The Council of Governors has rejected the bid by the Kenya Revenue Authority (KRA) to impose VAT on Counties’ Own Source Revenue (OSR).
The Council of Governors in a statement on Monday said the move lacks legal threshold and termed it as unconstitutional and an encroachment on the powers to impose taxes and duties of the Counties.
CoG chair Anne Waiguru said that these unwarranted demands undermine the principles of Article 6(2) of the Constitution.
"Raising own source revenue by counties in its strict sense does not necessarily correspond with a service provided, neither does it fall under any stage of production," she said.
"We therefore maintain that Kenya’s constitutional architecture does not envisage that the National Government will impose taxes on revenues raised by the County Governments."
Waiguru noted that VAT is a consumption tax that is levied on the value added at each stage of a product's production and distribution.
She added that there is no logic for counties to charge VAT on their own source revenue or to remit the same to KRA.
She noted that the CoG is open to discussions geared towards reaching an amicable solution on the issue.
"We wish to state that if no action is taken and this unconstitutionality continues, we will be left with no option but to seek legal redress without any further reference to you," she warned.
