A 2022 Commission on Revenue Allocation and World Bank Report says devolved units have the potential to collect up to Sh216 billion annually but only bring in Sh31 billion.
The joint push by the World Bank and the Commission on Revenue Allocation to increase revenue collection in counties may take longer to achieve as most of the devolved units continue to miss their revenue targets year after year.
The World Bank and CRA had in 2022 released a report indicating that the 47 regional governments had the potential of collecting own source revenue seven times the current figure.
But in a recently released report, the office of the Controller of Budget argues that counties are still unable to raise enough funds from their own source revenue, despite previous efforts to push and help them to do so.
Controller of Budget Margaret Nyakang’o, says that in the first quarter of the 2023/24 financial year, county governments only collected about Sh10.21 billion from their own-source revenue (OSR). This figure represented a paltry 13% of the annual target of Sh78.61 billion.
Similarly, counties that reported the lowest collection against their annual target were Machakos, Nandi, Kericho, Kajiado, Lamu, and Kajiado at 2.6%, 4.8%, 5.2%, 5.6%, and 5.6% respectively.
“The underperformance of own-source revenue collection implies that the counties could not implement some planned activities due to budget deficits,” Nyakang’o says.
“The Controller of Budget advises county governments to enhance revenue collection strategies to realise the OSR targets and fully implement the approved programmes,” she added.
The revelations by the CoB comes in the backdrop of the CRA and World Bank report of 2022 that indicated that the devolved units currently have the potential to collect up to Sh216 billion in revenue from their key revenue streams. This is in comparison to the current Sh31 billion that the devolved units have been collecting annually.
The report dubbed Comprehensive Own Source Revenue Potential and Tax Gap Study of County Governments, shows that all the 47 county governments can generate nearly seven times more than they currently realize in OSR. Such collections, CRA and World Bank argues, could help finance a significant portion of their annual budgets.
But the regional governments have continuously failed to hit the intended targets, with some critics pointing fingers at a failure by some counties to fight graft and seal loopholes blamed for the failed targets. Other county governments have also been blamed for failing to automate their systems to increase revenue collection.
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