State eyes Sh20bn cut in equitable revenue share for counties

By wazup on July 27, 2024 Comments Closed / 50 views

The government targets to hive off Sh20.12 billion from the money meant for counties as an equitable share of the revenue raised nationally in the current financial year in the wake of the rejection of the Finance Bill, 2024.

The planned cut is contained in a proposed amendment to the Division of Revenue Act, 2024, and will force the 47 devolved units to forgo a portion of the Sh400.12 billion allocated to them as their equitable share, and equally share the burden of the foregone taxes with the national government.

Article 202 of the Constitution requires that revenue raised nationally be shared equitably among the national and county governments.

President William Ruto was last month forced to reject the Finance Bill, 2024 and drop proposed revenue-raising measures amid youth-led anti-government protests that left a Sh346 billion shortfall in anticipated revenue collections.

Ndindi Nyoro, the chairman of the National Assembly’s Budget and Appropriations Committee, tabled the Division of Revenue (Amendment), 2024, which if adopted by the two houses will see counties take a hit in their funding for the current financial year.

“In this regard and in order to facilitate bridging the above financing gap as well as facilitate the national government to provide resources towards critical areas, the Bill proposes that the county governments’ equitable share for the 2024/25 financial year be reduced by Sh20.12 billion,” he said in the Bill’s memorandum.

“The National Treasury proposes that both levels of government bear this shortfall equitably.”

The national government has since slashed budget allocations to the Executive, Parliament, Judiciary, and constitutional offices to absorb a Sh325.88 billion shortfall, leaving it with a further Sh20.12 billion to bear.

Dr Ruto rejected the Finance Bill, 2024 in a bid to cool off protests as Kenyans, led by the youth, rejected the proposed taxes amid high cost of living and unemployment rates and on the grounds that the government had nothing to show for the increased taxation.

The protests have continued despite Dr Ruto’s rejection of the Bill, naming a new cabinet, and announcing a raft of measures meant to appease Kenyans.

County governments rely on the equitable share disbursed by the National Treasury to pay salaries, fund development projects, and settle bills owed to contractors.

But the counties have been forced to endure delayed disbursement of the money amid revenue shortfalls and mounting debt payments, mainly to China.

In the year that ended last month, the Treasury failed to release Sh30 billion to the devolved units out of the agreed Sh385.42 billion that was set out in the Division of Revenue Act, 2023.

Counties have been increasingly over-reliant on the equitable share of revenue, mainly due to their low own-source revenues, which has adversely affected their ability to run smoothly.