The finding that county governments continue to raise more revenues on their own is a welcome development.
According to the Controller of Budget, the 47 counties collected a total of Sh7.71 billion in the quarter ended September 2019.
This is the highest revenue generation compared to similar periods since the inception of the devolved system of governance in 2013.
While the steady progress is laudable, the local governments need to step up their internal generation of funds.
Counties still rely heavily on allocations from the national government from which they receive more than Sh300 billion annually. Ironically, counties with relatively lesser urbanisation are doing better in terms of revenue collection.
The report shows that Isiolo, Narok and Samburu achieved the highest proportion of internal revenues against the set target at 38.1, 35.5 and 33.8 percent respectively.
Isiolo collected Sh59.3 million against a target of Sh155.8 million while Narok collected Sh1 billion against a target of Sh2.99 billion. Samburu on the other hand collected Sh90.1 million against a target of Sh267 million.
One would expect counties like Nairobi, Mombasa and Kisumu and Nakuru, which are highly urbanised and house more businesses, to be in a better position to raise funds. These include parking fees, business permits and land rates. While allocations from the national government will continue to be major funding source for counties, those that expand their own revenue streams will find it easier to achieve their development goals.
The Constitution provides that the national government remits at least 15 percent of the revenue it collects to the county governments. The amount should be based on the most recent audited accounts received and approved by the National Assembly. In practice, counties have been receiving their allocations based on government finances that are four years old as the process of approval in Parliament is delayed.
This means they are denied the benefits of higher revenue collection by the national government in the most recent financial years.
It is worth noting that the National Treasury has unveiled plans to assist counties increase their collections, including through automation and enforcement.
Agencies like Kenya Revenue Authority, which are at the centre of many transactions, can be particularly helpful.
Care must, however, be taken to ensure that counties do not introduce too many taxes that will hurt the country’s business environment and weaken its standing as an investment destination.