Governors give up push for taxes

Governors on Friday softened their stance on key areas of county management after they agreed to subject the new levies they had imposed in their regions to the Constitution.

During a consultative meeting chaired by Deputy President William Ruto in Nairobi on Friday, the taxation issue, which has sparked controversy, was discussed at length among other challenges facing counties. Senators recently came out strongly to oppose the heavy taxes imposed by county governments, terming them unconstitutional.

The resolution could see the nullification of some of the outrageous levies introduced in several counties.

The Deputy President described yesterday’s discussions as intense and robust and that they had managed to thrash out all outstanding issues.

“I say with a lot of confidence that we had a robust engagement that has given everybody here hope that although we started out with a lot of challenges, there is clear writing on the wall that devolution in this country is headed for success,” the DP said at the end of the deliberations at the Kenya School of Government.

Mr Ruto said there should be clear differentiation between fees charged for county services and taxes.

He said governors needed to understand the powers and constitutional bases used to implement County Finance Bills.

National Treasury Cabinet Secretary Henry Rotich said counties should prioritise and exercise financial discipline in view of limited financial resources. 

“We won’t be able to meet all the needs of county governments,” he said and told them they should set realistic fiscal expenditure plans in line with the Public Finance Management Act.

The deliberations formed the second Inter-Governmental Budget and Economic Council meeting under the Office of the Deputy President.
The County Financial Bills, the source of the controversial levies adopted by some counties, featured prominently in the discussions.

Constitutional scrutiny

It was agreed that fees charged by counties would be separated from taxes, and that the taxes would be subjected to proper constitutional scrutiny as has been demanded by the Senate.

The mechanism to be used will be set out by the National Treasury and the Commission on Revenue Allocation.

Senators have insisted that the new levies are in conflict with the national economic policies as outlined in Article 209 of the Constitution.

Treasury and the Commission on Revenue Allocation had earlier stated that they were not consulted by county governments on the new

taxes. Both were represented in yesterday’s deliberations.

Article 209 (5) of the Constitution says taxation and other revenue-raising powers of a county shall not be exercised in a way that prejudices national economic policies, economic activities across county boundaries or the national mobility of goods, services, capital or labour.

The Article states that a county may impose property rates, entertainment taxes and any other tax that it is authorised to impose by an Act of Parliament.

The Senate’s committee on Finance, Commerce and Economic Affairs has proposed outlawing all the Finance Bills adopted by county assemblies on revenue generation, saying they were in conflict with the Constitution.

Yesterday’s meeting was also held at the backdrop of the impeachment of Embu Governor Martin Nyaga Wambora by the county assembly over allegations of corruption, a move that seems to have alarmed the governors.

It was resolved that county governments should develop their own revenue collection IT systems based on standards set by the Treasury.
The challenge of the huge wage bill was also discussed and an agreement reached to develop a wage policy.

On staff rationalisation at both levels of government, it was resolved that staff would be transferred between them rather than recruiting from outside.

The meeting agreed that all recruitment would be first subjected to current staff and that counties and the national government would only hire anew if the quality of staff needed was lacking.

Outstanding issues on the Division of Revenue Bill were also discussed with participants agreeing to have the CRA and Treasury continue engaging with the National Treasury to arrive at a unified figure that will be presented to Parliament. The meeting also discussed economic growth.

It was agreed that resources allocated for various functions be fully utilised for their intended purposes.

It was observed that the challenge of absorption had been experienced.

Participants further agreed on continuous engagement on cross cutting issues such as health provision.

Also in attendance were the chairpersons and teams of the CRA, Transitional Authority, Controller of Budget, Auditor General, and the Commission on the Implementation of the Constitution. Some Cabinet Secretaries and their principal secretaries also attended.

The governors were led by the chairman of the Council of Governors, Mr Isaac Rutto.