County governments may soon be required to justify whether the taxes and levies collected at the county level translate to improved services to the residents.
This is according to a new policy guideline currently being developed by the Commission on Revenue Allocation (CRA), which also seeks to compel the devolved units to adjust the levies and fees based on the individual need and location of a county. CRA, in a new guideline on tax policies in counties, wants each county government to develop tax policies that reflect its need and that of its residents.
The draft Model Tariffs and Pricing Policy and Guide, according to CRA deputy chair Koitamet Ole Kina, will be used to determine the basis for each fee or charge and whether the amount citizens pay in fees and charges is commensurate with the services provided by that county government.
Kina argues that the new policy aims to remove some hurdles that have hindered the adequate collection of taxes and revenues in counties to improve their own source revenues.
“We need to remove some of the hurdles to make devolution work better. At this point, the Commission is working on enhancing national and county governments’ revenues.
“We want to eliminate double or even triple taxation of citizens. Once the Model Tariffs and Pricing Policy is completed and adopted by the counties, citizens will understand clearly why they are paying certain fees and charges,” Kina said.
The draft policy comes when many county governments have been facing increasing pressure over unmet revenue targets, leading to a paralysis of service delivery.
Counties have long faced criticism over low revenues due to loopholes linked to corruption and the evasion of taxes by businesses in some of the counties.
For instance, a report done by CRA in conjunction with the World Bank estimated that the revenue potential of all 47 county governments is at least Sh215.6 billion against their current own source revenue collections of Sh35.9 billion in FY 2021/22.
CRA says that to help address some of these challenges, the commission has recently developed policies to help the devolved units boost their collections, including the National Policy to Support Enhancement of County Government’s Own Source Revenue by an Inter-Agency team which Cabinet approved in August 2018. Other efforts include the development of the National Rating Bill, which aims to unlock more revenues for counties from property taxes, and the County Governments’ (Revenue Raising Process) Bill.
The Bill outlines the process to be followed by counties in exercising their constitutional power to impose, vary or waive taxes, fees, levies, and other charges. And on the newly developed policy, Katule further noted that six key revenue streams had been included in the Model Policy based on earlier studies by CRA and the National Treasury – trade licenses, market access fees, parking fees, building plan approval fees, rent, and outdoor advertising.
Through the Model Tariffs and Pricing Policy, CRA and the National Treasury hopes that counties will not only enhance their revenue generation from fees and charges but also ensure that the devolved units are held accountable for the charges levied through effective service delivery.
“The key principle in setting county fees and charges is that fees must be proportional to the services offered. Other guiding principles in setting county tariffs, fees and charges include affordability, equity, financial sustainability, poverty, transparency, environmental sustainability, consistency, and promotion of local economic development,” Mr Kina said.
“No county government has complied with section 120 of the County Governments Act by establishing a Tariffs and Pricing Policy to provide a basis for their fees and charges. Counties rely on defunct local authority by-laws and legislation, such as Finance Act, in setting county fees and charges, which is contrary to the law. There is also a disconnect between fees charged and the county services provided,” he added. (
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