You are here: Home View More News and Highlights Do county government taxes impede trade?

The Trade and Foreign Policy Division of KIPPRA held a workshop to validate the findings of a report titled “survey on county government taxes and their implications on trade in selected counties in Kenya”. Members of the division, who participated in the study, led by their head, Dr Augustus Muluvi, introduced themselves. Others were Simon Githuku and Manasseh Otieno, who later took the participants through the findings of the report. 

The workshop, which was held at the Safari Club, Hotel in Nairobi on 23 June 2016, saw attendance from various stakeholder organizations including the Kenya Revenue Authority (KRA), Kenya Association of Manufacturers, Kenya Private Sector Alliance and representatives from the county governments.

The new Constitution requires counties to raise revenue to supplement allocation from the national government. The survey, which was conducted in five representative counties, aimed at determining whether some of the taxes imposed by county governments clashed with those already in place and what their effects were on the business community.

The five counties – Nairobi, Busia, Isiolo, Mombasa and Nakuru – were selected due to their strategic geographical location in relation to trade in Kenya, the East African Community and the region.

Busia County: The main source of taxes in this county is trailer parking fees. Others are single business permit, land rates and approval of plans. The study found that although the Constitution required public involvement in policy and decision making, many members of the public and the business community did not know how the decisions on county taxes were made. The business community complained of double taxation. Another complaint was that the county government collected parking fees even from those parking in private yards.

Isiolo County: The main source of revenue in this county is tourism fees. The county government reported a decline in revenue because of lack of automation and shortage of staff, which affected service provision. Most of the business community said provision of services was poor and that there was no consultation and public participation in decision making. The business community also complained of double taxation and poor infrastructure.

Mombasa County: This County collects revenue from land rates, signboards, single business permits and mining permits. There was a reported increase in revenue due to the employment of qualified staff and automation of services. However, there was an unexplained rampant breakdown of machines and gadgets. Even with the said automation, the business community felt that service delivery was still poor; the penalties charged on defaulting were exorbitant and that they were not involved in decision making.

Nairobi County: Being Kenya’s main economic hub and capital, Nairobi has the largest number of professional business services. The business community in Nairobi felt that service delivery had improved. They, however, complained that although they participated in forums to discuss policy, their input and views were not incorporated in the final decisions and outcomes.

Nakuru County: Although a number of business community members said service delivery had improved, they decried the over 300 per cent increase in taxation since the onset of devolution and wanted to know the rationale behind this high increase.

The study concluded that since the public did not feel part of decision making, there was need to develop a national public participation framework, which could be replicated in all counties. The study also recommended the implementation of the Inter-Government Fiscal Act to improve coordination between counties and the national government. The need for a national trade policy was also emphasized.

The participants raised a number of concerns including the little representation from counties, yet the discussion affected counties more. Some also wanted to know why businesspeople in some counties reported excellent service provision while the majority in the same counties thought the service was poor. Some participants also said there was need to clearly define public participation, especially because some public members felt that although they participated in discussions, their views were rarely reflected in their final outcomes.
One participant felt that the study should have included secondary data from counties on what fees they charge. Another one felt that Mombasa County should be involved in the collection of port fees and dock charges to ensure it benefits from the resource.
Another participant also wanted to know why Nairobi and Nakuru witnessed high public participation compared to other counties. Is it that they had structures and policies different from other counties? The capacity of county government officials in coming up with policies was also questioned. Some blamed the national government for insufficient allocations to counties, which in turn pressured them to increase taxes to meet their needs.  It was also noted that there was no synergy between the national and county governments, resulting in double taxation and varied, sometimes unreasonable, taxes in some counties. It was suggested that a central website be developed to display all the taxes charged by each county.

It was observed that although the recent World Trade Organization Conference held in Nairobi agreed on the need to be transparent on taxes charged, that was yet to be implemented. 

A KRA official in attendance said the institution was working to have offices in every county and also build the capacity of the business community to ensure proper engagement.

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