Devolved units are raising less own source revenue (OSR) far below their potential, Commission of Revenue Allocation (CRA) has disclosed.
Although some counties dramatically increased their revenue collections up to more than 200 per cent, while others doubled some have been collecting less than 1 per cent over in the 2013/14-2018/19 financial years.
The report titled ‘Counties’ Efforts Towards Revenue Mobilization’ a stock of the last six years shows that Embu and Garissa grew their own source revenue by 274 and 202 per cent respectively while 15 counties more than doubled their revenue during the period under review
Tana River, West Pokot, Lamu, Kirinyaga, Mombasa, Nandi, Kiambu, Elgeyo-Marakwet, Laikipia, Taita-Taveta, Marsabit, Makueni, Kakamega, Tharaka-Nithi, and Nyandarua doubled their revenue collection in the last six years.
In contrast, four counties Busia, Wajir, Homabay, and Mandera had declining revenue growth by less than one per cent over the same period.
The report also shows that Nairobi County, while raising the highest OSR and having the highest estimated potential of Sh77billion per annum, has grown by less than 1 per cent over the same period.
The report found out that 41 counties are raising less than 40 per cent of their estimated revenue potential, while six counties collects between 50-88 per cent of the estimated revenue potential.
“Based on a study on counties OSR potential undertaken by the National Treasury in 2018, the report established that most counties raised less than 40 per cent of their estimated revenue potential except counties with game reserves,” reads the report.
The report shows that Nairobi has an estimated potential to collect Sh77billion, Kiambu Sh12.8billion, Mombasa Sh10billion, Kiambu Sh10billion, Kisumu Sh7.1billion, Nakuru Sh6.9billion, Kajiado Sh6.7billion, Machakos Sh6.1billion and Kakamega Sh2. 9billion, respectively, annually.
Meru has a potential of collecting up to ShSh2.6billion, Uasin Gishu Sh2.54billion, Kilifi Sh2.5billion, Narok Sh2.1billion, Makueni Sh2.07billion and Nyeri Sh2.06Billion respectively.
However, in the 2018-19 financial year, in OSR, Nairobi collected Sh10.03billion, Mombasa Sh3.7billion, Narok Sh2.9billion, Nakuru Sh2.8billion, Kiambu Sh2.7billion, Machakos Sh2.2billion and Uasin Gishu Sh918million respectively.
In the same period under review, Kakamega collected Sh896million, Kajiado Sh883million, Kisumu Sh842million, Nyeri Sh837million and Laikipia Sh815million respectively.
On the other hand Wajir, Tana River, Lamu, Mandera, Homa Bay, Garissa, collected Sh60million, Sh63million, Sh71million, Sh89million, Sh93million and Sh108million respectively on OSR.
The report launched by CRA chair Dr Jane Kiringai further shows that in counties that are predominantly agricultural, Cess collection explains the low revenue performance of such counties.
Hospital fees contribute 11 per cent, to the overall county own source revenue while natural resources contributes 6 per cent.
The revenue commission in its first report on OSR shows that a majority of devolved units that collect low revenue have agriculture as their main economic activity and collects below Sh200million annually on average.
“Counties that have more diverse economic activities collect more own sources. Revenue management of game by county governments confer a comparative advantage to county own source revenue,” said Kiringai.
On average annually, Nairobi collects Sh10billion, followed by Mombasa Sh2. 8billion, Nakuru Sh2. 1 billion, Kiambu Sh2 billion and Narok Sh1. 9billion on Actual Own Source Revenue collection 2013/2014-2018/2019 financial years.
Of the 47 Counties, Samburu has the least potential on OSR at Sh164million, West Pokot Sh164.9million, Tana River Sh173million, Wajir Sh230.4million and Isiolo Sh245million respectively.
Narok County for instance collects more than a Sh1billion annually and that is largely from revenues collected from the Maasai Mara game reserve.
“Management of game reserves appears to confer certain advantages to counties in terms of OSR collection,” reads the report.
Also worth noting is that Samburu County has surpassed its estimated potential while Isiolo, Laikipia and Baringo are among the counties that collect more than 40 per cent of their estimated revenue potential.
“All these counties are collecting a substantial amount of their OSR from game reserves,” reads part of the report.
And now CRA is recommending that counties should enhance revenue mobilization effort, mapping out of all revenue streams and uploading tax-payers database by introducing new tax payers.
The commission also argues that agriculturally dominated counties should consider value addition with a view of attracting investors to earn more OSR, through single business permits.
The Commission also launched the Own Sources Revenue Training Guidelines which present a tool for use in the training of county governments in an effort to strengthen their technical capacity on Own Sources Revenue administration with the aim of improving performance.
The guidelines enhances the technical capacity of County Government revenue staff, supervisors, management and policymakers on the process of revenue collection, management and enhancement.
“These training guidelines are useful to you also as you seek to support counties in capacity development for revenue administration. It is a uniform tool that will guide training on own source revenue in the counties,” said Kiringai.
The Training Guidelines target Governors, County Executive Committee Members, Chief Officers, Speakers, Clerks, Members of the County Assembly, Budget and Finance Committee Clerks, Internal Auditors, Audit Committee Members, Revenue Directors, Heads of Revenue, Fiscal Analysts, Revenue Accountants, Cashiers, Sub-County Revenue Officers, Revenue Supervisors, Revenue Clerks and Enforcement Officers.