Revise land rates to boost revenue, counties advised

Counties have been advised to update their land rate rolls to enable them raise own-source revenue (OSR), even as they eye more funds from the Exchequer and capital markets.

Ken Gichinga, chief economist at Mentoria Economics said the current land rates were outdated and did not reflect the existing market rates, denying counties much-needed revenue.

“There is need to revalue so that the rates are anchored on present market values,” said Gichinga, noting that it is only recently that rates in Nairobi were revalued after almost 40 years.

According to a new report by the Office of the Controller of Budget, own-source revenue from counties decreased by Sh1.2 billion, from Sh35.8 billion collected in the financial year 2019/2020 to Sh34.4 billion in the financial year 2020/21.

Controller of Budget (CoB) Margaret Nyakang’o, said the Sh34.4 billion represented 64.2 per cent of the annual target of Sh53.7 billion.

Four counties including Makueni, Bungoma, Laikipia and Kisumu have approached the Capital Markets Authorities (CMA) to raise Sh1.1 trillion through infrastructure bonds to bridge deficits in their development projects.

However, Gichinga said though such innovative ways are welcome, they risked attracting more county taxes, adding onto a $71.5 billion (Sh7.9 trillion) national debt.

“Indeed there is always room for innovation, but given the levels of our national debt, it would not be a good idea to start increasing county debt which will result in more county taxes,” he said. 

The report shows the aggregate budget estimates for the 47 County governments in the period under review amounted to Sh501.7 billion comprising Sh186.7 billion (37.2 per cent) allocated to development expenditure and Sh314.9 billion (62.8 per cent) for recurrent expenditure.

Equitable share

It notes that in the 12 months of the financial year 2020/21, CoB approved the transfer of Sh346.2 billion as the equitable share of revenue raised nationally from the Consolidated Fund County Revenue Funds (CRFs).

Nyakang’o said the total expenditure by County governments in the period under review was Sh398 billion, representing an absorption rate of 79.3 per cent of the aggregate annual County governments Budget.

High expenditure on personal emoluments, low expenditure on the development budget, weak budgetary control and use of revenue at source, high expenditure on local travel costs, and high pending bills which amounted to Sh96 billion as at June 30, 2021 were factors Nyakang’o said hampered effective budget execution during the reporting period .

According to the report, counties spend Sh281.9 billion on recurrent expenditure while total expenditure on personal emoluments Sh176 billion.

Only Sh116.1 billion was spend on development, while Sh105.9 billion used for operations and maintenance.