Mudavadi urges counties to enhance own sources of revenues

Prime Cabinet Secretary Musalia Mudavadi said counties must be more robust in identifying untapped areas of revenue collection to not only enhance their tax base but also make them better functioning entities.

“We need to get our counties becoming more robust and we look forward to a situation where one day the Kisii Governor, for instance, will be the one lending money to the National Government,” said Mudavadi.

“In the past, there is something that went wrong, which was governing our entities and at that time they were not drawing money from the National Government, there was no revenue share but the same local governments were able to pay salaries... What happened when the revenue share mechanism came in, did we encourage some measure of laxity? This is an area that needs to be done very fast,” he added.

Even as he challenged counties to improve on tax collection and get more people within that framework, the PCS said they must bear in mind that they are also dealing with a major economic issue, which needs to be managed carefully.

“How do you make your counties competitive? Taxation is elastic. On revenue collection, you must figure out on what you would do to make sure that you are not taxing investors out of your city because with excessive taxation you can drive them out of town and erode own tax base. Explore a balance of this,” said Mudavadi.

He made his remarks after delivering the Deputy President Rigathi Gachagua’s speech during the official opening of Inaugural conference for Local Government Revenue Initiative (LoGRI) conference in a Nairobi hotel.

Gachagua made similar sentiments, noting that enhanced county OSR is premised on the need for enabling counties to expand and improve service delivery, county financial autonomy in fulfillment of devolution and overcoming constraints in external funding.

Also with OSR, Gachagua stated that it will instill a civic and constitutional duty in residents to pay towards cost-of-service delivery and well-being.

Simialrly, he said OSR will promote better remuneration to county staff because enhanced it may imply better pay for county workers and better enumeration increases productivity.

“Justification for enhanced county OSR is also premised on the need for accountability and efficient revenue management for OSR compliance. Ratepayers and consumers of County services will demand better service delivery from the OSR collected. Mismanagement of OSR automatically leads to non-compliance in the collection of OSR and poor service delivery,” Gachagua stated.

He added: “You are invited to share challenges, opportunities, and strategies in formulating more progressive and equitable property tax systems in low-income countries. This engagement presents opportunities to enhance OSR by county governments in efforts geared towards meeting fiscal deficits.”

In the current era of constrained resources, the DP was optimistic that the conference will stimulate practical discussions to inform policy on property taxation in counties and nationally.

The Deputy President also called for accountability and efficient revenue management, citing that own source revenue compliance plays a key role in terms of funding key services by government.

“Property tax which accounts for over 25 per cent of counties’ OSR is the core source of revenue for counties. There is, however, still a room to improve.  Reports from the Commission on Revenue Allocation (CRA) and the Office of Controller of Budget show that property taxes have huge untapped collection potential,” read Gachagua’s speech.

Mudavadi also called on Kenyans eligible to pay taxes to do so diligently and voluntarily, saying it is a moral obligation.

For any government to function well and deliver proper services to its citizens, it has to raise revenue, which calls for taxation.

He said it is time that Kenyans change their mind set and realize that they hold the destiny of the country thus obliged to honour their tax obligations.

“Going back to the medieval times, property ownership was a measure of political strength and many people could disclose what they owned openly. But nowadays people are hiding what they own, in the name of evading to pay tax because property ownership has now become synonymous with taxation.” said Mudavadi.

“Proper service delivery in the health sector, education and all other programs require funds. This is an obligation that government has to undertake and it all boils down to collecting revenue through taxation,” added Mudavadi.

Mudavadi urged participants drawn from various countries in Africa to use the conference to help in formulating policy frameworks that will help lower income countries improve on their tax collection mechanisms.