property tax, building permits, business licenses, liquor licenses, vehicle parking fees and outdoor advertising. However, the report warns against using a broad brush in revenue-enhancing measures. “Not all revenue streams are suitable for revenue enhancement effort e.g. user charges, which are based on payment of a fee for accessing a service.”

One such user fee that should not be touched, according to the report include the health services as this could make important medical care inaccessible. In a low scenario, the 47 counties could collect Sh125 billion while in medium scenario the collection would be Sh143 billion.

“This suggests that counties can gradually fund an increasing share of local service delivery from own source revenue if they are able to realise more of the available potential over time (while intergovernmental fiscal transfers will continue to play an important role for local goods and services, particularly in health, education and infrastructure.”

Revenue collection by counties has been a problem with former Controller of Budget Agnes Odhiambo recommending for the function to be taken up by the Kenya Revenue Authority.

Counties are collecting less revenue than their potential, and this is because of poor systems and leakages,” she said in August last year. “Counties should consider using KRA to collect taxes on their behalf.”

KRA has since taken over revenue collection in Nairobi and Kiambu counties, in what might be a coup against embattled governor Mike Sonko. Collection of revenues, which includes parking and trading licence fees, is perhaps the most critical functions of the county administration.

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