County governments will no longer arbitrarily impose taxes and levies in a new policy that seeks to streamline the collection and administration of decentralised taxes.
The new Model Tariffs and Pricing Policy provides guidelines for counties in imposing taxes, levies and fees in a bid to boost collections and standardise the levies.
The Commission on Revenue Allocation (CRA) developed the policy amid outcry over arbitrary taxes and levies by the devolved units.
“Once adopted by county governments, it will eliminate the confusing and often unfair multiplicity of fees and charges across different counties,” CRA chairperson Mary Chebukati said.
Chebukati said the model policy would help county governments develop transparent and understandable tariff structures, providing a clear basis for setting fees and charges.
“This step-by-step guide can be customised by each county based on their unique circumstances, helping to maximise revenue and ensure financial sustainability,” she said.
The commission unveiled the new policy last week.
She added that the policy aims to streamline local revenue collection, enhance public trust and foster a more business-friendly environment nationwide.
The policy seeks to eliminate redundant fees as citizens will no longer have to pay for the same services multiple times in different counties.
It also ensures fees will be levied only for services that are actually provided, ensuring fairness and transparency.
In addition, the policy aims to prevent discrepancies in fees, ensuring consistency across counties.
The policy comes at a time when counties are struggling to realise their own source revenue targets, leading to massive pending bills.
The latest budget implementation review report for the counties for the first nine months of the financial year shows that the devolved units had collected only 51 per cent of their annual targets.
The report by Controller of Budget Margaret Nyakang’o indicated that the devolved units have collected Sh41.40 billion out of an annual target of Sh80.78 billion over the period.
Article 209(4) of the Constitution allows counties to collect revenues from property taxes, entertainment taxes, user charges rendered for services, business regulatory and outdoor activities, thereby increasing their own source revenue.
In addition, Section 120 of the County Governments Act mandates counties to establish a Tariffs and Pricing Policy for public services. No county has developed such a policy until now.
However, inconsistency and unfairness in charges prompted widespread complaints at the onset of devolved government by the residents of the 47 county governments.
Council of Governor’s Finance Committee chairman Fernandes Barasa said the policy will help the counties improve their collections.
He said county governments have not yet fully tapped into this potential and called for the exploration of new revenue streams and improved management practices.
The Kakamega governor called for collaboration and capacity building to ensure the successful implementation of the Model Tariffs and Pricing Policy, which is crucial for enhancing county fiscal autonomy and improving public service delivery.
National Treasury’s Intergovernmental Fiscal Relations Department director Samuel Kiptorus said county governments should enhance their own source revenue collections to reduce fiscal pressures and improve service delivery.
Despite modest increases in own source revenue, the Treasury noted that county governments have not fully tapped into their revenue potential.
“The new Model Tariffs and Pricing Policy is essential for operationalising county laws and maximising revenue collection,” he said.