COMMISSION ON REVENUE ALLOCATION

COMMISSION ON REVENUE ALLOCATION

Promoting an equitable society
RECOMMENDATIONS ON SHARING OF REVENUE RAISED BY THE NATIONAL GOVERNMENT BETWEEN THE NATIONAL GOVERNMENT AND COUNTY GOVERNMENTS AND AMONG COUNTY GOVERNMENTS

COMMISSION ON REVENUE ALLOCATION

SHARING OF REVENUE RAISED NATIONALLY
REVENUE RAISED NATIONALLY

100%

100% < 84.5% > 15% 0.5%

EQULIZATION FUND NATIONAL SHARE COUNTIES SHARE

FORMULA

SHARING AMONG 47 COUNTY GOVERNMENTS

COMMISSION ON REVENUE ALLOCATION

BASIS (FORMULA) OF DIVISION OF REVENUE RAISED NATIONALLY
PROCESS OF APPROVING THE FORMULA BY (SENATE,) NATIONAL ASSEMBLY

COMMISSION ON REVENUE ALLOCATION

AUDITED YEAR 2010-2011 GOVERNMENT EXCHEQUER RECEIPTS
PARTICULARS Opening balance Income Tax PAYE Income Tax Corporations VAT Local Goods VAT Imported Goods Exercise Tax License under Traffic Act Customs Duties Other Taxes from International Trade Stamp Duty Land Rent Other Profits & Dividends Profits & Dividends from CBK Interest Received Misc. Revenues Fines, Penalties & Fortitures & Other Charges SUB TOTAL SHAREABLE REVENUE Recurrent Recovery Over Issues 2008/09 Development Recovery Over Issues 2008/09 Grants from Foreign Government through Exchequer Loans to Financial Institutions Loans from Foreign Government through Exchequer Loans to Non-Financial Public Enterprises Domestic lending T/Bills Domestic lending T/Bonds Civic Contingencies Fund Recoveries SUB TOTAL NOT SHAREABLE GRAND TOTAL 2010/11 SHS. MILLION 2,673 137,054 121,596 90,211 81,669 80,566 2,463 46,071 20,598 6,800 1,073 9,085 2,000 758 7,823 289 610,729 2,457 815 7,468 33 17,016 1,126 4,000 186,300 1,075 220,290 831,019

COMMISSION ON REVENUE ALLOCATION

RECOMMENDATIONS ON SHARING REVENUE RAISED NATIONALLY BETWEEN THE NATIONAL AND COUNTY GOVERNMENTS FOR FINANCIAL YEAR 2012-2013 SHAREABLE AUDITED REVENUE FOR 2010-2011 = SHS.610 BILLION

COUNTY GOVERNMENT SHS.203 BILLION 33%

NATIONAL GOVERNMENT SHS.407 BILLION 67%

COMMISSION ON REVENUE ALLOCATION PEER-TO-PEER LEARNING

THE COMMISSIONERS VISITED THE FINANCIAL AND FISCAL FINANCE COMMISSION OF SOUTH AFRICA UGANDA LOCAL GOVERNMENT FINANCE COMMISSION WAS INVITED IN APRIL 2011 FOR A KNOWLEDGE-SHARING FORUM TWO COMMISSIONERS AND ONE STAFF MEMBER ATTENDED A FISCAL DECENTRALISATION AND LOCAL GOVERNANCE COURSE AT ANDREW YOUNG SCHOOL OF PUBLIC POLICY AT GEORGIA STATE UNIVERSITY, USA DESK RESEARCH WAS CONDUCTED ON THE EXPERIENCES IN OTHER COUNTRIES INCLUDING NIGERIA, SOUTH AFRICA, UGANDA,RWANDA,INDIA, INDONESIA, PHILIPPINES, AUSTRALIA, CANADA, AND USA
5

COMMISSION ON REVENUE ALLOCATION PUBLIC PARTICIPATION

PROFESSIONAL GROUPS FOCUS GROUP DISCUSSIONS COUNTY PROFESSIONAL FORUMS RELIGIOUS GROUPS

COMMISSION ON REVENUE ALLOCATION

ATTRIBUTES OF A GOOD REVENUE SHARING FORMULA AMONG COUNTY GOVERNMENTS

1.
2.

AS SIMPLE AS POSSIBLE ;
BASED ON AVAILABLE OFFICIAL DATA ;

3.
4.

HAS INCENTIVES FOR EFFICIENT FISCAL MANAGEMENT;

MINIMISE INEQUALITIES AMONG COUNTIES; AND

5.

GIVES EFFECT TO THE PROVISIONS OF THE CONSTITUTION

COMMISSION ON REVENUE ALLOCATION

PARAMETERS CHOSEN FOR SHARING AMONG COUNTY GOVERNMENTS

1.
2.

POPULATION
POVERTY INDEX

3.
4.

LAND AREA
BASIC SHARE

5.

FISCAL RESPONSIBILITY

COMMISSION ON REVENUE ALLOCATION POPULATION USE OFFICIAL DATA FROM K.N.B.S THE SELECTION IS BASED ON TWO FACTORS:-

COST OF SERVICES DEPEND ON POPULATION SIZE

PROMOTION OF EQUITABLE SOCIETY ON PER CAPITA BASIS

COMMISSION ON REVENUE ALLOCATION POVERTY

USE OFFICIAL DATA FROM K.N.B.S SELECTION OF POVERTY INDEX IS BASED ON:POVERTY COMPONENT TREATS EVERY POOR KENYAN EQUALLY IRRESPECTIVE OF LOCATION

10

COMMISSION ON REVENUE ALLOCATION

MAMA EKAI

11

COMMISSION ON REVENUE ALLOCATION BASIC EQUAL SHARE

EVERY COUNTY HAS FIXED EXPENSES IRRESPECTIVE OF SIZE, POPULATION AND POVERTY LEVELS

12

COMMISSION ON REVENUE ALLOCATION LAND SIZE

USE OFFICIAL DATA FROM K.N.B.S COST OF SERVICE DELIVERY DEPENDS ON THE SIZE OF A COUNTY TO ENSURE EQUITY,PLACED MINIMUM AND MAXIMUM CONTRIBUTION TO TOTAL LAND MASS AT 1% AND 10% RESPECTIVELY BINDING INTRODUCES AFFIRMATIVE ACTION IN FAVOUR OF VERY SMALL COUNTIES
13

COMMISSION ON REVENUE ALLOCATION FISCAL RESPONSIBILITY

BUILDS FINANCIAL PERFORMANCE INCENTIVE MECHANISM THAT WILL ENSURE THAT;

FISCAL MANAGEMENT
EXPLOITATION OF REVENUE POTENTIAL

INITIAL EQUAL WEIGHT SINCE THERE ARE NO HISTORICAL FISCAL PERFORMANCE EVALUATION MEASURES
14

COMMISSION ON REVENUE ALLOCATION COUNTY EQUITABLE SHARE FORMULA 47 EQUITABLE SHARE Ca= (Pi + PVi +Ai+BSi+ FRi)
i 1

WHERE

Ca
P

=
=

COUNTY REVENUE SHARE

COUNTYs SHARE OF POPULATION COMPONENT

PV =
A =

COUNTYs SHARE OF POVERTY COMPONENT

COUNTYs SHARE OF LAND AREA COMPONENT

BS

COUNTYS EQUAL SHARE COMPONENT

COUNTYS SHARE OF FISCAL RESPONSIBILITY COMPONENT 15

FR =

COMMISSION ON REVENUE ALLOCATION HOW ARE WEIGHTS ASSIGNED?

1. EXTENT TO WHICH A PARAMETER GIVES EFFECT TO THE PROVISIONS OF THE CONSTITUTION; 2. SIMULATIONS RUN SEVERAL SCENARIOS

16

COMMISSION ON REVENUE ALLOCATION SUMMARY PARAMETER POPULATION EQUAL SHARE POVERTY LAND AREA % 60 20 12 6

FISCAL RESPONSIBILITY
TOTAL
17

2
100

COMMISSION ON REVENUE ALLOCATION

PARAMETERS AND WEIGHTS IN THE HORIZONTAL FORMULA

Population 60% Basic Equal Share 20% Poverty 12% Area 6% Fiscal Responsibility Fiscal 2% Responsibili ty 2%
18

60%

COMMISSION ON REVENUE ALLOCATION

THANK YOU