Markets harvest more from cess than sources, says new study

Cess collection, which accounts for about two per cent of the county’s revenue, benefits destination markets more than the source county, a move that has impacted negatively on income that devolved units are making from levies.

A recent research by Egerton-based Tegemeo Institute of Research shows that counties where goods are produced are charging lower than the market destination.

For instance, Trans Nzoia county charges Sh17 for a bag of maize, while the same is charged Sh70 in Nairobi.

“In trading 15 million bags of maize, North Rift counties will collect Sh255 million, while Nairobi County would get Sh954 million from cess,” says Nicholas Odhiambo, a researcher with Tegemeo.

Cess has become a controversial subject in the recent days with millers and tea stakeholders accusing counties of slapping the fee on their goods.

But Tegemeo has a different view on this: “It is recommended that counties should continue charging it since it’s an important source of income,” the researcher said.

“Contrary to opinion held by millers and the public in general, cess is not charged in every county while maize is on transit. It is charged at the source county and destination markets. Transporters only need to show proof of payment at the source county,” he said.

However, revenue collection from cess has been low and is attributed to visual estimation of trucks load capacity by collectors without verifying the quantities or weight charged for.

“Improving cess collection requires rethinking the collection procedures and methods,” said Mr Odhiambo. 

Cess is a levy imposed on tradeable agricultural produce by county governments. It is intended to help improve production and distribution of agricultural commodities.

Before the 2010 Constitution became effective, Agriculture Act Cap 318, Section 192A gave powers to the defunct local authorities to collect produce levy.

The Act also directed that 80 per cent of the money collected be used to maintain and improve infrastructure and other services for the agriculture sector. But most counties still rely on the national government for funding of key infrastructural projects as they do not collect adequate revenue.

Losses reported on cess collection are attributed to lack of verification of the actual number of bags of the commodity being ferried.

The research established that cess collectors instead opt for arbitrary levying depending on their agreement with the transporter.

“It is a common practice by many traders to fill the vehicles way beyond the required capacity in order to minimise the unit cost,” said the report.

It notes that traders have devised various ways to lower taxation mainly by use of extended bags. For instance, a standardised bag of potatoes weighs 50 kilogrammes but traders use extended packs that weigh up to 70 kilogrammes, but end up paying the same amount of Sh40 as cess levies.

“County governments should think of introducing appropriate technologies for weight measurement and verification. This approach will reduce loss of revenue at cess collection points,” the report notes.

Adoption of electronic receipts, which are already being implemented in Nakuru County can streamline and enforce compliance with cess collection procedures to increase revenue.

The survey conducted by Tegemeo established that cess contributes about five per cent to the overall cost of marketing maize in Kenya.

It is the main levy charged on maize and Irish potatoes, with trade licenses being the other form of taxation.

Cess collection goes to the general treasury pool to be used together with other county funds and is allocated based on the priorities of counties.