Icpak defends Treasury on dispute over county revenue

By James Anyanzwa

The Institute of Certified Public Accountants of Kenya (Icpak) agrees with the Treasury in its interpretation of the word ‘revenue’ in the context of the new Constitution.

Technocrats at the Treasury have differed strongly with a taskforce on devolved governments over which revenue would be shared among the devolved governments and the extent of autonomy for the counties.

The issue is whether national and county governments should be governed by separate laws on financial management, the definition of revenue to determine resources shared out between the two levels of governments and application of unitary system of government to devolution.

The taskforce suggests that the 15 per cent of revenue raised nationally and which is to be disbursed to county governments as envisaged in the Constitution should entail much more than only the amount collected by the Kenya Revenue Authority (KRA).

Counter-productive

But the Treasury maintains that widening the scope to include receipts and cashflows, for instance loan proceeds that go into financing the Budget is a violation of the Constitution.

Mr Karithi Murimi, a risk consultant and a member of the accounting body said by holding on to such position the Taskforce on devolved government is treading on a dangerous ground since misunderstanding the Constitution would scare foreign direct investments (FDI).

"When you talk of revenues from an accounting perspective, it is usually the taxes that arise in an economy. What the Treasury is saying is that those revenues should exclude loans. The taskforce is saying loans should be included.

"From ICPAK’s perspective the word revenue should exclude the loans. I have a strong feeling that the taskforce will agree with the Treasury’s interpretations," Murimi told The Standard On Saturday.

Murimi said the taskforce’s argument of having two Bills (County financial management Bill and Treasury’s Public Financial Management Bill) is not supported by the Constitution.

"The taskforce is foreseeing some counties being unable to borrow. We need to stick to the definition of revenue as earnings, which exclude borrowing. According to accountants, revenues should consist of taxes excluding loans.

"The reconciliation of the Treasury and county governments positions should be understood from the point of view of how the country gets money," he said.

It is understood that the Treasury PS Joseph Kinyua has asked Minister for Finance, Uhuru Kenyatta, not to sign a memorandum on the Commission for Revenue Allocation (CRA) Bill until standoff on definition of "revenues raised nationally" is resolved.

The Bill is meant to provide a legal framework for the CRA whose membership Parliament has approved.

"The argument is that who will be in-charge of the country’s fiscal policy. Is it the treasury or both the treasury and the 47 counties? We are misunderstanding the philosophy of fiscal policy," said Murimi.

"If the 47 counties are allowed to borrow, the economy can collapse."