Counties must generate and manage own revenue to win donor confidence

Opinion and Analysis

Outgoing Council of Governors chairman Isaac Ruto at a past Press briefing. FILE PHOTO | MACHARIA MWANGI 

By ROSE WANJIRU

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.