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Comprehensive Own Source Revenue (OSR) Potential and Tax Gap Study

The assessment of Comprehensive Own Source Revenue (OSR) Potential and Tax Gap Study is an initiative aimed at fulfilling the Constitutional mandate of the Commission on Revenue Allocation (CRA) of defining and enhancing revenue sources for County Governments as stipulated by Article 216 (3b). The study has determined the maximum possible own source revenue that each County Government can collect from the most important revenue streams when they apply the best practices in revenue administration.

The study builds on the earlier one undertaken by the National Treasury with support from the World Bank in the 2017/2018 financial year. Appreciation of the maximum possible OSR that the County Governments can collect is key in the conversation about maximizing the collection and consequently enhancing their fiscal autonomy. This is
critical, especially considering Kenya’s fiscal space is contracting.

The results of this study make it possible for the County Governments as well as the Commission and other agencies that support revenue administration reforms to objectively measure the progress of counties as they march towards their full potential.

For instance, the study findings can be used to set clear targets which counties can work towards in their revenue
administration reform journey and gradually move towards achieving their full potential. This approach would enhance the adequacy and reliability of county revenues and eventually lead to faster development and improvement of service delivery.

The Commission envisages that the findings of this study will be considered and recommendations implemented by the county governments. Further and in line with the Commission’s constitutional mandate, CRA remains committed to spearheading the counties’ OSR enhancement agenda. This publication is an excellent resource in understanding the counties’ OSR scenario in Kenya.