Counties must generate and manage own revenue to win donor confidence

Counties must generate and manage own revenue to win donor confidence

Council of Governors Press Conference meeting to elect the new Chairman.
Council of Governors Press Conference

It is that time of the year again when the government prepares its budget and defines its financing options. It is the third year when this exercise is being carried out by 47 county governments and the national government – 48 governments in total.

In most cases, citizens are preoccupied with the proposed expenditures which articulate the intended development projects and the service provisions by the government. Citizens pay less attention on the financing options that the government intends to take.

This, however, has significantly changed with the onset to a devolved system of government. Sharing of the national revenues and taxation measures being taken by both national and county governments have become a key issue of discussion and contestation.

The county governments’ taxes, fees and charges in particular have elicited new interest, contestation and protest.

The responsibilities of county governments as established through the Constitution goes beyond the basic responsibilities that were the preserve of defunct local authorities. They go beyond providing basic services and ensuring that the public has access to social amenities.

The county governments are expected to facilitate the counties to move into a new trajectory of growth and development. Put simply, in a number of years Kenya should have thriving towns all over the country and eventually these county towns and urban areas should be upgraded to cities.

The county governments’ performance should eventually be measured by the extent to which they have managed to improve human security and the human development index.

The county governments’ performance should be measured against their economic growth, food security, creation of employment, and increased connectivity not only physical but technological (feeder roads, Internet), among others.

It is against this background that county governments prepare the County Fiscal Strategy Paper, the budget estimates and the Finance Bill. The County Finance Bill sets out revenue raising measures. It provides the details of what taxes, fees, levies and charges the county government has set that will enable it to raise its own revenues, in addition to income shared from the national revenues.

It is in the interest of the county governments to raise their own revenues, which gives them latitude to do more development and provision of services beyond what the shared national revenue can achieve.

However, if the taxes are perceived to be punitive and the accrued benefit to the citizens is not clear from the onset, this leads to non-compliance (avoidance and evasion).

In the recent past we have experienced protests, court cases and other legal and political interventions that have led to the annulment of taxation measures.

Own revenue is critical in that, firstly, these revenues can be used to augment the ongoing development projects and service provision in the counties.

Secondly, own revenues can be crucial in county borrowing or contracting of debt. At this stage, county governments cannot contract debt because regulations have not been set and also because they can only do so when the national government agrees to guarantee the loan.

Based on the past performances of the local authorities and semi-autonomous government agencies whose debts the national government was forced to pay when they did not fulfil their obligations, it is expected that the national government would be wary of becoming a guarantor for any county any time soon.

Also considering that there are 47 counties, and accepting one application would mean accepting another, the debt contracting for counties is not likely to start soon.

However, a county government could justify borrowing if it has a solid track record of raising and managing significant own revenues consistently, efficiently and effectively. The extent to which a county generates and manages its own revenues may be the most justifiable basis for contracting debt in the near future.

Thirdly, donors are currently looking for opportunities to support counties in development projects and capacity building. In most cases, donors do not provide grants without a commitment of matching funds by the recipient.

Counties can negotiate major grants by having in place flexible own revenues which can be used as matching funds to donor grants.

In most cases, at least 10 to 30 per cent of a project fund must be contributed by the receiving government as a matching fund. In the first two years under devolution, most counties collected less than the defunct local authorities used to collect. This is despite increasing taxes, fees and other charges.

One of the reasons cited for poor performance in collecting own revenues was poor communication and lack of participation in determining the taxes, fees and charges.

The other reason for poor performance is that with a considerable high amount of national shared revenues, most counties did not pay attention to ensuring that their own revenues were collected efficiently and effectively. In essence, the revenue collectors rarely got the facilitation, motivation and supervision.

Most counties have also not addressed staffing issues as the inherited defunct local authorities’ staff are still unconfirmed in their new positions under the county governments.

County governments have to address these operational and staffing issues even as they look into the strategic issues that will enable them to raise their own revenues in an efficient, effective, predictable and equitable manner.

They have a clear mandate of spurring growth and development at the county levels, and mobilising own revenues can leverage other county resources from shared national resources and donor grants to achieve these critical objectives of devolution.

Posted Previously on Business Daily.

Let’s stop working and paying tax till our MPs come to their senses

Let’s Stop Working and Paying Tax Till our MPs Come to Their Senses

Kenyan Parliament Debating a Tax Bill
Kenyan Parliament

Kenya argues that it applies a progressive form of taxation where those with less pay less, and those with more are taxed more, but this is not true if the political class is treated differently.  

Acting Finance minister John Muchuki did not let me down after all; he did not remove the proposal to tax MPs from the Finance Bill and it therefore gave us an opportunity to see MPs as they really are. What do we do now that we know MPs only concerned about their stomachs?

I’m calling for civil disobedience. I’m asking, can all Kenyan workers — public, private, corporate, everyone — just remain at home and not go to work until MPs go to the House and do the right thing?

I’m asking, is it possible for the media to shut down and deliver no news for a day and make no money for a day to pass the point.

I’m asking, is it possible for all the civil servants to stay away for a day or more until the MPs are awaken to the reality that we don’t pay taxes so that they can give themselves hefty salaries?

I’m asking, is it possible for Kenya Airways to stop its flight and decide no tourist or any other person is moving to any place until the House gets its act in order?

After all, why should we all be working to contribute to the government revenue through our taxes when those in leadership can only pay themselves and not contribute?

Is it possible for the Kenya Association of Manufacturers, Kenya Private Sector Association and other private sector institutions call for a civil disobedience?

It is totally unacceptable for working Kenyans to be taxed so heavily yet, their Members of Parliament can determine their own salary and can also determine whether they can be taxed or not.

Our parliament is the only public institution that determines its own salary, determines whether to pay tax. In one bout of selfishness, they increased their salaries, allowances and even retirement packages without commensurate economic development to back such pay.

How come young MPs like Ababu Namwamba become so vocal on things not related to them directly, but when it comes to what is progressive but will affect them directly, they become completely numb?

Only Kangundo MP Johnstone Muthama is willing to pay tax. We want leaders who will mean what they say, and walk the talk.

Gender activists believe that if the House had more women, we would have a less selfish House, but alas, I’ve not seen any woman MP champion this course on taxes. Do women MPs just caucus to determine change rules like “women should be allowed to carry their handbags in the house”?

If I am too hard on women MPs it’s because we’ve not seen much from them except when Ms Njoki Ndungu worked on the sexual harassment law which was enacted by the Ninth Parliament.

If the House does not recollect itself quickly and reverse this selfish act, I propose that the media call the nation to civil disobedience. After all, we still have displaced families, in camps and they are displaced because they went to vote for change.

I am calling for civil disobedience. Let’s set the date when all shall stay at home because, if we cannot get the Government not to tax us, we can make them get less than what they would otherwise get.

Kenya argues that it applies a progressive form of taxation where those with less pay less, and those with more are taxed more, but this is not true if the political class is treated differently.  

I would like to appeal to the president of the republic to Kenya NOT to assent to the financial bill. Mr. President, it is either the government nets all the tax or nothing from the rest of us.  While the conscience of the Acting Finance Minister, John Michuki could not allow him to move the motion to delete the clause that would otherwise authorize the Kenya Revenue Authority to deduct MPs allowance, he seemed fine if someone else did move the motion to strike. In other words, it is fine to ensure the tax from other citizens and the Corporate be deducted as the House decides whether or not they should be taxed and by how much.

The die is not cast, neither is the matter rested. I don’t think Kenyans ought to wait for the Parliamentary Commission to discuss the how to tax the MPs, the Parliamentarians are not first rate Kenyans, therefore the same rules should apply to them.

When the President assented to the salaries increase in 2003, the parliamentarians, supported by the executive (never mind one is made up of a section of the others) argued that with the “proper salary structure” (read amounts) they would ensure that proper taxation is done and that they would avoid having the bulk of the salaries being in form of allowances.

They also argued that MPs should get a development fund hence the Constituency Development Fund.  This would then ensure that the MPs did not have to share his salary with there constituencies.  However, as soon as the two agendas were passed by the parliament, the issue of taxation was forgotten. It took five more years to actually get the government to introduce the taxation proposal.

The MPs argue that they give their “salaries” for burials, weddings.  They forget that we all do give to this events based on our level of influence and the amounts we have! In fact if we were to wait on our MPs for burial and wedding contributions, we might end up having unburied relatives and unwedded couples gauging by the dismal performance.

Mr. Henry Kosgei in his explanation as to why he doesn’t think he should pay taxes to KRA said that he would rather give the money to his constituency since he doesn’t know where the money will go if he gives it to KRA. Then let us apply this logic to ALL Kenyans.  Since we don’t know how KRA will spend the money, let each of us build their own road from our houses, our own hospitals near our homes – this is taking us back to barbaric years! Kenyans actually voted MPs to provide oversight over our finances, to check the government (KRA) and to ensure all our funds are spent in the right manner, how say he doesn’t know how KRA will spend the money? This says a lot of our MPs have no idea why they are in the House!  

At this point it seems we are operating under a Monarchy – where we all leave to serve the bidding of the king and he owns all the properties and people. He owns the land and determines when he wakes up, what new thing he wants ranging from a young virgin to satisfy his needs to a parcel of land, leave alone the fact that it may be a water catchment that would eventually affect many.  Unfortunately now the monarchy has over 200 kings and queens, all waiting to be satisfied. This is unattainable.

Kenyans are saying it either ALL or NOTHING, no taxation to the rest, if the finance bill will not include the taxation clause for the MPs.

Previously Posted in the Daily Nation.