Parliament has thwarted a bid to force counties to forgo part of their equitable share as part of equally sharing the burden of missed revenue targets with the national government in the financial year ending June 2025.
Lawmakers on Tuesday voted to adopt the recommendation by the National Assembly Budget and Appropriations Committee to delete a proposed clause in the Division of Revenue (Amendment) Bill, 2024 that if passed, would have forced all counties to forgo billions of shillings equivalent to not more than 15 percent of the revenue shortfall.
The Treasury has set an ambitious revenue target of Sh2.6 trillion in the year to June 2025, but it has already said the target might be missed due to rejection of the Finance Bill, 2024 in June.
The law says that the equitable share to counties shall not be less than 15 percent of the revenue, raised by the national government of the latest audited revenue accounts.
Counties have been receiving more than 15 percent, meaning that the proposal sought to reduce the extra billions they have been getting.
“Section 3 of the Bill be deleted in its entirety. This implies that the section where revenue shortfall within the 2024/25 was to be shared between the two levels of government and the capping of what was to be borne by the county governments at 15 percent was dropped,” the committee said in its report.
“Consequently, provisions of Section 5 of the Division of Revenue Act 2024 remain and in case of revenue shortfall, it shall be borne by the national government.”
A cut on the amount that counties were to get as equitable share would have significantly hit them, given that the devolved units are mainly relying on the cash to run operations.
This (reliance on National Treasury) has been attributed to dismal own-source revenue collections by the counties and rampant corruption.
The Kenya Revenue Authority (KRA) has in recent years been on the receiving end of backlash due to missed revenue targets.
For example, in the 2023/24 financial year, KRA missed revenue target by Sh267 billion and collected Sh2.22 trillion in the period.
The government had sought to mitigate impact of the looming revenue miss in the current financial year, by compelling counties to forgo part of the money due to them in equitable share.
“If the actual revenue raised nationally in the financial year 2024/25 falls short of the expected revenue set out in the schedule, the shortfall shall be borne by the national government and county governments equitably,” Division of Revenue (Amendment) Bill, 2024 read in part.
The Bill s was tabled in Parliament following rejection of the Finance Bill, 2024.
Rejection of the Finance Bill, 2024 following countrywide protests forced the National Treasury to cut the budget for the national government by Sh325.88 billion. The Treasury then wanted counties to bear the remainder of the anticipated revenue fall.
KRA had been given a revenue target of Sh2.94 trillion but rejection of the Finance Bill, 2024 forced the National Treasury to lower this target to Sh2.6 trillion.
The National Treasury has been flagged many times for setting ambitious revenue targets, that have forced the government to review the budget at least twice before the lapse of a financial year.
