Today marks the launch of phase 2 of the training and assessment of the County revenue administration systems in five Kenyan Counties – Mombasa, Isiolo, Garissa, Lamu and Busia.

This second phase comes in the wake of the first phase completed in December 2020 in another three Counties – Kilifi, Kisumu and Makueni. This initiative is part of the United Nations support to the evolving Kenya’s devolution process delivered through the UN Joint Programme on Devolution in Kenya.

The programme is comprised of the UN Development Programme (UNDP), UN Children’s Fund (UNICEF), and UN Women and supported by Sweden, Finland, and Italy. This programme focuses on improving County governance capacity in areas related to poverty reduction and fighting inequality and discrimination and is designed to support improved Public Financial Management (PFM); performance monitoring and reporting; resilience to environmental risks as well as citizen engagement and inclusiveness (especially policy concerns of women, youth, children, persons with disability and other marginalized sub-population groups).

Participants in Busia County during Phase 2 TADAT training and assessment

The initiative is also supported by the UN Capital Development Fund (UNCDF) and the International Monetary Fund (IMF) to include some Counties outside the Joint Programme to ensure a nationally representative sample of Counties with different socio-economic characteristics. UNCDF is responsible for the overall implementation of the activities designed to enhance fiscal sustainability, resilience and autonomy of Kenyan Counties.

Devolution has resulted in expanded reach of services at the grassroots of the country, reversing the past trend of uneven development and growing disproportions of economic opportunities that have caused poverty in many regions and communities. Increased budgetary allocations, including through the marginalization fund, have resulted in expanded road and telecommunication infrastructure, oil and gas prospecting initiatives, market access for local products and improvements in targeted health sector areas such as maternal health.

The third Medium-Term Plan (MTP III) of Vision 2030 has sharpened focus on a set of integrated sectoral interventions in pursuit of the Big Four Agenda.
Devolved governments are fairly new. The policy, legal and institutional arrangements put in place are still nascent and will need to be continuously reviewed and revised based on real experiences on the ground.

Fiscal autonomy and sustainability of counties to create an adequate fiscal space for service delivery and inclusive local development remain a challenge. Hence, an important objective of the Joint Programme is to improve County capacities for own-source revenue projection, generation, collection, and reporting.

To this end, UNCDF in cooperation with the African Tax Administration Forum (ATAF) and supported by the International Monetary Fund’s TADAT Secretariat plans to conduct TADAT training and assessments using the Tax Administration Diagnostic Assessment Tool in 14 target counties to achieve the following objectives:

• Capacity building for the County officers on what constitutes international best practice for an inclusive tax administration/County revenue administration for the various performance outcome areas
• Identify the relative strengths and weaknesses of the County revenue administration system by reference to each indicator.
• Provide baseline and set the reform agenda for an inclusive County revenue administration by focusing on the key initiatives which can enhance revenue administration at County level.

Given the lessons learnt during Phase 1 of the TADAT training and assessments in Kilifi, Makueni and Kisumu Counties, assessments underscored the need for more conducive legal and regulatory environment for Counties to be able to improve their revenue generation, increase compliance levels to proactively engage taxpayers, simplify tax legislations and explore partnership for better engagement, comprehensive revenue automation for revenue collection is paramount, coupled with better administrative capacity and cost-effective collection practices.

Recent research suggests a substantial unrealized County revenue potential between 35% and 94% for different County revenue sources.

The Tax Administration Diagnostic Assessment Tool (TADAT) is an internationally recognized tool developed by the International Monetary Fund (IMF) and applied by tax administrations globally to establish the strengths and weaknesses in revenue administration to guide their reform agenda.

Initially designed for assessments at the national level, the IMF developed a version relevant for the subnational level that is also applicable to the Kenya context. The outcome of TADAT assessments guide counties on processes requiring improvement to enhance own source revenue collection and accountability to achieve the development agenda of the Counties, including further policy advice and support to tap into alternative revenue sources towards achieving the Sustainable Development Goals (SDGs).

On behalf of the UN Joint Programme on Devolution, UNCDF is very grateful to the Council of Governors, Commission on Revenue Allocation and the respective County governments for their support to this initiative and looks forward to working closely with the Counties (Mombasa, Isiolo, Garissa, Lamu and Busia) on these assessments as well as on implementation of the assessment recommendations and reforms of their revenue administration.