Counties are still heavily reliant on equitable share from the national government after failing to meet targets set in the collection of own source revenue.
More worrisome is the fact that some of the counties that have the weakest revenue base are least able to collect, according to the Half Year report for Financial Year 2018/19 by the Controller of Budget (CoB).In the period between July to December 2018, counties generated Sh15.37 billion against an annual target of Sh51 billion.
This was an increase of 54.5 per cent compared to Sh9.95 billion generated in a similar period of FY 2017/18.
“The under-performance of own source revenue collection implies that some planned activities may not be implemented in the financial year as budgets will not be fully financed. Counties should develop and implement strategies to mobilise own source revenue,” said CoB boss Ms Agnes Odhaimbo.
The report shows counties have extremely ambitious revenue targets in their budgets and the evidence so far suggests they will not be able to meet them.It suggests that many counties will have to review their budgets downwards to reflect their limited capacity to raise revenues.
Nairobi collected far more than any other county in that period at Sh3.8 billion.
The city county was closely followed by Narok and Nakuru at Sh1.84 billion and Sh1.55 billion respectively.
Counties that generated the lowest amount were Wajir, Tana River and Lamu at Sh26.21 million, Sh20.78 million, and Sh17.39 million respectively.
But a combination of operational and policy factors is to blame for the dismal performance in local revenue collection.Top counties in collection like Nairobi, Nakuru, Mombasa and Narok enjoy privileges and have lots of revenue potential that lack in others. Other counties do not enjoy the kind of economic activities that are easy to profitably tax.
There is also lack of capacity to set, review and report on realistic targets where most counties forecast their collections based on budget deficit gaps in relation to what they receive from the Exchequer.
While a key source for counties is property, rates have not been reviewed for a long time thus denying small counties profits.
According to the Fourth Schedule of the Constitution, counties get their revenue from market and trade licensing fees, parking fees, liquor licensing, county parks, beaches and public cemeteries. They also control licensing of dogs, ferries, tourism and casinos.