Division of revenue impasse: Let counties become self-sufficient

Keroka Town. Revenue collection workers from Kisii and Nyamira counties on January 14, 2015 fought over the Keroka Town market boundary, after the two groups disagreed over their areas of operation. FILE PHOTO | SULEIMAN MBATIAH | NATION MEDIA GROUP

What you need to know:

  • It is estimated that own-source revenue collection of counties is about a third, at best a half, of what it should or could be.

  • The message is, they should work harder in collecting revenue that they are entitled to.

  • Counties should work flat out in getting their financial houses in order and strengthening their financial bases.

The oft-recurrent impasse over the allocation of revenue to the counties should be seen in the wider and bigger picture of income constraints versus expenditure demands and in the context of what could be collected but is not against what is spent versus what should not have been.

LEAKAGES

Most local governments have often faced considerable challenges raising revenue. The genesis of the problem is that governments, both national and local, have struggled to raise sufficient money through taxes, levies and fees to pay for even the basic services they are obligated to offer.

Devolution is widely acknowledged as a huge step forward in bringing goods and services closer to the people. But it has come at a massive cost. The counties, too, have struggled to solidify a strong revenue and collection base to pay for even a modicum of those devolved services.

Factor in issues such as bloated workforces with too many employees in the wrong places and too few where there should be more and the net result is low productivity and service provision. Add to that corruption, which means the revenue base is punctured with leakages and significant losses.

Yes, it can be argued that counties inherited much of the baggage from the old system but they, and they alone, must introduce the relevant measures to rationalise their operations.

There are several examples of unnecessary or extravagant expenditure binges on everything from junket trips to very expensive wheelbarrows and, of course, putting fire engines on the convoy to upcountry visits!

UNSUSTAINABLE

If you traverse the country, you can tell almost instantly which counties give better value for money than others. A good example is Makueni, where there is a noticeable hive of activity on infrastructure support and maintenance. If one goes to the even bigger picture of support from the national government, there are the inevitable problems.

First, there is the fight over the figure — which is what is going on. Then there is the challenge of getting that money from a national government that is seriously strapped for cash.

One is not arguing against the principle of the national government making its contribution as per the Division of Revenue Bill 2019. But there is the question of how it can find enough for this obligation when it struggles with its own bills and often resorts to borrowing.

While this has been overshadowed by the squabble over the amount, what is expected from national government is the biggest challenge for the future. It will find its obligation that the shortfall in county government revenue ‘shall be borne by the national government’ an unsustainable burden.

Clause 25 of the Explanatory Memorandum to the Division of Revenue Bill 2019 states: “It should, however, be noted that the proposed equitable share allocated to county governments in the Division of Revenue Bill 2019 at 30 per cent of the most recent audited revenue, as approved by the National Assembly, is way above the minimum threshold required under Article 203(2) of the Constitution, which is 15 per cent.” Clearly, the national government is not only being overstretched in meeting its 30 per cent but the figure is double what is stipulated.

LOOPHOLES

A counter-argument that will increasingly be aired is that it is time counties pulled up their socks and strengthened their revenue and collection bases. But it should be approached by systematically and forensically going through the whole of the body politic of each and every county government and sealing the many loopholes where taxes are not being levied or paid and, of course, where revenue is lost.

It is estimated that own-source revenue collection of counties is about a third, at best a half, of what it should or could be. The message is, they should work harder in collecting revenue that they are entitled to.

Counties should work flat out in getting their financial houses in order and strengthening their financial bases. And they should spend less time arguing about what they feel they are entitled to from a national government that is struggling to pay its way.

Mr Shaw is a public policy and economic analyst. [email protected]