KRA takes over revenue collection in Nairobi

Governor Sonko handed over some county functions to the national government.

In Summary

• Sonko and Devolution CS Eugene Wamalwa signed the agreement at State House, Nairobi, in the presence of President Uhuru Kenyatta.

• From July 2019 to January 2020, Sh3.9 billion was collected.

The KRA headquarters in Nairobi.
The KRA headquarters in Nairobi.
Image: FILE

The Kenya Revenue Authority is to collect revenue for Nairobi county.

It is expected that the authority will reverse the trend of declining collections. The takeover is highlighted in a Gazette notice over the deed of transfer of the county government functions to the national government.

On Tuesday, embattled Governor Mike Sonko handed over the functions of the county to the national government, citing Article 187 of the Constitution. Sonko and Devolution CS Eugene Wamalwa signed the agreement at State House, Nairobi, in the presence of President Uhuru Kenyatta and Senate Speaker Kenneth Lusaka, Attorney General Paul Kihara and newly appointed acting county secretary Justus Kathenge.

KRA will be the principal agent for the overall revenue collection of the county. This is, however, not new as back on August 22, 2019, Sonko said he was considering to engage KRA to collect revenue on behalf of the county.

Speaking in a meeting of the county assembly Budget Committee in Mombasa, Sonko said KRA was among the options the county had, despite City Hall launching its own collection system after terminating JamboPay's contract in June.

"I had options of KRA, Co-operative Bank, National Bank of Kenya, Kenya Commercial Bank and the option was to go with the NBK as we knocked down other options due to various reasons,” he said.

Revenue has been declining, an issue that has been a subject of debate, especially from the legislative arm of the county government. It was noted that the county has never met its revenue targets since 2013.

In 2019-20, revenue collected included Sh380.75 million in July 2019, Sh298.34 in August, Sh655.65 million in September, Sh255,31 million in October, Sh265.21 million in November, Sh491.84 million, Sh491.84 million in December and Sh1.12 billion in January.

As of December 31, 2019, which was the end of the second quarter of the financial year 2019-20, Nairobi collected Sh4.7 billion as revenue, which was a decline compared to Sh5.4 billion collected in 2018-19.

As of December 31, 2019, own-source revenue collected stood at Sh765 million for rates, parking fees Sh1.04 billion, single business permit at Sh918.42 million, building permits Sh268.04 million, billboard and adverts Sh494.5 million, rent Sh282.16 million and fire inspection Sh94.52 million.

Others were food handlers at Sh83.49 million, regular building Sh52.53 million, Wakulima market Sh58.18 million, other markets Sh48.32 million and other incomes Sh588.47 million.

In the same period for 2018-19, the revenue stood Sh688.40 million for rates, parking fees Sh1.20 billion, single business permit Sh1.02 billion, building permits Sh714.72 million, billboard and adverts Sh407.82 million, rent at Sh335.77 million, and fire inspection at Sh191.14 million.

Others were Sh111.75 million from food handlers, regularisation of buildings Sh11.80 million, Wakulima market Sh59.40 million, other markets Sh53.61 million and other incomes at Sh614.22 million.

The county government had blamed the underperformance on poor enforcement, invasion by unscrupulous traders, poor collection mechanisms and inaccuracy of records on business establishments.

Collected revenue in the last financial year (2018-19) stood at Sh10.25 billion against a target of Sh17.23 billion. It was an improvement by Sh139.01 million as Sh10.17 billion had been collected in 2017-18 against a target of Sh15.29 billion.

Reports by the Controller of Budget reveal Nairobi's annual revenue collection has been declining year after year. At an average of Sh11.08 billion per year, City Hall collected Sh33.24 billion between 2013 and 2016.

In an attempt to save the county from losing more revenue, the county on June 7, 2019, terminated Jambopay's contract, the firm that had been collecting revenue on its behalf since 2013. As a result, the county announced it would do it on its own and a new e-payment system called Internal Revenue Management System (IRMS) was introduced.

By the time of the termination, JamboPay had digitised 136 out of 138 revenue streams. The National Bank of Kenya had been contacted by the County to collect the revenue.

The county assembly last year passed the Nairobi City County Revenue Administration Bill, 2019, which focuses on improving collection. It suggested the creation of the office of county revenue administrator to receive and account for revenue in accordance with the Public Finance Management Act.

Last November, Governor Sonko admitted that corruption and forgery of documents are among the major challenges faced. He said residents had been victims of fake licences and business permits.

"Yes, there is corruption in some sectors like markets and liquor board who have been accused of issuing fake licences to Nairobians. As a result since 2014, the county has failed to meet its own set targets. Taxes are paid to impostors and do not find their way to the county. This automatically affects the revenue performance," he said.