ABSTRACT
The introduction of county governments with the adoption of the new constitution has brought with it challenges in administration of these new institutions. This is particularly the case with revenue collection in the county governments whereby the revenue collected has in many times been below the projected figures. This has resulted in financial challenges in the delivery of services to the public. The purpose of this study was to establish the factors affecting revenue collection in Nairobi City County Government. The specific objectives of the study were to: establish effect of revenue diversification on revenue collection, establish the effects of administration on revenue collection, assess the effects of tax structure on revenue collection and find out how different forms of revenues affects revenue collection. The study adopted a descriptive research design. The study population comprised of a total of 340 members of staff working as chief officers, technical staff and members of Nairobi City County assembly. The sample size was determined using the Fischer‟s formula. The sample size for the study was 180 which were distributed proportionately among the strata. The study used a survey questionnaire as a research instrument. Data collected was analyzed with the help of SPSS by both descriptive and inferential statistics. The results were presented in form of tables and graphs. The study adopted a multivariate regression. The study found that revenue diversification affect revenue collected through number of sources of revenue and new policies to a great extent. Tax administration affects revenue in Nairobi City County through competent staff, availability of computers, availability of postal communication system and tax education. Tax structure affects revenue collection through flexibility, equitability, neutrality and simplicity while different forms of revenue (property, business license) affect amount of revenue collected. Revenue diversification had a positive and significant relationship with amount of revenue collected whereas different forms of revenue collected had positive and significant effect on amount of revenue collected in Nairobi City County. The study concluded that revenue diversification strategies increases the amount of revenue collected, with a good tax administration practices like competent staff and adoption of latest technology, the amount of revenue collected increases. A good tax structure that is flexible, simple and economical, the amount of revenue collected will be high. The study recommends on the use of latest technology and competent staff in tax administration, also there should be more innovations to have diversified sources of revenues in Nairobi City County in order to collect more revenue. The financial managers and policy makers in Nairobi City County assembly should come up with new sources of revenues and taxes that obey the canon law of taxation that is economical, simple, flexible and easy to administer.
CHAPTER ONE
INTRODUCTION
1.1 Background of the Study
The fundamental sources of own revenue for urban areas are normally property taxes, business licenses, market fees and different user charges. They can possibly give dependable revenue if all around managed, yet practically speaking all have genuine limitations. For property tax, the primary drawbacks incorporate powerless ability to actualize exact valuation practices; poor methods of collection; absence of clear possession titles; and absence of political backing for enforcement. Business licenses make high consistence costs because of complex techniques; may not reflect capacity to pay; give chances to rent seeking; and are regularly ineffectively controlled, so they produce little revenue. User fees may empower productive utilization of public sector resources; additionally experience the ill effects of defects such as inequitable burdens on low income users, insufficient accumulation and billing plans, low quality administrations and persistent imperviousness to payment. Nonetheless, experience additionally indicates open doors for change, including streamlining strategies for property valuation and upgrading aptitudes; making business permit frameworks easier, more transparent and successful, for instance by presenting single business license frameworks; and enhancing consistence in paying user fees for instance through shared private water taps in informal settlements (Fjeldstad, and Heggstad, 2013).
Key issues influencing voluntary compliance and social collaboration incorporate trust of citizens in others, and the apparent reliability of government. Local governments have tried different things with an assortment of alternatives to enhance collection of tax including outsourcing accumulation to central government, private specialists and semi-private partners, for example, market cooperatives. For instance, in Tanzania accumulation of property taxes, market fees and different duties have been outsourced to a scope of different specialists. The confirmation is uncertain in the matter of whether outsourcing has prompted better revenue organization; notwithstanding, it can build up a stage from which future change can be encouraged. Achievement relies on upon the nature of local government administration, the degree of political backing for change, and the procedure transparency.
Evaluating revenue potential can be an issue: in the event that this is thought little of, it can bring about a specialist catching a disproportionate amount of revenue gathered (Fjeldstad, 2006).
1.1.2 Public Finance under the Devolved System of Government in Kenya
The Constitution of Kenya, 2010 and the Public Finance Management (PFM) Act, 2012 have tied down public finance on the standards of responsibility and clear fiscal reporting. Section twelve on Public Finance addresses the financing of the elements of the two levels of Government towards an impartial society based on account openness, responsibility and public interest in financial matters. The Constitution further creates new institutions with changing forces and obligations over the administration of public finances administration at both levels of government. They incorporate the Commission on Revenue Allocation (CRA), with the duty to make suggestions on the criteria for fair sharing of national revenue; the workplace of the Controller of Budget to supervise the usage of the national and county spending plans; and the Auditor-General to review the accounts of all substances supported from public assets, including National and County Governments.
Alongside the division of responsibilities between the National and County Governments, the Constitution further presents fiscal equality in the spending procedure where three arms of Government, that is the Judiciary, Executive and Legislature get ready individual spending plan different to the past. The implementation true test of the decayed administration framework lies in strict devotion to the set up public finance and administration frameworks (PFM Act, 2012). Under the Financial Aspect of Devolution, there are rules that apply and funds obtained by counties must follow guidelines indicated by the current Kenyan Constitution; (a) The Power to Raise Revenue. A county can create revenue through taxation article 209(3). It might impose property rates, entertainment taxes and any other tax that it is approved to administer by an Act of Parliament. (b) Collecting of Revenue in the new constitution, it is indistinct how revenue generated will be gathered. Organization of revenue includes the accumulation of taxes once they have been resolved. Under the old constitutional framework, local authorities should gather their own taxes. Experience shows that huge numbers of them had no ability to release this capacity. With the new constitution, it is still a subject of level headed discussion whether the KRA will gather revenue in the interest of the counties or whether it should help the counties in building their own abilities to gather their own particular revenue. (c) The ability to spend revenue. The county governments can raise and spend what they raise. Be that as it may, what the national government collects is to be shared among the two levels of government.
Article 202 accommodates the idea of evenhanded shares. The article requires that revenue raised by the national government be shared evenhandedly between the national and county governments. The county governments may likewise be given extra portions from the national government's offer of revenue. These extra revenues might be given restrictively or unequivocally (Kramon and Posner, 2011). Article 203 gives a detailed standard to be followed in vertically deciding the fair shares of both the national and county governments from one perspective; and evenly among the 47counties. This standard joins the standards of financial balance which must be followed while deciding the shares. Collection of revenue in Nairobi City County has been challenging due to the perception in the public that there is decreased revenue alongside increased service demands (Lagomarsino, Garabrant, Adyas, Muga & Otoo, 2012). Many services go undelivered allegedly due to insufficient funds to cater for the said services just like other Local Governments therefore failing to meet their legal obligations. Many studies have been carried out in the country to improve local participation in developmental matters and governance to the people as well as financial management in order to put available revenues into better use. However, there is lack of enough studies to assess issues affection revenue collection in local Governments and this scenario therefore informs this study to investigate factors affecting revenue collection in the Nairobi City County with a view to identify the causes and gaps and take corrective measures to avert the same. This in turn offered additional contribution to already complete studies in revenue mobilization and its uses in Local Governments.
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Item Type: Kenyan Topic | Size: 66 pages | Chapters: 1-5
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