CRA meets with the Senate Finance Committee to deliberate on the Division of Revenue (Amendment) Bill
On 5th September 2024, the Commission honoured an invitation by the Senate Standing Committee on Finance and Budget to deliberate on the Division of Revenue (amendment) Bill, 2024 (National Assembly Bill No.38 of 2024) in Nairobi.
Through the Chairperson, CPA Mary Chebukati, the Commission considered the contents of the Division of Revenue (Amendment) Bill, 2024 and submitted its comments for consideration on county equitable share allocation, revenue shortfall and allocation to the Equalization Fund.
The Bill allocates the county governments an equitable share of Ksh. 38o Billion for the financial year 2024/25 on account of the revised revenue projection, reducing the funding by Ksh. 20.12 Billion, from Ksh. 400.12 Billion given in the Division of Revenue Act 2024.
The revised projected ordinary revenue for FY 2024/25 is Ksh.2,602.12 Billion down from Ksh. 2,948.1 Billion. But despite the downward revision, the projected revenue for FY 2024/25 is expected to grow by Ksh. 379.1 Billion compared to the previous financial year.
The Commission, aware that the national government has debt service obligations and the need to contain fiscal deficit, considers it necessary that national and county governments are adequately financed to ensure that they are able to perform their functions as required under Article 203 (1d). For this reason, CRA notes that there are new priority programs initiated by the national governments that need to be implemented by both levels of government in FY 2024/25. They include: Aggregation and Industrial Parks (CAIPs), the Community Health Promoters (CHPs) and the Housing Levy deductions.
CRA rejects the proposal to reduce counties’ allocation
The Commission submitted that the national government allocation be Ksh. 2194.1 Billion and the county allocation be retained at Ksh. 400.1 Billion for financial year 2024/25. The submission was informed by the fact that revenue is projected to increase to Ksh.2602.12 Billion compared to Ksh. 2223 Billion in 2023/24 and the provisions of Article 203 (i) which provides for stability and predictability in the county equitable share allocation.
On revenue shortfall, the Commission submitted that Clause 3 of the Bill be amended to read: if the actual revenue raised nationally in the financial year falls short of the expected revenue set out in the Schedule, the shortfall shall be borne by the national government. The amendment is informed by the Public Finance Management Act, 2012 section 12 which among other responsibilities, assigns the responsibility to formulate, implement and monitor macro-economic policies involving expenditure and revenue to the National Treasury and the constitutional provision in Article 203 (1)(j) on desirability of stable and predictable allocation of revenue.
The Division of Revenue (Amendment) Bill, 2024 allocates Ksh. 7.87 Billion to Equalization fund for FY 2024/25 based on the latest audited approved accounts of FY 2020/21 amounting to Ksh. 1570.6 Billion. The Commission submitted that it was the correct allocation to the Equalization Fund.
During the meeting, Committee Chairperson Sen. Roba Ali Ibrahim appreciated the Commission’s robust contribution to the legislative amendment process, describing it as “solid and based on hard facts.” However, he noted that the Commission had overlooked some issues, including the mandatory annual IPPD increments.
The Committee’s Vice Chairperson, Tabitha Mutinda, also commended the Commission for its alignment with the Committee’s objectives. She acknowledged the collaborative spirit between the two bodies but highlighted areas that require further attention, such as the house levy, NHIF increments, annual salary increments for employees and Community Health Partnerships (CHPs).
The leaders stressed the importance of continuing conversations to resolve pending issues. They noted that thorough reviews of legislation by key stakeholders are crucial to make sure that all important matters are addressed effectively.
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