Cabinet proposes law to curb rise in county levies

The Cabinet has proposed a law aimed at enhancing counties’ own revenue collection and restrict governors from introducing levies that “derail economic development”.

The County Governments’ (Revenue Raising Process) Bill 2018 introduced at a recent cabinet meeting also seeks to enable counties optimise own-sources revenue.

In a bid to reach revenue collection targets, a number of governors have come up with levies that are oppressive to businesses and residents.

“Cabinet approved the National Policy to Support Enhancement of County Governments’ Own-Source Revenue and the County Governments’ (Revenue Raising Process) Bill, 2018,” read a brief from the Cabinet Office.

Some recently introduced levies at the counties include taxes on bodaboda operators by the Kisumu government, Kiambu’s taxes on bar operators and Nairobi's environmental levy for all homes, supermarket carrier bags and parking in selected private properties.

The new Bill is an enhancement of the County Governments (Revenue Raising Regulation Process) Bill 2017 that was rejected by governors in March on grounds that it violates the constitutional functions of the devolved units. The rejected proposed law had sought to define the manner in which the National Treasury could exercise its policy oversight role and how the counties could exercise their taxation authority and indicate compliance burden to the taxpayers.

Counties get their revenue from market and trade licensing fees, parking fees, liquor licensing, county parks, beaches and public cemeteries. Other sources include control licensing of domestic animals, ferries, tourism and casinos. The devolved units have been performing dismally on the own-revenue generation front, pushing them to rely on the national Treasury to pay suppliers, workers’ salaries and finance projects.

In the nine months to March, counties generated Sh22.2 billion which was 42 per cent of the annual target of Sh52.5 billion for the year, according to the latest Controller of Budget report. At the end of January, pending bills in the year ending June had hit reach Sh99.2 billion with some counties grappling with law suits from contractors.

Controller of Budget Agnes Odhiambo, said the problem could be linked to counties overstating their revenues and going ahead to commit to suppliers, warning that the counties are likely to continue facing cash flow challenges as long as they keeping spending on assumption of 100 per cent revenue collection.