MPs seek to block counties from charging high levies
National Assembly Majority Leader Kimani Ichung’wah is the sponsor of the County Governments (Revenue Raising Process) Bill 2023.
A proposed law seeks to control runaway county taxes by imposing National Treasury oversight to block exorbitant levies that undermine national economic policies and cross-county trade.
If the Bill is enacted, the National Treasury will soon determine how county governments impose taxes, issue waivers and exemptions.
It provides that “the county government tax shall not materially or unreasonably prejudice national economic policies, economic activities across county boundaries or the national mobility of goods, services, capital or labour.”
The Bill also notes that where a fee is proposed to be introduced for a service, it should not exceed the cost of providing such service.
The County Governments (Revenue Raising Process) Bill 2023, sponsored by Kikuyu MP Kimani Ichung’wah, the Leader of Majority in the National Assembly on behalf of the national government, seeks to empower the National Treasury Cabinet Secretary to regulate the process by which county governments impose taxes, fees, levies and other charges.
The Bill, currently before the National Assembly, has already drawn mixed reactions from the Council of Governors (CoG) and senators, especially the proposal to have Kenya Revenue Authority (KRA) collect tax for the counties and why it was not first introduced in the Senate.
The proposed regulation of taxes imposed by counties shall be done by providing for the compliance by a proposed tax or any other charge with the Constitution ‘and the provisions of this Bill’.
“The Bill defines the manner in which the national government through the National Treasury may exercise its policy oversight role and establishes the process whereby the county governments may exercise their taxation authority,” the Bill reads.
It seeks to have the National Treasury Cabinet Secretary exercise policy oversight and to make regulations for implementation of the law once it comes into force.
This includes cess fees that counties impose on goods like livestock on transit, sand, building stones, murram and soil that move across county borders.
To actualise this, the Bill seeks to establish an Inter-Agency Transitional Committee (IATC) led by the Cabinet Secretary for National Treasury with the mandate of reviewing all fees and charges imposed by the county governments once the Bill becomes law.
The committee shall exist for two years or more as may be determined by the CS Treasury “from the time of its establishment” and shall consist of the National Treasury, CRA, Intergovernmental Relations Technical Committee (IGRTC), Council of Governors (CoG) and KRA.
The committee shall, in consultation with the public, review the taxes and make recommendations on allowable list of taxes to the CS for consideration.
The CS shall then within 30 days from date of receipt, approve and publish the list in Kenya Gazette or refer it back to the committee for reconsideration.
The current county government taxes are exempt from the Bill but will be deemed to have been imposed once it is enacted.
Ms Anne Waiguru, the CoG Chairperson and Kirinyaga governor, welcomed the Bill but added she has a problem with appointing KRA as the collector of taxes.
“The Bill is good as it seeks to regulate the process of counties imposing charges, the process of issuing waivers and exemptions and to ensure that taxes imposed by a county do not prejudice one another. However, there are clauses that will need to be amended such as allowing KRA as a collector,” says Ms Waiguru.
She notes that it was agreed during the 19th Ordinary Session of Intergovernmental Budget and Economic Council (IBEC) chaired by the Deputy President that the Bill be introduced in the Senate as it is a Bill concerning counties, wondering why it was introduced in the National Assembly.
This is the second time the Bill is being introduced after it lapsed in the 12th Parliament in 2019 ‘because the National Assembly did not prioritise it’.
“The resolution was to reintroduce it but this time in the Senate,” the CoG chairperson explained.
Vihiga Senator Godfrey Osotsi fears that if the Bill becomes law in its current form, it will take counties back to the county council era where the councils needed the approval of the Minister for Local Government to introduce new fees and charges.
“This Bill looks retrogressive and will curtail the county governments in their revenue raising measures. In essence, it takes counties to pre-2010 Constitution,” says Mr Osotsi, noting that there is no need to review existing taxes, fees and charges which are already approved by county assemblies.
“After micromanaging the expenditure side, which has yielded nothing but Exchequer delays, they now want to focus on the revenue side. Then what next?” Mr Osotsi posed.
The Bill states that where a county government intends to impose a tax, fee or charge, the County Executive Committee Member (CECM) for Finance shall, 10 months before the commencement of the financial year, submit particulars of the proposal to the National Treasury and the Commission on Revenue Allocation (CRA) for approval.
In doing so, the CECM Finance shall give reasons for the imposition of the tax, identify and where appropriate describe the persons liable for the tax and any relief measures or exemptions.
CRA shall review the proposal and submit it to the National Treasury within a month of receipt. The National Treasury may consult any other State organ or interested persons on the proposal.
County governments have two main types of revenues. Cash collected directly from residents, known as Own Source Revenues, and funds collected at the national level and passed on to counties as inter-governmental transfers, the largest of which is the equitable share. This year, the government proposes Sh385 billion as equitable share.
The law bars counties from spending revenues at source. Article 207(1) of the Constitution provides that there shall be established a Revenue Fund for each county government, into which shall be paid all money raised or received by or on behalf of the county government, except money reasonably excluded by an Act of Parliament.
A county can only spend money on those functions that have been devolved, which include agriculture, county health services, trade and development regulations, and pollution control.
