Underneath the calls by Governors and the Senate for the national government to allocate more revenue to counties is the assumption that a large portion of the county revenues will be provided by the national government
This is by dint of the provision in the new Constitution that at least 15% of all revenue collected by the central government be disbursed to the 47 Counties. The governors want the limit raised to at least 40 per cent.
Both assumptions are faulty.The national government should not unthinkingly dish out money to the counties. Any allocations should be guided by basic principles of public finance which are applicable in a unitary and devolved system.
A devolved system of government implies transfer of legislative, executive and in some cases, judicial powers from the centre to the regional governments. This entails determination of functions and powers between the centre and the periphery which include finances, the tax raising and spending power of government.
Different layers of government have considerable freedom and initiative to raise and manage their resources. But some degree of control and regulation by the national government is always necessary to ensure coordination between different bodies and also to promote sound financial management.
One of the guiding principles in the division of powers and responsibilities between the national and county governments is that the national government is allocated the more elastic and productive sources of revenue while the county governments take the less elastic sources which have a localized base.
A basic principle of taxation is that tax payers pay taxes based on the benefit which they receive from public services. It follows that functions/services peculiar to a county government should be borne in the jurisdiction in which the benefit is reaped.
County governments are expected to concentrate on the provision of local public goods with the central government providing targeted grants in cases where there are jurisdictional spill-overs associated with local public goods or serious shortfalls in raising revenue to finance goods and services purely local in benefits.
It is therefore inconsistent for county governments to exclusively look to the national government for revenue to establish or maintain programmes whose benefits have a local reach. Programmes like feeder roads, garbage collection, establishment and maintenance of sewerage systems, keeping the street clean, rural access roads, development of markets and urban centers should be financed by local revenues.
County governments should impose property taxes, user fees and other licenses to secure the revenue to run these programmes.
Progressive income taxation is therefore assigned to the central government to finance among others, national defense, external relations, national highways and other roads linking counties and districts, education, police.
A prudent allocation of revenue should be proportional to the amounts county governments raise to finance local budgets—the principle the central government under the old Constitution used in Local Transfer Funds to local Government authorities.
To avoid abuse, the national government may give money conditionally—it will assign money to counties to be used only for particular projects.
Demanding that the national government allocates an inordinate percentage of revenue to the counties weakens its ability to effectively pursue its taxation goals.
It is necessary that the national government retains control of the tax structure, check fiscal profligacy and reduce distortions in the allocation of resources.
This means that the national Treasury should have a say in the allocation of revenue on goods and services with nationwide reach and even on the Grant in Aid regional governments will need to finance certain goods and services.
A devolved system of government means that county governments should individually have the ability of making substantial contribution to their own revenue and only require national government assistance on a need basis.
Recognition of this principle of public finance will force governors to sit down and start working instead of locking horns.
Kennedy Buhere is the communications officer at the Ministry of Education, Science and Technology
Posts
No comments:
Post a Comment