The Nature of Local Revenue Decisions within the Decentralized Structures in Kenya

Abstract

Fiscal decentralization is widely recognized to bring leaders and decisions makers closer to the citizens resulting in better delivery of public services. Underperformance in the revenue collection has a significant effect on the ability of the sub-national governments (SNGs) to deliver services to its citizens. Due to these challenges, this study sought to examine the state of the local revenue decisions among sub-national(county) governments with a focus on Kiambu, Vihiga and Baringo Counties in Kenya. The study was descriptive in nature and used interviews with purposefully   directors from budget, finance and planning departments and secondary data collected from Commission on Revenue Allocation (CRA) and Kenya National Bureau of Statistics (KNBS). Data obtained was analyzed thematically and descriptively. The analysis shows that the revenue collection by the SNGs in Kenya have increased marginally since the establishment of the devolved structures but have stagnated when they are adjusted for inflation. The revenue collection figures of the SNGs are underperforming and are drawn from a relatively small base. User charges, business licenses and property tax are the main revenue bases contributing about 86 per cent with user fees contributing more than half of the revenues. The effective own source revenue (OSR) to budget funding indicates that six counties can fulfil the requirements for devolution of at least 10 per cent effective OSR to budget. This scenario impeded the attainment of the objectives of devolution and increases dependence on fiscal transfers. The study recommends the following; the county governments should give realizable estimates of local revenues, improve on the management and control of the current revenue bases and lastly integrate new revenue bases. The study contributes to the existing knowledge by delving more into the elements of revenue decentralization and recommends further studies on how other elements of revenue decentralization impact the performance of the subnational governments in sub-Saharan Africa