National Treasury to regulate arbitrary county taxes
National Treasury CS Henry Rotich accompanied by Moiben MP Sila Tiren and Dr. Dinah Mwinzi, Principal Secretary for Vocational and Technical Training after receiving Automobile Engineering Equipment for the newly constructed Moiben Technical Training Institute in Uasin Gishu County. The National Treasury is drafting a bill that will curb arbitrary county taxes. PHOTO | JARED NYATAYA | NATION MEDIA GROUP
What you need to know:
Before imposing taxes, counties will be required to specify the collecting authority, the persons responsible for remitting the collections, the compliance burden on taxpayers, the methods and likely cost of enforcing compliance as well as the compliance burden on taxpayers.
However, the Bill does not set specific taxes that a county government may enact.
Besides the manner of imposing taxes, levies and charges, the Bill seeks to limit county governments from offering arbitrary waivers and variations to defaulters.
The National Government is seeking to rein in arbitrary imposition of taxes, levies, fees and waivers by county governments.
Through the County Governments (Revenue Raising Regulation Process) Bill, 2017, the National Treasury proposes, among others, to regulate “the exercise by county governments of their power to impose taxes, levies and duties.”
Section 4(1) of the Bill states: “Where a county government intends to impose a tax, fee or charge, the County Executive Member 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.”
Such a proposal, the Bill provides, will require the counties to set out the reasons for the imposition of the tax, fee, levy or charge, and give particulars on compliance with Article 209(5) of the Constitution which prohibits county governments from raising local revenue in a way that could prejudice national economic policies, economic activities, or mobility of goods, services, capital and labour.
THE BILL
If the Bill is enacted in its present form, the County Executive Member for Finance shall be required to “identify, and where appropriate, describe the persons liable for the tax, fee, levy or charge and any relief measures or exemptions.”
Before imposing taxes, counties will be required to specify the collecting authority, the persons responsible for remitting the collections, the compliance burden on taxpayers, the methods and likely cost of enforcing compliance as well as the compliance burden on taxpayers.
In addition, the Bill provides that before imposing new taxes, levies and charges, counties will have to give particulars of, and describe the estimation methods and assumptions used, to determine the amount of revenue to be collected on an annual basis over the three financial years following the introduction of the tax, fee, levy or any other charge.
Also required is the economic impact on individuals and businesses residing in the county, the economic impact on individuals and businesses in other counties, the impact on economic development in the county as well as particulars of any consultations conducted, including consultations with affected counties.
OVERSIGHT ROLE
National Treasury Cabinet Secretary Henry Rotich, whose docket is the initiator, on Thursday published the Bill, along with the Draft National Policy to Support Enhancement of County Governments’ Own-Source Revenue and invited comments from the public which should be forwarded to National Treasury Principal Secretary Kamau Thugge by this Friday.
“The Bill gives effect to the constitutional requirement of Article 209(5) of the Constitution by defining the manner in which the national government, through the National Treasury, may exercise its policy oversight role, and establishes the process whereby county governments may exercise their taxation authority,” the Bill’s memorandum of objects and reasons states.
In the memorandum, Mr Rotich also says the Bill “further regulates the exercise by county governments of their power to impose taxes, levies and duties by providing for the compliance by a proposed county government tax, with the Constitution and provisions of this Bill and to ensure that county government proposals are dealt with in accordance with Article 6(3) of the Constitution.
However, the Bill does not set specific taxes that a county government may enact.
REGULATE PROCESS
“Responsibility for initiating a county government tax proposal rests with county government and they may propose any tax in accordance with the Constitution. Rather, the Bill regulates the process by which county governments’ taxes are imposed,” he states.
Section 7(1b) of the Bill also requires county governments to submit to the National Treasury for onward transmission to the proposed Inter-Agency Transitional Committee for review and approval a list of all existing fees and charges.
The Bill proposes to establish the Inter-Agency Transitional Committee whose composition will comprise the National Treasury, Commission on Revenue Allocation, Intergovernmental Relations Technical Committee which succeeded the Transition Authority, Council of Governors and the Kenya Revenue Authority.
Besides the manner of imposing taxes, levies and charges, the Bill seeks to limit county governments from offering arbitrary waivers and variations to defaulters.
Section 5(3b) provides that “the waiver or variation shall not apply to the same category of ratepayers in a financial year following a similar variation or waiver in the preceding year.”
