Counties will be required to seek Treasury approvals at least ten months in advance before imposing new taxes, fees, levies and other charges if new MPs approve changes to the law.
In the proposed law being supported by the Treasury, counties planning to impose any new taxes will be required to submit their plan 10 months before the commencement of the financial year, to the National Treasury and Commission on Revenue Allocation (CRA).
Currently, counties impose or vary taxes, fees levy and other revenue-raising measures without the approval of the National Treasury.
The County Governments (Revenue Raising Process) Bill, 2018 will require the County Executive Committee Member for Finance to explain to the CRA and the Treasury the reasons for the imposition of the tax, fee, levy or charge and identify the persons liable for the tax, fee, levy or charge and any relief measures or exemptions.
The county committee member in charge of finance will also specify the collecting authority, the persons responsible for remitting the collections, the methods and likely costs of enforcing compliance and the compliance burden on the taxpayers.
The county will also furnish the CRA and the National Treasury with particulars of, and describe the estimation methods and assumptions used to determine the amount of revenue to be collected on an annual basis over the three financial years following the introduction of the tax, fee, levy or any other charge.
The county seeking to impose a tax, fee or levy will further provide the economic impact on individuals and businesses residing in the county, the economic impact on individuals and businesses residing in other counties and the impact on economic development in the country.
The Commission on Revenue Allocation will review the proposal submitted by counties and submit the same to the National Treasury within one month upon receipt of the proposal.
The National Treasury will have three months to grant permission or reject the proposals in writing to the County Executive Committee Member.
“The National Treasury may consult any other organ of State or interested persons on the submission,” the Bill states. Article 209 (3) of the Constitution provides that counties can impose property rates, entertainment taxes and any other tax that is authorised by an Act of Parliament.
Only the national government can impose an income tax, value-added tax, customs duties and exercise duties. The Bill was submitted to the National Assembly in 2018/19 financial year but lapsed in December 2019.
The Treasury told Senators that the Intergovernmental Budget and Economic Council (IBEC) in its 17th ordinary session held on May 31, 2022, resolved that the Bill be resubmitted to the Senate.
“The National Treasury has already requested the Attorney General to do so. Senate is requested to prioritise the enactment of this Bill,” Ukur Yatani, the Treasury Cabinet Secretary said.
Treasury estimates that counties can raise up to Sh173 billion from internally generated revenues.
