Government agencies, which collect about Sh400 billion annually in fees for government services, are facing increasing scrutiny over changes proposed by lawmakers aimed at improving accountability in spending public funds.
A committee report submitted to the National Assembly has referred to a change in the law governing how ministerial allocations for aid are collected and spent by various agencies such as the Ministry of Immigration and Citizens Services.
The Budget and Appropriations Committee has raised concerns about a growing trend of agencies underestimating the revenue they are likely to raise when preparing the government budget, only to raise the target later in the year.
Ministerial revenues are revenues collected by ministries, departments and various government agencies when providing services and are spent at the source after being allocated by legislators.
Some of the AiA receipts include a road maintenance tax levied at the rate of Sh25 per litre of petrol and diesel, a railway development tax of 1.5 per cent of the value of imports, a housing tax of 1.5 per cent of gross personal income matched by employers, a petroleum development tax, and university fees.
“The committee noted with concern that AiA constitutes a significant component of national government funding of about Sh400 billion in the proposed budget for the 2024/25 financial year,” the committee, chaired by Kiharu State Member of Parliament Ndindi Nyoro, said in the report.
“However, the agencies charged with collecting the income tax on income continued to underestimate the income tax targets on income during budget approval, only to seek an upward revision during supplementary estimates. This continues to limit the accountability and wisdom in the use of the income tax on income on income, a form of revenue collected from taxpayers.”
The Treasury has not officially released revenues in the AiA for the year ending June 2024, but data available for the nine months to March shows collections of Sh332.66 billion against a target of Sh285.68 billion – a performance of Sh46.98 billion.
As a result, the Budget Team has requested the National Treasury to prepare a comprehensive report on the sources and expenditures of all national government general revenues by ministry, department and agency and submit it to the House of Representatives by December.
The report recommends that “the report also includes practical proposals for reviewing the legal frameworks governing the collection and use of various land use revenues to provide a comprehensive legal framework for governing this critical source of revenue.”
“Underestimating the AiA during budget approval leads to an increase in the budget deficit in the fiscal framework equally leading to additional borrowing.”
This comes at a time when the William Ruto administration has increasingly focused on cash in the accounts of state trading companies and semi-autonomous government agencies (SAGAs).
CEOs of SAGAs such as the Communications Authority of Kenya, the Capital Markets Authority and the Central Bank of Kenya are required to hand over up to 90 per cent of surplus funds, while commercial companies such as the Kenya Electricity Generating Company and the Kenya Power Company have been directed to remit 80 per cent of net profits.