Counties must align revenue-raising frameworks with delivery of services

The Constitution allows county governments to impose property rates, entertainment taxes, charges for services they provide, and any other tax or licensing fee authorised by an Act of Parliament. This is under Article 209 of the Constitution.

The Constitution together with Section 120 of the County Governments Act requires an objective basis for setting user fees and charges.

The Commission for Revenue Allocation developed a model Tariffs and Pricing Policy in 2024 for use by counties.

The model policy is meant to assist each county in developing a policy that provides an objective basis for setting tariffs and serves as a guide in the development of the policy.

The policy should be used to determine county fees and charges. It is also meant to inform the residents of a county of the objectives of the tariffs and provide an understanding of the fees and charges.

The policy will set the foundation for the development of county-specific tariffs. A well-developed policy should inform the basis for tariffs, fees and charges levied by each county for various public services. Each County is expected to localise the model policy to fit its local nuances and economic landscape.

However, most counties struggle to raise sizeable own source revenue to supplement the allocation by the national government. This has often led to delayed, undelivered or sub-standard services in some instances, more so, when there is a delay in disbursement of funds by the national government.

Despite the underperformance in own source revenue collections, there have been numerous complaints, by businesses, of multiple or duplicated fees or charges for similar services offered by counties. This has partly been blamed on the continued use of the by-laws that were set out by local authorities and annual amendments through the Finance Acts.

Each revenue stream should be matched against the expected services.

Read:  Solving the counties’ own revenue problem

The Constitution provides that a governor should serve a maximum of two five-year terms. The short-term nature of leadership tenure creates the risk of lack of long-term planning thus creating gaps in the implementation of progressive development programmes.

Additionally, in the absence of a well-laid-out policy, counties are exposed to the risk of incoherent, drastic and unpredictable changes to fees and levies every time there is a change in the top leadership.

This is not only unfriendly to businesses since it creates an unstable operating environment but also makes it difficult for investors to make long-term plans.

County governments should, without delay, initiate the process of developing their policies and ensure that they engage all stakeholders in the counties.

The process is likely to increase public trust in government activities which is key to voluntary compliance in payment of county fees and charges. Revenue collection should then be followed by commensurate high quality and reliable services.

The model tariffs and pricing policy provides a critical guide in the development of robust, long-term and sustainable own source revenue plans.

It also provides a great platform of active engagement between county leaders and the citizenry which increases the likelihood of general acceptance and ownership of revenue raising measures.

The writer is an Associate Director at Ernst & Young LLP. The views expressed here are not necessarily those of EY