COUNTY OWN SOURCE REVENUE ENHANCEMENT PROPOSALS.
In efforts to reduce the cost of doing business in the country and enhance service delivery, the National Treasury held a conference in Naivasha. The conference was held under the aegis of the Intergovernmental Budget and Economic Council (IBEC). Kenya Flower Council attended the seminar and participated in the drafting of the final report.
The agenda of the conference was the development of a national policy to aid counties enhance the collection of own revenue and to cut on dependency on national allocation through maximization in and alignment of the seven pillars, to avoid revenue wastage at collection and to expand the tax base. The pillars are:
• Single Business permit/Multiplicity of Taxes
• Other taxes, fees and Charges Collected by Counties
• Property Taxation
• Drafting National and County Policy and Legislation
• Citizen Engagement and Public Participation
• ICT Applications for Revenue Collection
• Revenue Administration and HR Systems
Summary of the recommendations to thematic Pillars
Taxes & Levies
As already provided for in the Public Finance Management Act (PFMA) that the National Treasury should be responsible for the review and analysis of county tax proposals. The PFMA read together with articles 209 and 210 of the Constitution provides that the Cabinet Secretary for Finance should review and be consulted on county tax proposals. However, it is not yet clear what happens if he rejects the proposal as it may prejudice the economic unity of Kenya.
The suggested framework legislation should provide a legal instrument which regulates the county tax assignment process in a transparent manner where neither a county nor the National Treasury can delay the county tax introduction.
Legal review of all enabling or principal legislation for the imposition of cess, business license fees etc should commence with the view to aligning them with the current requirements of the Constitution and the PFMA. To advance this process at an accelerated pace would require increasing resources of the Law Reform Commission to complete this process as a matter of high importance.
Single Business Permits
– Strengthening the legal basis of SBP. Implement a uniform law across all counties for similar taxes / charges such as SBP
– Delink regulation from revenue raising and focus licenses on regulation and maximize revenue by applying appropriate revenue instruments.
– Understand burden of business contribution to county revenues -capture totality of the burden of taxes, fees and charges on the business community before setting actual rates/taxes.
– Align SBP approaches and practices across the counties by establishing nationwide standards and criteria for SBP administration and management (Identify the institution to champion this effort).
– Link SBP revenues to service delivery.
– Reconsolidation of all licensing charges into SBP.
– Justify SBP fee increases e.g. –need for indexation for inflation.
– Ensure effective public participation with regard to preparation and enactment of finance bills –share draft bills with the business community for input prior to presentation to the County Assembly and conduct civil education prior to public consultation. This will improve the quality of public participations.
– Implement harmonized public participation legislation across all counties.
– Harmonize management of vehicle branding fees –Fees charged at primary location of business should be recognized across all counties in order to mitigate against multiple payments.
– Utilize forum on Intergovernmental Relations to champion Ease of Doing Business agenda at County level.
– Counties and the business community to hold fora where issues raised are forwarded to the COG for consideration and to address rates/fee inconsistencies.
– Consider introduction of municipal infrastructure grants to cater for high infrastructural costs in urban area.
Property Rates are mandated by the Constitution as a revenue source for County Governments. Poor Administration of property taxation has made it a weak source of revenue for the counties, as compared to international benchmarks. Counties were encouraged to expand their tax base to increase their revenues instead of relying on business licenses and cess for their growing budgets. To enhance county revenue collection from property rates, counties were encouraged to update their property registration rolls and valuation.
Also, to partner with the KRA for collection and enforcement of property taxes and other county revenues.
Drafting National and County Policy and Legislation
– The national government should consider adopting national framework legislation for adhering to a process which have to be followed by counties for purposes of introducing new taxes and levies with the view to aligning it with the economic unity principles as enshrined in the Constitution of 2010 (art 209(5)).
– The national framework legislation adopted should stipulate the procedure of putting county tax and levy proposals on a so-called allowed list.
– Importantly, the county tax proposal should include evidence of negotiations with the KRA reflecting on whether the Authority could not assume the revenue administration of the proposed tax or levy.