New Model Tariffs and Pricing Policy: A milestone for Kenya’s county governments
It was a momentous occasion for East, West and Central Africa as the Commission on Revenue Allocation (CRA), county governments and other key stakeholders witnessed the groundbreaking launch of the Model Tariffs and Pricing Policy for County Governments on Tuesday, 18th June 2024.
The event was graced by CRA’s key stakeholders: The Council of Governors (CoG), National Treasury and Economic Planning, Public Finance and Management Reforms (PFMR) Secretariat, The Senate, County Assemblies’ Forum, the Office of the President, the Intergovernmental Budget and Economic Council, Parliamentary Budge Office, Institute of Public Finance, National Land Commission, National Gender and Equality Commission, county governments, the media and CRA Commissioners and Staff. The Chief Guest representing the CoG Chairperson was H.E. Fernandes Barasa, Vice Chairperson.
The launch of the Model Policy marked a significant step forward in guiding Kenya’s 47 county governments to develop their own tariffs and pricing structures as required by Section 120 of the County Governments Act. The event, thus, heralds a new era of financial management and revenue enhancement for county governments in Kenya.
Empowering County Governments
CRA is a critical enabler of devolution, under Article 216 of the Kenyan Constitution: recommending the equitable sharing of nationally raised revenue between the national and county governments and providing recommendations on financing and financial management for county governments. Empowered by the 2019 National Policy to Support Enhancement of County Governments’ Own Source Revenue, the CRA has taken on the critical task of assisting counties in developing their Tariffs and Pricing Policies.
The Need of the Model Policy
Article 209(4) of the Kenyan Constitution allows counties to collect revenues from property taxes, entertainment taxes, user charges rendered for services, business regulatory and outdoor activities, thereby increasing their own source revenue. However, inconsistency and unfairness in charges prompted widespread complaints at the onset of devolved government by the residents of the 47 county governments. To address this, the Intergovernmental Budget and Economic Council (IBEC), chaired by His Excellency President Dr. William Ruto (who was the Deputy President then), resolved in 2015 to develop a national policy to streamline the collection and administration of decentralized taxes, fees and charges.
The Model Tariffs and Pricing Policy for County Governments is, therefore, the culmination of these efforts. It was developed by a special Inter-Agency Committee, led by the CRA and comprising representatives from various national and county bodies.
Objectives and Benefits of the Model Policy
Section 120 of the County Governments Act mandates counties to establish a Tariffs and Pricing Policy for public services. Yet, no county has developed such a policy until now. The new Model Policy addresses this gap, providing counties with a comprehensive guide to setting tariffs. The policy aims to enhance revenue sources, ensure equitable revenue sharing, and promote prudent public financial management.
The Model Policy will help county governments develop transparent and understandable tariff structures, providing a clear basis for setting fees and charges. This step-by-step guide can be customized by each county based on their unique circumstances, helping to maximize revenue and ensure financial sustainability.
CPA Mary Chebukati, Chairperson of the CRA, emphasized that the new Model Tariffs and Pricing Policy will significantly improve Kenya’s business environment. “Once adopted by county governments, it will eliminate the confusing and often unfair multiplicity of fees and charges across different counties. This Model Policy, once adopted by County Governments, will resolve a longstanding issue for citizens since the onset of devolution,” said Mrs. Chebukati. The Model Policy aims to streamline local revenue collection, enhance public trust and foster a more business-friendly environment nationwide.
Key benefits of the Model Policy include:
- Elimination of redundant fees: Citizens will no longer have to pay for the same services, multiple times in different counties.
- Service-linked charges: Fees will be levied only for services that are actually provided, ensuring fairness and transparency.
- Standardized charges: The Policy will prevent discrepancies in fees, ensuring consistency across counties.
- Clear information: Citizens will have a clear understanding of what fees and charges apply to various services, and these will be directly linked to the quality and level of service provided.
- Enhanced public participation for residents in the development of counties’ tariffs and pricing policies.
While the Model Tariffs and Pricing Policy represents significant progress, it also raises several critical questions and challenges. For one, the Policy’s success hinges on the willingness and ability of county governments to adopt and implement it effectively. This requires not only political will but also adequate resources and capacity at the county level. CRA has planned dissemination and capacity building of the relevant officers in the 47 county governments.
There is also the challenge of ensuring uniformity and fairness in the application of the Model Policy across different counties, each with its unique socio-economic conditions. CRA and its key stakeholders are on standby to support the county governments in this critical process. The pilot dissemination and capacity building exercise planned to start in the last week of June 2024 will shed more light to improve and support counties properly domesticate the Model Policy.
Moreover, the Policy’s emphasis on increasing Own Source Revenue must be balanced with the need to avoid overburdening citizens and businesses with excessive fees and charges. Only those revenue streams that have economic and financial viability will be exploited. County governments must engage in meaningful public participation to ensure that the tariffs and fees set are both reasonable and justified.
Highlights of main messages of other key speakers
In his keynote address on behalf of the CoG, H.E. FCPA Fernandes Barasa highlighted the substantial potential for counties to increase their Own Source Revenue, citing recent improvements in revenue collections. He emphasized that county governments have not yet fully tapped into this potential and called for the exploration of new revenue streams and improved management practices. H.E Barasa also urged the National Government to facilitate rather than obstruct county revenue efforts, criticizing the Kenya Revenue Authority’s insistence on VAT for county revenue sources.
The CoG further emphasized the need for collaboration and capacity building to ensure the successful implementation of the Model Tariffs and Pricing Policy, which is crucial for enhancing county fiscal autonomy and improving public service delivery.
While speaking on behalf of the National Treasury and Economic Planning, Samuel Kiptorus, Director, Intergovernmental Fiscal Relations Department, highlighted the critical need for county governments to enhance their Own Source Revenue (OSR) to reduce fiscal pressures and improve service delivery. Despite modest increases in OSR, the Treasury noted that county governments have not fully tapped into their revenue potential.
The Treasury further emphasized that effective revenue collection is closely linked to service delivery and accountability, and the new Model Tariffs and Pricing Policy is essential for operationalizing county laws and maximizing revenue collection. The Treasury also reaffirmed its commitment to providing technical assistance to counties in implementing the Model Policy.
In his remarks, Joel Bett, Programme Coordinator for the Public Finance Management Reforms Secretariat, emphasized the critical support provided for the Model Policy’s development. He highlighted CRA’s pivotal role under the PFM Reforms Strategy 2018-2021, where it served as the lead agency for Results Area 1: Sustainable and Predictable Fiscal Space. As part of this mandate, CRA developed comprehensive guidelines and a training curriculum for county revenue management, focusing on policy, legislation, institutional arrangements, and administration. Bett noted that the Model Tariffs and Pricing Policy and Guide offer a clear roadmap for efficient revenue policy administration at the county level, enhancing fiscal autonomy and public finance management.
Cabinet Secretary of the Ministry of Trade, Investments and Industry, Hon. Rebecca Miano, added that in implementing the Model Policy, counties must ensure their actions support national economic goals and do not obstruct the mobility of goods, services, or capital.
Conclusion and call to action
The launch of the Model Tariffs and Pricing Policy is a crucial milestone for Kenya’s county governments. It represents a collective effort and commitment to enhancing revenue generation and financial management at the county level. As counties adopt and domesticate the Model Policy, we can expect to see significant improvements in service delivery and economic growth, contributing to a balanced socio-economic development for Kenya.
The CRA, along with its key stakeholders, has set a strong foundation for future financial stability and growth for county governments. It is now up to the 47 County Governments to embrace and implement this Model Policy, ensuring that it benefits all Kenyans. Domesticating the Model Policy not only promises enhanced revenue but also ensures that county governments can provide better services to their residents, ultimately contributing to the nation’s economic turnaround and growth.
Appreciation to our stakeholders
The successful development of the Model Tariffs and Pricing Policy would not have been possible without the concerted efforts of CRA’s internal and external stakeholders. First and foremost, H.E. the President, Dr. William Ruto, and H.E, the Deputy President, Hon. Rigathi Gachagua, provided crucial support and leadership. The National Treasury and Economic Planning, the Council of Governors, the Public Financial Management Reforms Secretariat, and the Second Commission played instrumental roles in shaping this Policy.
The Inter-agency Committee, comprising representatives from the Council of Governors, National Treasury, Kenya Institute for Public Policy Research and Analysis, State Department for Trade and Enterprise Development, State Department for Public Works, State Department for Housing and Urban Development, Kenya Investment Authority, and county representatives from Machakos, Kiambu, and Nairobi, ensured that the Policy was inclusive and comprehensive. Additionally, the CRA’s Commissioners, CEO James Katule, Legal Directorate – Director Sheila Yieke and Manager Emily Kimani, and other staff worked tirelessly to mid-wife the birth the new Policy. Their dedication and hard work have laid the foundation for a more financially stable future for county governments
In conclusion, as county governments adopt and implement the Model Policy, CRA anticipates substantial enhancements in service delivery and economic growth, thereby fostering balanced socio-economic development in Kenya. The Policy is poised to significantly improve county governments’ Own Source Revenue, benefiting critical sectors like healthcare, agriculture and education, and fostering a conducive environment for Micro, Small, and Medium Enterprises (MSMEs).
By aligning fees with services rendered, the Policy ensures improved service delivery, while promoting public participation, enhancing community ownership and fostering widespread acceptance.
