The County Governments (Revenue Raising Process Bill, 2023

SPECIAL ISSUE

Kenya Gazette Supplement No.37 (National Assembly Bills No. 11)

REPUBLIC OFKENYA

KENYA GAZETTE SUPPLEMENT

NATIONALASSEMBLYBILLS,2023

NAIROBI,24thMarch,2023

CONTENT

| Bill for Introduction into the National Assembly- | PAGE | |------------------------------------------------------------|--------| | The County Governments (Revenue Raising Process) Bill,2023 | 147 |

THE COUNTY GOVERNMENTS(REVENUE RAISINGPROCESSBILL,2023 ARRANGEMENTOFCLAUSES

Clause

• 1-Short title.
• 2-Interpretation.
• 3-General principles.
• 4—Introduction of new tax,fee,levy or charge
• 5-Waivers and variations.
• 6-Collection ofrevenue.
• 7-Transitional provisions.
• 8—Establishment of Inter-Agency Transitional Committee.
• 9-Functions of Inter-Agency Transitional Committee
• 10-Duration of the Committee.
• 11-Regulations.

THE COUNTYGOVERNMENTS REVENUE RAISINGPROCESS)BILL,2023

A Bill for

AN ACT of Parliament to provide for the process to be followed by county governments in the exercise of Constitution to impose,vary or waiver taxes,fees, levies and other charges; to establish the InterAgency Transitional Committee;and for connected purposes

ENACTEDbyParliament ofKenya,asfollows-

• 1.This Act may be cited as the County Governments (Revenue Raising Process) Act,2023.
• 2.In this Act,unless the context otherwise requires-

"Cabinet Secretary"means the Cabinet Secretary for the timebeingresponsibleformattersrelating to finance;

"charge"means a charge for the use of a product or

service and applyper use of the good or service or for the bulk or time-limited use of thegood or service;

"Committee"means the Inter-Agency Transitional Committee established by the Cabinet Secretary under

section 8of this Act;

"Commission"has the meaning assigned to it under section 2of the Commission on Revenue Allocation Act, 2011;

"Council"means the Intergovernmental Budget and Economic Council establishedunder section 187 of the PublicFinance ManagementAct,2012;

"County Executive Committee Member for finance" means a County Executive Committee member of a county responsible for finance in that county;

"fee"includes parking fee,market fee,health facility fee or a license fee charged or imposed as a necessary condition for using a public facility or conducting a

business;

"national economic policy" includes the fiscal policy

as determined by the national government, relevant Short title.

Interpretation.

No.16of2011.

No.18of2012.

administrativeprocedures,existinglegislation,international treaties, agreements and the plans to implement the mandate of the national government under the Fourth Schedule to the Constitution;

"National Treasury"has the meaning assigned to it under section 2 of the Public Finance Management Act, 2012;and

"tax" means a compulsory payment that does not involve the use or derivation of direct benefits from services,regulation or goods.

3. (1) A county government may not exercise its power in terms of Articles209 or 210 of the Constitution to impose tax, levy, fee or any other charge in a way that materially and unreasonably prejudices- 2. (a)national economic policies; 3. (b) economic activities across county boundaries;or 4. (c) the national mobility of goods, services, capital or labour.

• (2) Before imposing a tax, fee, levy or any other charge, a county government shall follow the process provided for in this Act and shall, in addition-

6. (a) ensure compliance with theprovisionsof 7. subsection (1); 8. (b)adhere to the principles of consultation and Constitution. 9. (c) ensure compliance with the tariff and pricing policy as provided for under section 120of the County Government Act,2012;and

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• (d) where a fee is to be charged for a service,ensure that the fee does not exceed the cost of providing such service.

4. (1) Where a county government intends to impose a tax, fee or charge, the County Executive Member for finance shall,ten months before the commencement of the financial year, submit particulars of the proposal to the National Treasury and the Commission.

Introductionof new tax,fee, levy or charge.

General principles.

• (2)The proposal under subsection (1) shall
• (a) set out the reasons for the imposition of the tax, fee,levy or a charge;
• (b)give particulars on the compliance with Article 209(5) of the Constitution and section 3of this Act;
• (c) identify, and where appropriate,describe the persons liable for the tax, fee, levy or charge and
• any relief measures or exemptions;
• (d) specify-
• (i)the collecting authority;
• (ii)t the persons responsible for remitting the
• collections;
• (iii) the methods and likely cost of enforcing
• compliance;and
• (iv) the compliance burden on taxpayers;
• (e) give particulars of,and describe the estimation
• methods and assumptions used to determine-
• i) the amount of revenue to be collected on an annual basis over three financial years following the introduction of the tax,fee, levy or any other charge;
• the economic impact on individuals and
• (ii) business residing in the county;
• (ii) the economic impact on individuals and
• business residing in other counties;and
• (iv) the impact on economic development in the
• county;
• (f) give particulars of any consultations conducted by
• the county,including consultations with affected counties.
• (3) The Commission shall review the proposal
• submitted under subsection (1) and submit it to the National Treasury within one month upon receipt.
• (4) The National Treasury may consult any other state organ or interested persons on the proposal contemplated in subsection (1).

• (5) In considering the proposal submitted by county governments, the National Treasury shall take into consideration the recommendations of the Commission under subsection (3),provisions of Article 209 of the Constitution,relevant administrative procedures,existing legislation and international treaties and agreements and shall notify theCountyExecutive CommitteeMember for finance concerned of the decision,in writing,not later than three months after receipt of the proposal under subsection (1).

2. 5.(1) No tax or licensing fee including a fine or 3. legislation.

• (2) Where legislation permitsthewaiver of any tax or licensing fee as envisaged under subsection (l)-

5. (a)a publicrecord ofeachwaiver shall bemaintained togetherwith thereason for thewaiver;and 6. (b) each waiver,and the reason forit,shall bereported to the Auditor-General within three months of granting the waiver.

• (3) Waiver or variation of any tax or licensing fee

8. shall- 9. (a) indicate reasons or policy objectives of such variation or waiver; 10. (b) identify the category of tax payers to benefit or 11. burdenfromsuchvariation orwaiver:

Provided that the waiver or variation shall not apply to the same category of ratepayers in a financial year following a similar variation or

waiver in the preceding year;

• (c) outline the impact of the variation or waiver on revenue collection;
• (d) indicate thelikely economic impact of the variation or waiver including potential shifts in tax
• burden and benefits.

6. A county government may engage the Kenya Revenue Authority or any other designated person as the revenue collecting agent in accordance with section 160 of

Waivers and variations.

Collection of

revenue.

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• the Public Finance Management Act,2012 and Regulations made thereunder.

7. Any county tax or any revenue raising measures including waivers and variations imposed by a concerned countyprior to commencementof thisActshall be deemed to have been imposed,waived or varied in accordance with

• this Act:

Provided that-

• (a) such imposition,waiver or variation is in compliance withArticle209(5)ofthe Constitution, provisions of the Fourth Schedule to the Constitution and any relevant national legislation; and
• (b) within three months upon commencement of this Act, county governments shall submit a list of all taxes, fees and charges imposed prior to the commencement ofthisAct to theCabinet Secretary for onward transmission to the InterAgency Transitional Committee established under section8forreview.
• 8.(1) Upon the commencement of this Act, the Cabinet Secretary shall establish and constitute an InterAgency Transitional Committee to review the taxes, charges and fees envisaged under section 7 of this Act.
• (2) The Committee shall consist of-
• (a) the National Treasury;
• (b)the Commission on Revenue Allocation;
• (c) Intergovernmental Relations Technical Committee;
• (d)Council of Governors;and
• (e) the Kenya Revenue Authority.

9. (1) The Committee shall review the taxes, charges andfees envisaged under section 7of thisAct.

• (2) The Committee shall, in consultation with the public,review the taxes, charges and fees under section 7 and make recommendations on allowable list of such taxes, charges and fees to the Cabinet Secretary for consideration.

Establishmentof Inter-Agency Transitional Committee.

Functions Inter-Agency Transitional Committee.

of

Transitional provisions.

• (3)After receipt of the recommendations under subsection (2),the Cabinet Secretary may,within thirty (30) days from the date of receipt,approve andpublish the list in the Gazette or refer back to the Committee for reconsideration,noting,in writing,any reservations that he or she has concerning therecommendations.
• 10.The Committee shall be for transitionpurpose only and shall cease to exist after a period of two years or any other time asmay be determined by the Cabinet Secretary
• from the time ofits establishment.

11. The Cabinet Secretary may, by notice in the Regulations. Gazette,make Regulations regarding-

• (a) anything which shall or may be prescribed in
• terms of this Act;and
• (b) any matter which is necessary to prescribe for the effective implementation of the provisions and objects of this Act.
• (2) For the purpose of Article 94(6) of the Constitution-
• (a) the purpose and objective of the delegation under this section is to enable the Attorney General to make regulations to provide for the better carrying into effect the provisions of this Act;
• (b) theauthority of the Attorney General to make bringing into effect the provisions of this Act and fulfillment of the objectives specified under this
• regulations under this Act will be limited to section;
• (c) the principles and standards applicable to the regulations made under this section are those set out in the Interpretation and General Provisions Act and the StatutoryInstruments Act.

Duration of the Committee.

MEMORANDUM OFOBJECTSANDREASONS

Statement of objects and reasons of the Bill

209(5) of the Constitution by defining the manner in which the national

The Bill gives effect to the constitutional requirement of Article government, through the National Treasury may exercise its policy oversight role and it establishes the process whereby the county governments may exercise their taxation authority

The Bill further regulates the exercise by county governments of their power to impose taxes, levies and duties by providing for the compliance by a proposed county government tax, fee, levy or charge with the Constitution and the provisions of this Bill and to ensure that county government proposals are dealt with in accordance with Article 6(2) of the Constitution

The Bill does not set specific taxes that a county governmentmay enact. Responsibility for initiating a county government tax proposal rest with county government and they may propose any tax in accordance with the Constitution. Rather, the Bill regulates the process by which county government taxes are imposed.

Clause 2 of the Bill provides for the definitions of words or expressions used in the Bill in technical sense.

boundaries or the national mobility of goods,services,capital or labour. It

also requires county government taxes to be consistent with co-operative

governance as outlined in Article 6(2) of the Constitution, tariff and

pricing as provided for under section 120 of the County Government Act,

• Clause 3 of the Bill restates Article 209(5) of the Constitution,noting prejudice national economic policies, economic activities across county 2012 and that where a fee is proposed to be introduced for a service, it does not exceed the cost ofproviding such service.
• Clause 4 of the Bill provides for the process of introduction of county governments to submit tax proposals to the National Treasury and Commission on Revenue Allocation for approval.

Clause 5 of the Bill contains provisions relating to waivers and variations. It states that a tax or a licensing fee including a fine or a penalty may not be varied except by legislation.

Clause 6 of the Bill states that the Kenya Revenue Authority may be the collecting agent for a county government tax in accordance with section 160 of the Public Finance Management Act,2012.

Clause 7 of the Bill clarifies that current county government taxes are exempt from the Bill, and are deemed to have been imposed in terms of the Bill unless they are not in compliance with Article 209(5) of the

Constitution.

Clause 8 of the Bill contains provisions for establishment and composition of the Inter-Agency Transitional Committee by the Cabinet Secretary for the purpose of reviewing all fees and charges imposed by the county governments prior to commencement of the Act.

Clause 9 of the Bill contains provisions on functions of the Committee established for the purpose of reviewing all fees and charges imposed by the county governments prior to commencement of the Act.

Clause 10 of the Bill provides for the duration of the Committee which shall be for a period of two years or more as may be determined by the Cabinet Secretary from the time ofits establishment.

Clause 11 of the Bill further empowers the Cabinet Secretary to make Regulations for implementation of the Act.

Statement on the delegation of legislative powers and limitation of fundamental rights and freedoms

The Bill does not limit fundamental rights and freedoms.

Statement as to whether the Bill concerns county governments

The Bill concerns County Governments in terms of Article 110 (1) (a) of the Constitution as it affects the functions and powers of County Government set out in the Fourth Schedule to the Constitution.

Statement as to whether the Bill is a money Bill within the meaning of Article 114 of the Constitution

The enactment of this Bill may occasion additional expenditure of public funds to be provided for through the annual estimates.

Dated the 16th March,2023.

KIMANIICHUNG'WAH,

Leader of the Majority Party.