By Peter Ochieng
The Council of Governors (COG) is up in arms over a bid by the Kenya Revenue Authority (KRA) to tax Own-Source Revenue (OSR).
OSR refers to rates, rents, royalties, stamp duties, registration and licensing fees and taxes from within their jurisdictions, collected by the 47 county governments, through the County Government Act (2012) and various other pieces of legislation.
COG chairperson Anne Waiguru who doubles up as Kirinyaga governor in a statement, said the move to impose Value Added Tax (VAT) on OSR lacks legal threshold.
The second term county boss termed it as unconstitutional, and an encroachment on the powers to impose taxes and duties of the Counties.
“We, therefore, find the demands by KRA on imposition of VAT on counties’ OSR unconstitutional and an encroachment on the powers to impose taxes and duties of the counties in contravention to Article 209 (3) and (4) of the Constitution.”
“Raising own source revenue by counties in its strict sense does not necessarily correspond with a service provided, nor does it fall under any stage of production. We therefore maintain that Kenya’s constitutional architecture does not envisage that the National Government will impose taxes on revenues raised by the County Governments,” she said.
Waiguru termed the move as illogical. “All finance laws enacted by counties do not load the revenue streams and sources with VAT as contemplated by KRA. Therefore, there is no logic at all for counties to charge VAT on their source revenue or to remit the same to KRA.”
She threatened legal action if KRA maintains the stand to tax OSR.
“We wish to state that if no action is taken and this unconstitutionality continues, we will be left with no option but to seek legal redress without any further reference to you.”
Waiguru noted that the Council is open to discussions, geared towards reaching an amicable solution on this issue.