In Summary
  • Only five county governments were able to collect more than 100 per cent of the annual Own Source Revenue targets
  • National Treasury has since developed a national policy to support enhancement of county governments’ OSR
The National Treasury Building.
The National Treasury Building.

County governments are still heavily reliant on the National Treasury for money, a report tabled in the National Assembly shows.

The National Treasury 2022 Pre-election Economic and Fiscal Report said counties collected Sh34.4 billion in Own Source Revenue against an annual target of Sh53.7 billion in the 2020-21 financial year.

This represented 64.1 per cent of the annual OSR target in the fiscal year.

“Only five county governments were able to collect more than 100 per cent of the annual OSR target in FY2020/2021,” the report says.

The report did not name the five counties that surpassed their targets.

The National Treasury, through a multi-agency team, has since developed a national policy to support the enhancement of county governments’ OSR and the County Governments' (Revenue Raising Process) Bill 2018.

“The policy proposes strategies to address challenges in collection and administration of decentralised taxes, charges,” the report says.

“The Bill, which is currently before Parliament for legislation, will regulate how counties introduce, vary fees.” 

It says the legislation will address the problem of multiplicity of fees and charges within and across counties in line with Article 209 (5) of the Constitution.

Devolved units have two main types of revenues, the ones they collect directly from residents–OSR and the ones collected at the national level and passed on to counties as inter-governmental transfers, the largest of which is the “equitable share”.

OSRs have been seen as important for their financial contribution to the functioning of county governments and funding of service delivery.

According to the Commission of Revenue Allocation report 2019,  only 11 out of 47 counties can finance more than 10 per cent of their overall budget.

This implies that the majority of the counties finance close to 90 per cent of their budgets through transfers to county governments.

Under-performance in own-source revenue also implies some activities may not be implemented. There is also a risk of completed projects remaining unpaid.

County governments make money from market and trade licensing, parking, liquor licensing, parks, beaches and cemeteries.

They control the licensing of domestic animals, ferries, tourism and casinos.

In the report, Treasury said it has developed the National Rating Bill 2022 in collaboration with the Ministry of Lands to replace the outdated Valuation for Rating Act (Cap 266) and Rating Act (Cap 267).

“The proposed Bill which was submitted to Parliament in January 2022 is expected to guide valuation for rating and imposition of rates on rateable property in the county governments,” the document says.

It says the National Treasury constituted a task force to evaluate and recommend a single integrated revenue management system for county governments in line with the Presidential Directive of February 2019.

“The task force has identified three viable integrated revenue management systems and prepared a report for consideration by the Steering Committee,” it says.

“The approval of a viable Integrated County Revenue Management System by the steering committee will pave way for piloting and roll-out of the revenue system to county governments.” 


Edited by Kiilu Damaris

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