How resources are shared can be a source of friction between Kenya’s central government and its 47 new counties. Established by the 2010 constitution, the counties came into operation in 2013.
Their governments often want a larger share of the resources in their territories. Paul Chepkwony, the governor of the tea-rich county of Kericho, recently demanded a bigger slice of revenues from tea exports.
He based his demand on developments in another county. The discovery of oil in the northern Turkana county led to sometimes very public fallouts between governor Josphat Nanok and President Uhuru Kenyatta.
“Whereas Turkana county gets 30% of the revenue from petroleum, the government gets billions of dollars from our tea but we receive nothing,” Chepkwony was reported as saying in September 2018.
‘We just want to benefit like Turkana’
Chepkwony told Africa Check that the 30% figure was derived from a 2014 bill setting out how revenue earned from the country’s natural resources should be shared.
The bill proposes that 20% of these funds go into a sovereign wealth fund. Out of the remaining 80%, the national government would get 60% (48% of the total) and counties 40%, or 32% of the total.
“We just want to benefit the way Turkana has,” Chepkwony told Africa Check.
But Turkana has not yet exported any oil and so hasn’t received any money for it, Rosemary Nchinyei, the county’s director of communication, told Africa Check.
Does Kericho ‘get nothing’ from tea?
Kericho county has received close to KSh80 million from tea cess in recent years. “Cess” is defined as a “a levy on tradable agricultural produce”:
- KSh71.4 million in ad valorem (based on the value of) cess from March 2012 to May 2016.
- KSh6.96 million in tea cess from the Agriculture and Food Authority in 2016/17. This is recorded in its 2018-2022 development plan.
The national government collected the ad valorem levy from the county’s tea exporters at a rate of 10% of the tea’s value, the agriculture authority’s interim director, Anthony Muriithi, told Africa Check. The levy was scrapped in 2016.
The KSh6.96 million received in 2016/17 was arrears collected in 2012 under a law that has since been repealed, he said.
“Currently, the national government does not collect or levy any cess from tea,” Muriithi said. “But the constitution allows county governments to impose taxes, including cess, in their jurisdiction so long as they enact the necessary legislations.”
Since 2014, Kericho has been levying agricultural cess on transporters of tea, but Africa Check has been unable to verify the amount collected so far. (Note: The county collected KSh253.4 million as own revenue in the financial year 2016/17.)
National taxes are shared with counties
Kericho county has also indirectly earned revenue from its tea growers and processors.
“The national government, as of now, taxes the profits made by the corporations and companies that produce and process tea in Kericho,” Dr Amenya Nyakundi, an adviser on natural resources at the Commission on Revenue Allocation, told Africa Check.
The commission makes proposals on how revenues should be shared between the national government and the counties.
Taxes collected by the national government do make their way back to the counties in an “equitable share”. Kericho received KSh5.2 billion of these taxes in the 2017/2018 financial year.
The Kericho governor had “a right to make and justify a petition to the national government to get a share of that tax revenue before it is consolidated with tax revenues from elsewhere”, Nyakundi said.
But if this were granted, other counties might also demand a share of their resources – leading to “serious national revenue sharing challenges”.
Conclusion: Kericho county has received levies and taxes from tea production.
The governor of Kericho, an important tea-growing area, said Kenya’s national government earned “billions of dollars” from the county’s tea production but the county itself got nothing.
He demanded that Kericho should benefit from tea in the way Turkana country benefited from oil. Turkana is however yet to pocket any money for its oil.
But Kericho’s government has received money from its tea industry. First, it has earned close to KSh80 million in levies on tea in recent years.
Second, the national government taxes Kericho’s tea growers and processors. Part of this money finds its way back to Kericho in the “equitable share” of taxes that the national government distributes to counties.
Kericho received KSh5.2 billion in the equitable tax share in the 2017/2018 financial year.
We therefore rate the governor’s claim as incorrect.
Edited by Lee Mwiti
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