Tax pain for Nairobi in Sonko’s Sh35.2bn budget

Nairobi residents and property owners are set to pay more in land rates, parking fees and garbage collection levy in a raft of new charges intended to finance Governor Mike Sonko’s Sh35.2 billion annual budget.

In his budget speech Tuesday, Nairobi Finance and Economic Planning Executive Charles Kerich announced new taxes and levies that if approved by the County Assembly will see city residents dig deeper into their pockets starting next month.

Mr Kerich, however, failed to disclose the extent of the additional tax load that Nairobians will have to shoulder, saying that details of the new levies will be revealed in the county’s Finance Bill.

“The demand for services by far outmatches the ability of the county to deliver, partly because majority of the county’s population enjoy the services without contributing any amount as fees or charges,” said Mr Kerich while reading budget estimates for the 2019/2020 financial year.

First to be hit will be motorists driving in and out of the city for work, business meetings or shopping with parking charges set to go up from the current Sh200 per day in less than one week, on July 1. Property owners will from next year also pay increased charges, based on new valuation of real estate across different parts of the city.

“The valuation roll was last updated 39 years ago, in 1980. The new valuation roll is ready. We intend to start implementing it from July 1 2019, but the new rates will be applicable from January 1 2020,” said Mr Kerich.

Hotel owners will also pay a new charge for every bed in their facilities.

The new levy set to be known as city bed-occupancy levy will see City Hall carry out a census to determine the number of beds in hotels across the county.

Mr Kerich said details of the charge will be included in the Finance Bill that is set to be tabled before the County Assembly at a later date. "To improve service delivery, I shall be proposing to amend the relevant laws to introduce a city bed-occupancy levy. We have our proposal, but we will have to meet with the MCAs to agree on a charge," said Mr Kerich.

Businesses, households and schools will also pay new charges “to match the services offered” in managing their solid waste. The Sonko administration gave the health sector the biggest allocation, at Sh7.4 billion.

The transport sector got the second-highest allocation at Sh3.64 billion, the county assembly will receive Sh3.2 billion while Sh2.7 billion will go to water, energy and environment.

“The focus in the coming financial year will be to consolidate the gains, confront the challenges with vigour and determination while ensuring there is prudent use of the resources we have been entrusted with,” said Mr Kerich.

Owners of online businesses operating in the city will also be roped into the county’s tax bracket. Gambling and entertainment establishments will also pay a new charge starting July 1.

The county currently only collects revenue from pool tables and premises. The new levies are intended to raise Sh17.32 billion in internal revenue for the capital.

The county collected slightly over Sh10 billion in internal revenue in the 2018/2019 financial year, missing its Sh15 billion target. The previous year’s collection was Sh10.1 billion.

The county finance chief attributed the below-par performance to over-reliance on automation ‘without a corresponding effort on innovation.’

To achieve optimal revenue collection, he said that the county has now directed effort towards rolling out an effective internal revenue management system after terminating its contract with JamboPay early this month.

He also said that the county will also restrict issuance of waivers that have the potential of injuring the county revenue targets, restrain the growth of the wage bill, and allocate more resources towards debt resolution.

“These coupled with innovation of creative enforcement models for rapid growth of own source revenue shall have the net effect of achieving the target contained in the budget for the FY 2019/20,” he said.

The executive also plans to engage the Assembly to restructure the Nairobi City County Revenue Administration Bill, 2019 to ensure that all revenue streams are domiciled in the County Treasury as well as provide tools and resources to facilitate revenue collection.

Others allocations in the county budget include Education (Sh2.1 billion), safety and security (Sh2.2 billion), urban planning sector (Sh688 million) and Sh126 million for agriculture.