Notable challenges hindering optimal revenue collection
A number of challenges were observed, including inadequate legislation, and weak technological and human capacity for revenue collection. These have hindered Kakamega County Government’s ability to meet its OSR potential.
A recent study by CRA and the World Bank showed that Kakamega can collect up to Ksh.5.9B, compared to the Ksh. 1.31B collected in the FY2022/23. Although Kakamega was 7th in Kenya in actual OSR collection last financial year, the collections are just a fraction of its potential of Ksh.5.9B annually.
Key revenue streams like public health services, business permits, cess, advertising and parking drive its earnings. Nevertheless, there is unexplored potential in these and other revenue streams like market fees, property rent, land rates, among others. CRA is, however, building Kakamega and the other counties’ capacity to collect optimum OSR to be more self-sustaining.
About the Cost of OSR collection Study
The CRA study is driven by the need to solve one of the pressing challenges in revenue administration and management, identified in the National Policy to Support Enhancement of County Own Source Revenue – weak understanding of county revenue administration costs. The cost of revenue administration at the county level is not well understood and research data is lacking. This makes it difficult for counties to collect fees and charges efficiently.
Furthermore, although county governments are permitted four administrative arrangements for revenue collection and management, there are no guidelines on how to select the most suitable as counties lack data to guide in the selection.
CRA opted to conduct the Cost of OSR Collection study in five pilot counties, three of which have Revenue Boards and two have revenue departments. After concluding the data collection, the data will be analysed then presented in a report, to be validated by County Revenue Boards and Directors of Revenue in the piloted counties.