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Equity and Fairness in Revenue Sharing Formulas: Analysis and Implications

This presentation by Lineth Nyaboke Oyugi, Director at CRA, explores the Third Revenue Sharing Basis and its impact on equity and fairness. The comprehensive outline covers the current framework, objectives, criteria, and comparison with previous formulas. Key aspects such as fiscal capacity, efficiency, and decision-making processes are examined, along with principles of responsibility on revenue sharing. The audience will gain insights into the challenges and opportunities in achieving equitable revenue distribution. Join the discussion on the implications of the Third Basis and its alignment with the principles of equity and fairness in resource allocation.

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Equity and Fairness in Revenue Sharing Formulas: Analysis and Implications

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  1. The Third Revenue Sharing Basis/Formula: Will this lead to Equity Presentation by: Lineth Nyaboke Oyugi Director, Research and Policy Commission on Revenue Allocation (CRA) Thursday, 4th March 2019 Uphold public interest

  2. The Principle of Equity/Fairness • Responsibility on Revenue Sharing: • Commission on Revenue Sharing • Parliament • Objectives of revenue Sharing • Criteria for Revenue Sharing • Previous framework for Revenue Sharing PresentationOutline

  3. Comparable intergovernmental financing framework • Framework for Third Revenue Sharing Formula • Comparison of the Current/previous formulae • Conclusions: Has the Third basis lead to Equity • Plenary Q&A session Presentation Outline Cont…

  4. Need • Minimum/ Maximum Shares • Fiscal Capacity • Effort • Efficiency • Decision Making Process The Principle of Equity/Fairness

  5. Commission on Revenue Sharing: Article 216 (1) • Parliament (Article 217(1): • Senate • National Assembly Responsibility on Revenue Sharing

  6. Commission on Revenue Sharing: Article 216 (1) • Parliament (Article 217(1): • Senate • National Assembly What revenue is being shared?

  7. What is being shared

  8. Sharing of Nationally Raised Revenues

  9. To enhance equitable service delivery • Fourth Schedule • Article 187 • Article 203(1)(d) • provide adequate revenues to ensure that county governments are able to perform functions assigned to them Objectives of Revenue Sharing

  10. Promote balanced Development • Article 203: • provides for economic optimisation • Consider development and other needs of counties • Address economic disparities Objectives of Revenue Sharing

  11. 3. Incentivise counties to optimize capacity to raise revenue • Counties have different endowments/ potentials • Article 209. Empowers counties to raise revenues • Article 203: provides for provision of incentives to optimise capacity to raise revenue Objectives of Revenue Sharing

  12. 4. Incentivise prudent use of public resources • Article 216(3)(c). Encourage fiscal Responsibility • Article 203 (1)(e): Provides for consideration of Efficiency of county governments Objectives of Revenue Sharing

  13. Comparable intergovernmental financing framework

  14. Review of Previous Bases

  15. Previous framework for Revenue Sharing

  16. Disconnect between Vertical and Horizontal Basis:

  17. 2. Measure of the Fiscal Effort used creates instability

  18. 3. Measure of poverty used creates instability

  19. 4. Unfunded Mandates Revenue sharing framework does not take into account unique needs of urban areas

  20. The Third Basis for Revenue Sharing

  21. Framework for Third Revenue Sharing Formula

  22. Framework for Third Revenue Sharing Formula

  23. Has the Third Basis Achieved Equity:1. Through the Basis2. Through implementation

  24. Equity/Fairness

  25. Equity/Fairness…

  26. Equity/Fairness…

  27. National government • County governments • Politicians • Citizens Fairness: Whose Perspective???

  28. Fairness: Whose Perspective??? • What do counties spend money on?

  29. 3 YEAR AVERAGE WAGE BILL EXPENDITURE (%)

  30. 3 YEAR AVERAGE DELOPMENT EXPENDITURE (%)

  31. Has the 3rd Basis addressed the following principles? • Need • Minimum/ Maximum Shares • Fiscal Capacity • Effort • Efficiency • Decision Making Process Fairness???

  32. Third Basis for Revenue Sharing • Plenary Q&A session

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