APRM • SECOND COUNTRY REVIEW REPORT OF THE REPUBLIC OF KENYA 4. 2.77 A very significant transformative change in Kenya’s history of governance is devolution of governance that is enshrined in the Constitution. The two levels of government provided for in the Constitution are the national and county governments, which are distinct and interdependent. Both levels of government are required to maintain mutual relationships through consultation and co-operation. The expectation of Kenyans is that the devolved system of government will promote good governance through participation, and enhance service delivery and raise their welfare. Three years in its implementation, the people of Kenya are generally happy with devolution because it has initiated and improved participation and consultation in governance. Also, devolution has increased the provision of social services (e.g. healthcare, education, roads and electricity), especially in the rural communities and counties have now become new centres of economic activities and growth. Indeed, devolution in Kenya, in terms of design, legislative and institutional structures, among others, is capable of promoting inclusive growth. 5. 2.78 High revenue generation Recent statistics show that the revenue ratio gradually rose from 18.8% in the 2012/2013 fiscal year to 20.5% in the 2015/2016 fiscal year. This has enabled the Government of Kenya has been able to underwrite about 80% of its total expenditure from the revenue collected. The increase in government revenue is attributed largely to improved tax administration. Other significant measures taken are tax education, Integrated Tax Management System (ITMS), the holding of a National Tax Day, revision of the legislations relating to excise and income taxes and VAT reforms, and landlords were brought into the tax net. The government amended the Income Tax Act to deal with the issue of tax avoidance by multinational companies. In addition, the Kenya Revenue Authority (KRA) established a Medium Tax Office (MTO) to collect taxes from medium taxpayers as well as to reach the hard-to-tax informal sector of the economy; and a review of the turnover tax regime. The collective effect of these measures was increased revenue generation. 6. 2.79 Devolution Mobile banking through the M-Pesa platform Kenya is a world leader in mobile banking. Its landmark M-Pesa platform, a service offered through a partnership between Safaricom and Vodafone, allows a range of money transfer, cash-flow management and banking options through mobile phones. Launched in March 2010, M-Pesa counted more than 9 million customers in January 2010, and has received worldwide acclaim as many countries are working to emulate its successes. A number of African countries have mobile banking platforms modelled on the M-Pesa. Mobile banking has revolutionized banking and assured financial inclusion of majority of Kenyans, who otherwise are left out by mainstream banking systems. | 50 |