Fiscal decentration and the enhancement of county own Source revenue: a study of the dynamics of implementation of Busia countycess act

Abstract

The devolved system of government introduced in Kenya in 2013 ushered in fiscal decentralization, granting counties the autonomy to collect and manage their own-source revenues (OSR). Embedded in the Constitution and supported by legislations, OSR was further guided by a National OSR Policy formulated by the Government of Kenya through the Commission for Revenue Allocation (CRA). This policy aimed to streamline county OSR processes, becoming crucial for sustained service provision by county governments, particularly as an alternative financing source when the equitable share disbursement faces challenges. Despite these initiatives, the anticipated benefits of fiscal decentralization have not been uniformly realized. A prime example is Busia County, where a mere 20 percent of the projected OSR was in collected in 2022, significantly below the national average. This declining trend over five years triggered the need for an in-depth examination of the factors impacting OSR implementation, focusing on the Cess Act – a legislative tool governing the collection and administration of agricultural product revenues. Given Busia County's agrarian economy, this study sought to assess OSR Policy implementation within the framework of the Cess Act. The study pursued three specific objectives: firstly, to scrutinize the legal and policy frameworks shaping the enactment of the Cess Act for agricultural produce collection within Busia County Government; secondly, to dissect the obstacles impeding effective administration and collection under the Cess Act in the county; and lastly, to evaluate the efficacy of the collection and administration strategies outlined by the Cess Act. Through a mixed-method approach, this research engaged diverse stakeholders engaged in agricultural revenue processes, spanning taxpayers to tax officers. Stratified into three tiers, these actors formed the analytical unit, facilitating a comprehensive understanding of challenges and dynamics. Data collection encompassed document analysis of pertinent county and national reports, quantitative data from semi-structured questionnaires, and qualitative insights from focus group discussions and key informant interviews. Study sample population encompassed 461 based on Fischer et al. 1998 adjusted 20% upwards to cater for unforeseen limitations to participation. The findings offered valuable insights into Busia County's OSR landscape. They uncovered legal and policy gaps, and operational challenges that hindered effective Cess collection and administration. Beyond the empirical results, the study's theoretical underpinning of fiscal decentralization shed light on the intricate interplay between policy intent and on-ground hurdles. In conclusion, this study's inquiry into OSR Policy implementation through the Cess Act within Busia County illuminates the intricacies of revenue collection and administration. It bridges the gap between policy aspirations and implementation realities, enriching the understanding of fiscal decentralization dynamics in the Kenyan context. The study underscores the urgency for coherent legal frameworks, efficient strategies, and meaningful stakeholder engagement to advance sustainable county development.