A few months ago, when the Commission on Revenue Allocation (CRA) hinted at tying allocations to the 47 counties to service delivery, the idea was to stimulate innovation and reduce revenue leakage.
The new formula for allocating the national cash has finally been put to use and, as is expected, counties that ignored the warnings have lost out.
Official data shows several counties have had their annual allocations from the national government’s sharable revenue cut due to failure to deliver services and raise collection of own-source revenue.
Mombasa and Lamu top the list of losers, giving away more than Sh1 billion in the current financial year. Others are Kilifi, Bomet, and Kericho (losing Sh400m each), Marsabit and Siaya (Sh300m each), Turkana (Sh200 million) and Kisumu (Sh100 million).
On the other hand, Tana River, Wajir, West Pokot, Kiambu, Kirinyaga, Uasin Gishu, Kakamega and Narok have gained between Sh100 million and Sh1.7 billion.
This formula implies business unusual for counties. While the previous methods distributed cash based only on population, land size and poverty, this has changed to rewarding counties for water provision (three percent) and urban services (three percent).
Other county services which are given on the basis of population are weighted at 18 percent.
In short, the new CRA formula is an attempt to egg counties to make use of their constitutional powers to collect taxes, parking charges, rent, business permit and licence fees.
For devolution to achieve its intended goal, counties must collect local taxes. The counties must also render services to the local people as implied under new formula.
At the moment, counties appear neither keen on collecting own revenue nor providing services.
The Kenya Revenue Authority that targeted to raise Sh2 billion in presumptive tax in the year to June 2019 only got Sh35 million, citing lack of support from the devolved units.
Presumptive tax, which is to be collected from SMEs at the rate of 15 percent, is based on the value of single business permit, a trade licence issued or renewed by a county.
PAYE Tax Calculator
Note: The results are not exact but very close to the actual.
