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County governments intending to impose taxes and levies will have to submit a proposal to an inter-agency committee at least 10 months for consideration, a new bill proposes.

The County Governments (Revenue Raising Process) Bill, 2023 sponsored by Senate Majority leader Aaron Cheruiyot (Kericho) proposes that where a county government intends to impose a tax, fee or charge, the county executive committee member shall, for 10 months before the commencement of the financial year, submit particulars of the proposal to the Committee.

Cheruiyot further proposes to establish a committee known as the Inter-Agency Committee on County Taxes and Charges.

The Committee shall consist of one person each working and nominated by the following entities, and appointed by the Cabinet Secretary whenever the need arises the National Treasury, the Commission, the Intergovernmental Relations Technical Committee and the Council of County Governors and the Kenya Revenue Authority.

“The Committee shall be responsible for considering and approving taxes, charges and fees imposed by a county government. The National Treasury shall provide secretariat services and facilities required by the Committee for the effective performance of its functions,” reads part of the Bill.

Cheruiyot in his proposal, charges that the Committee shall, within three months from the date of receipt of the proposal under subsection (1), consider the proposal and notify the county executive committee member of its decision in writing.

In considering a proposal submitted by the county executive committee member, the Committee shall take into consideration the provisions of Article 209 of the Constitution and relevant administrative procedures, existing legislation and international treaties and agreements.

“No tax or licensing fee including a fine or penalty may be waived or varied except as provided by legislation. Where legislation permits the waiver of any tax or licensing fee, the county treasury shall maintain a record of each waiver together with the reason for the waiver. The county executive committee member shall, within three months of granting of the waiver, report the waiver together with the reason for the waiver to the Auditor-General,” reads part of the bill.

Proposed law

The Bill proposes that a county government may engage the Kenya Revenue Authority or any other designated person as the revenue-collecting agent of the county government in accordance with section 160 of the Public Finance Management Act. “Any county tax or any revenue-raising measures including waivers and variations imposed by County Governments prior to commencement of this Act shall be deemed to have been imposed, waived or varied in accordance with this Act,” reads part of the bill.

The proposed law further adds that where the National Government and a county government fail to agree on a proposed imposition or revision of a tax, fee or charge, the National Government and County government shall be guided by the provisions of the Intergovernmental Relations Act on resolution of disputes.

The bill if passed, will give effect to the constitutional requirement under Article 209(5) of the Constitution, which requires taxation and other revenue-raising powers of a county not be exercised in a way that prejudices national economic policies, economic activities across county boundaries or the national mobility of goods, services, capital or labour.

The Bill achieves this by regulating the exercise by county governments of their power to impose taxes, charges, levies and fees by providing that a proposed county government tax, fees, levy or charge be in compliance with the Constitution and the provisions of this Bill.

However, the Bill does not set specific taxes that a county government may impose. Responsibility for initiating a county government tax proposal rest with the county government and they may propose any tax in accordance with the Constitution.

County boundaries

Article 209(5) of the Constitution, states that a county government tax shall not materially or unreasonably prejudice national economic policies, economic activities across county boundaries or the national mobility of goods, services, capital or labour.

It also requires county government taxes to be consistent with co-operative governance as outlined in Article 6(2) of the Constitution, tariff and pricing as provided for under section 120 of the County Government Act, and that where a fee is proposed to be introduced for a service, it does not exceed the cost of providing such service.