Five counties to get less cash allocation for collecting less taxes

Five counties will partly miss out on their allocation as penalty for collecting less revenue.

And property owners in 10 counties could be required to pay more in rates as the Commission on Revenue Allocation (CRA) has proposed a review of regulations to ensure payments are commensurate to size of development.

Based on the latest own source collections, Busia, Samburu, Turkana, Vihiga, and Mandera will miss out on their share of funds under fiscal responsibility.

While Busia collected Sh329 million in 2013-14, revenue collection dropped to Sh315 million in 2014-15. For Samburu, collections dipped to Sh196 million from Sh201 million.

Turkana collected Sh127 million, down from Sh133 million, while Vihiga collected Sh116 million, a dip from Sh123 million. Mandera collected Sh88 million, down from Sh90 million.

Fiscal responsibility

"The five counties will get zero when it comes to allocations of funds through fiscal responsibility," said CRA Chairman Micah Cheserem.

Fiscal responsibility is based on a reward system that allows counties that collect more to receive more in CRA allocations. Other parameters for allocation of revenue include population, land, poverty and equal share.

The report released by CRA shows county governments have collected Sh60 billion over the three-year period of devolution, which is a huge improvement from days of the defunct local government authorities.

And CRA identified Nairobi, Mombasa, Nakuru, Kiambu, Narok, Machakos, Kisumu, Uasin Gishu, and Kajiado as having a huge potential to increase revenue of property rates if regulations are reviewed.

Mr Cheserem said property taxes are difficult to implement because of an "archaic" regulation that dates back to the 1970s. The regulation governs collection of such taxes.

"Valuation of property has not changed making it difficult for counties like Nairobi, Mombasa, and Kisumu to collect more from property taxes. Valuation of property based on 'an improved side value' that makes it possible for a building with more floors to pay similar rates like that of one floor is archaic and needs to be overhauled," explained Cheserem.

He gave an example of a building such as Kenyatta International Convention Centre (KICC) paying same rate as Kipande House yet KICC has more floors and therefore more tenants.

Since devolution came into force, a majority of counties have increased their revenue collections apart from a few whose collection has nosedived compared to collection of the previous year.

"County governments have increased the collection of revenues to Sh60 billion. In 2013-14, they collected Sh26 billion and in 2014-15, it rose to Sh33.8 billion. This is encouraging," Cheserem said.

He pegged the increase on automation, curbing waste, and streamlined operations.

"The table indicates Kiambu, Nairobi, Mombasa among others that are performing better in revenue collections compared to counties that are yet to automate operations," Cheserem explained. He said Mombasa, Kiambu, Nairobi, have increased their revenue collection and once regulations are aligned to the new laws, these counties can perform better.