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County Taxation

County Taxation. Coast Branch Annual Tax Workshop Held on 1 st December, 2016 Best Western Creekside , Mombasa. County Budgets and Financing. FCPA Shabir Issak. County Budgets and Financing. Outline of Presentation Overview of County Budgeting County Budget Calendar

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County Taxation

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  1. County Taxation Coast Branch Annual Tax Workshop Held on 1st December, 2016 Best Western Creekside, Mombasa

  2. County Budgets and Financing FCPA Shabir Issak

  3. County Budgets and Financing • Outline of Presentation • Overview of County Budgeting • County Budget Calendar • County Revenue Allocation • Local County Taxation - MOMBASA • Public participation • Role of CPA’s and other professionals • Discussion session

  4. “The success of devolution will largely depend on appropriate management of public resources at the County level.” – Agnes Odhiambo, Controller of Budget, Republic of Kenya

  5. Financial Management • CHAPTER TWELVE – Public Finance • Public Finance Management (PFM) Act 2012 envisaged and established a clearly defined process to promote prudent financial management and budgeting for all the different levels of Government including the county governments • The County Governments (CG) Act 17 of 2012 outlines the planning process that is required at County level by summarizing “The County plans shall be the basis for all budgeting and spending in a county” Section 107(b)

  6. Section 125 of PFMA • 125.(1)The budget process for county governments in any financial year shall consist of the following stages— • (a) integrated development planning process which shall include both long term and medium term planning; • (b) planning and establishing financial and economic priorities for the county over the medium term; • (c) making an overall estimation of the county government's revenues and expenditures; • (d) adoption of County Fiscal Strategy Paper; • (e) preparing budget estimates for the county government and submitting estimates to the county assembly;

  7. Section 125 of PFMA (con’t) • 125.(1)The budget process for county governments in any financial year shall consist of the following stages— • (f) approving of the estimates by the county assembly; • (g) enacting an appropriation law and any other laws required to implement the county government's budget; • (h) implementing the county government's budget; and • (i) accounting for, and evaluating, the county government's budgeted revenues and expenditures; • (2) The County Executive Committee member for finance shall ensure that there is public participation in the budget process.

  8. Budget Timeline • August 30. National Treasury and County Executive Member for finance to release a circular to all government agencies: starting the process, and setting out guidelines for public participation. • September 1. Counties must prepare and table a county development plan in the County Assembly by this date. The plan must be made public within 7 days. • September 1 to February 15. National Treasury and the various ministries and agencies should undertake some type of consultation with the public and other stakeholders. This can include sector hearings as in the past, or visits by Treasury to counties to solicit views. Views from the public should feed into the formulation of the Budget Policy Statement. C-BROP to be prepared by 30 September

  9. Budget Timeline (Con’t 2) • January 1. By January of every year, the Commission on Revenue Allocation should submit its recommendations for the division of revenue between national and county governments, and among the counties, to the rest of government. • February 15. Cabinet Secretary for Finance to submit the Budget Policy Statement to Parliament. Also the deadline for the debt management strategy paper, and the Division of Revenue and County Allocation of Revenue Bills to go to Parliament. • February 28. Deadline for Budget Policy Statement to be approved by Parliament and deadline for the County Fiscal Strategy Paper to be tabled in each County Assembly. • March 1. Deadline for Budget Policy Statement to be made available to public.

  10. Budget Timeline (Con’t 3) • March 16. Deadline for passing the Division of Revenue and County Allocation of Revenue Bills. • April 30. Deadline for the Cabinet Secretary to submit the budget proposal or Budget Estimates to Parliament; Also the deadline for the Judiciary and the Parliamentary Services Commission to submit their budgets to Parliament and for the county budget proposal to be submitted to the County Assembly. • May. This is likely when the Budget Committee will begin to hold public hearings on the budget. • May-June. This is when the Budget Committee will table its recommendations on the budget in Parliament. • May 15. Deadline for the Cabinet Secretary to give comments on the Judiciary and Parliamentary budget requests.

  11. Budget Timeline (Con’t 4) • June. National Finance Bill to authorize tax and revenue collection is tabled in Parliament. A County Finance Bill is to be tabled at this time in the County Assembly. • June 30. End of the financial year, and deadline for Appropriations Bill to be passed by Parliament to authorize spending for the new budget year. • July. Sometime in the latter half of July, the final approved budget estimates should be available to the public. • November. Government must publish the Budget Review and Outlook Paper, reviewing last year’s budget performance and this budget year’s initial forecasts from the Budget Policy Statement in February. County Budget Review and Outlook Paper should be available around this time as well. Reproduced with permission from “The Kenyan Public Finance Management Act 2012 FAQ for Citizens” published by Jason Lakin, Ph.D. for International Budget Partnership, March 2013

  12. County Allocation 2015 • Total Allocated .................... 259,774,500,000 ...... of which for Coast counties is 27 Billion:- • Mombasa ........................... 5,197,893,978 • Kwale .................................. 5,125,697,562 • Kilifi .................................... 7,441,216,645 • TaitaTaveta ........................ 3,309,568,191 • Lamu .................................. 2,051,883,746 • Tana River .......................... 3,984,569,971 Extracted from County Revenue of Allocation Bill 2015

  13. County Allocation 2016 • Total Allocated .................... 280,300,000,000 ...... of which for Coast counties is 29 Billion:- • Mombasa ........................... 5,608,593,922 • Kwale .................................. 5,530,693,069 • Kilifi .................................... 8,029,167,703 • TaitaTaveta ........................ 3,571,066,305 • Lamu .................................. 2,214,008,743 • Tana River .......................... 4,299,401,839 Extracted from County Revenue of Allocation Act 2016

  14. County Revenue • CHAPTER ELEVEN • 174. The objects of the devolution of government are— • (a) to promote democratic and accountable exercise of power; • (g) to ensure equitable sharing of national and local resources throughout Kenya; • 175. County governments established under this Constitution shall reflect the following principles— • (b) county governments shall have reliable sources of revenue to enable them to govern and deliver services effectively;

  15. Relevant Legislation • Power to impose taxes and charges • Section 209. (1) Only the national government may impose – • (a) income tax; • (b) value-added tax; • (c) customs duties and other duties on import and export goods; and • (d) excise tax • (2) An Act of Parliament may authorise the national government to impose any other tax or duty, except a tax specified in clause (3) (a) or (b).

  16. Relevant Legislation (con’t) • Section 209. (3) A county may impose— • (a) property rates; • (b) entertainment taxes; and • (c) any other tax that it is authorized to impose by an Act of Parliament. • (4) The national and county governments may impose charges for the services they provide. • (5) The taxation and other revenue-raising powers of a county shall not be exercised in a way that prejudices national economic policies, economic activities across county boundaries or the national mobility of goods, services, capital or labour.

  17. Evolution of Devolution • CHAPTER ONE – Constitution of Kenya, 2010 • 1. (1) All sovereign power belongs to the people of Kenya and shall be exercised only in accordance with this Constitution. • 6. (2) The governments at the national and county levels are distinct and inter-dependent and shall conduct their mutual relations on the basis of consultation and cooperation.

  18. Effective Public Participation Chapter 12 of the Kenya Constitution 2010 states “there shall be openness and accountability, including public participation in financial matters.” “A well balanced, inclusive approach, according to certain standards and ideals, is essential for the proper governance of any country.” - LaiseniaQarase (6th Prime Minister of Fiji)

  19. Experiences

  20. There shall be opennessin public financial matters Article 201 (a)

  21. Key Principles of Public Participation 1. Public consultations should be open to all citizens and taxpayers, without discrimination. 2. Safeguards should be established to prevent consultative forums from being dominated by any one political group, organized interest, or politician. 3. Public consultations must have clear and specific purposes. 4. The timeline and venues for public consultations should be made known at least two weeks in advance of the consultation. 5. Public consultations must set aside dedicated time for public feedback and questions.

  22. Principles of Public Participation (con’t) 6. Public participation in the planning and budget process should occur at all stages in this process. 7. The public must have access to all relevant plan and budget documents in a timely fashion. 8. All plan and budget documents should contain an executive summary and a narrative. 9. Citizens should be able to provide input into public consultations through direct participation, through representatives, and through written comments. 10. There should be a feedback mechanism so that citizens know their inputs were considered. Source: Joint Policy Statement on Public participation by IBP & Others

  23. CPA’s role in the Way Forward • Successful public participation coupled with greater input by the Accounting professionals will result in an effective implementation of the budget process. • This will lead to enhancing County Governance and thereby improve service delivery. • Accountants need to take lead role in guiding the public in the budgeting process. • 47 Counties ---> Keep yourself informed...

  24. Your involvement in the process Ensure that your branch / institute nominates a member /s to the County Budget & economic Forum Nominate the right person – dedicated, willing to give time and commitment to process Effective communication with CBEF’s and provide constructive input Help public to understand and analyse the numbers Be involved...do not become a (loud) bystander

  25. So the next time you see this... Do something...inform someone Take part in the discussion Attend the Public sessions Engage with Icpak...make comments Help analyse the numbers Inform the wider public

  26. Mombasa County

  27. S e a r c h i n g … As at November 2015

  28. Success … As at November 2016

  29. Mombasa Budget 2015/6 • KShs. • Allocation (D of R Act) ……………..5.7 Billion • Local Revenue Projection …………5.0 Billion • Proposed Budget ……………………10.7 Billion . • Recurrent ….. 69.2%.... 7.4 Billion • Development 30.8% …. 3.3 Billion

  30. Mombasa Budget 2016/7 • KShs. • Allocation (D of R Act) ……………..5.6 Billion • Local Revenue Projection …………3.5 Billion • Proposed Budget …………………… 9.9 Billion . • Recurrent ….. 67.7%.... 6.7 Billion • Development 32.3% …. 3.2 Billion

  31. County Budget Review • Extract from Controller of Budget Reports 2014/5 • Mombasa • Approved budget of Kes 9.87billion (Recurrent 6.68Bn and 3.18Bn for development) • To be financed 4.74Bn from national equitable share and 3.92Bn from donor funds (conditional grant) with 5.12Bn projected from local revenue sources • Local sources generated 2.49Bn • Actual total expenditure was 7.71Bn (5.62Bn on recurrent) Source: Controller of Budget, Annual County Government Budget Implementation report August 2015

  32. County Budget Review • Extract from Controller of Budget Reports 2015/6 • Mombasa • Approved budget of Kes 9.9billion (Recurrent 6.62Bn and 3.36Bn for development) • To be financed 5.2Bn from national equitable share and 729M from donor funds with 4.05Bn projected from local revenue sources • Local sources generated 2.94Bn • Actual total expenditure was 8.54Bn (5.7Bn on recurrent, 2.84Bn on development) Source: Controller of Budget, Annual County Government Budget Implementation report September 2016

  33. Sample Extracts (Mombasa)

  34. Conclusion - Need for a focus group 1. Every Branch and work-stream should create a team to review the quarterly and annual reports published by Controller of Budget . 2. Such sub-committee to invite CBEF’s to engage and avail two way communication mechanism. 3. Not restricted to the profession but involve all stakeholders. 4. Since this requires analysis of numbers it requires input from the Accountants 5. Call for volunteers – true patriots...Think tank 6. Correct budgeting will result in correct taxation!

  35. “As for the future, your task is not to foresee it, but to enable it.” Antoine de Saint Exupery

  36. Thank You and God Bless Kenya! Discussion... @shabirissak

  37. Useful Resources • Respective County Government Websites e.g. • www.kilifi.go.ke ; www.mombasa.go.keetc • National Treasury – www.treasury.go.ke • Controller of Budget – www.cob.go.ke • Comm. for Revenue Allocation–www.crakenya.org • Transition Authority - www.transauthority.go.ke • Kenya Law reports – www.kenyalaw.org • Others: • www.icpak.com • www.tisa.or.ke • www.internationalbudget.org • www.ieakenya.or.ke • www.nta.or.ke

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