APRM • SECOND COUNTRY REVIEW REPORT OF THE REPUBLIC OF KENYA Box 4: Good Practice – Revenue Generation Recent statistics show that the revenue ratio (that is, total revenue/GDP) gradually rose from 18.8% in the 2012/2013 fiscal year to 20.5% in the 2015/2016 fiscal year. Consequently, the Government of Kenya has been able to underwrite about 80% of its total expenditure from the revenue collected. This is good. The increase in government revenue is attributed largely to improved tax administration. It should be recalled that the Kenya Revenue Authority (KRA) granted tax amnesty in which interest payment on all tax arrears was waived in 2004. Thereafter, there was increased emphasis on the principle of self-assessment and the use of personal identification number and electronic tax registers (ETRs). 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 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. Legislative Framework 336. Sound financial management is emphasized and significant progress has been made. The government has made laws with respect to PFM in line with the procedures and timelines prescribed in the constitution. Some of the laws are the Commission for Revenue Allocation Act 2011, the Salaries and Remuneration Commission Act 2011, the Independent Offices (Appointment) Act 2011, the National Government Loans Guarantees Act 2011 (repealed), the Contingencies Fund and County Emergency Funds Act 2012 (repealed) the Transition to Devolved Government Authority Act 2012, and the Public Finance Management (PFM) Act, 2012. These laws are to ensure that there is prudent financial management at the national and the county levels in order to have value for money. Institutional Reforms 337. In order to enhance the efficiency and effectiveness of budget execution, the Office of Controller and Auditor-General was split into two, namely, the Controller of Budget and Auditor- General as constitutionally required. In order to strengthen the oversight functions of the parliament over budget matters, the Government established the Parliamentary Budget Office to provide technical support. The PFM Act 2012 has also strengthened the audit committees. The Act provides that the various Ministries, Departments and Agencies (MDAs) and county governments should constitute an audit committee whose membership will be outsiders. | 158 |