Revenue System at City Hall is Under Interior Docket, Tax Authority Reveals

KRA head of legal services Sylvester Okello tells House Ad hoc Committee the NRS System is owned by national government.

The Inter-governmental Budget and Economic Council (IBEC) chaired by Deputy President Rigathi Gachagua is cited in the revenue collection system at City Hall.

The national government holds the key to the controversial revenue collection system used by Nairobi City County Government, Kenya Revenue Authority has disclosed.

Nairobi City County Assembly Ad hoc Committee was told the system known as Nairobi Revenue Service (NRS) is a national government multi-agency product in which state security organs led by the Ministry of Interior were involved.

“The NRS is a product of a multi-agency team that was spearheaded by the Ministry of Interior. It is a national government revenue system under the ministry of Interior”, KRA Chief Manager Legal Services, Mr Sylvester Okello told the Committee on Friday, December 15, 2023.

The probe Committee heard that an ambitious national government plan to introduce a reliable revenue system for the counties was kicked off at the National Treasury by the Inter-governmental Budget and Economic Council (IBEC) which is chaired by Deputy President Rigathi Gachagua.

Among other issues, the Committee also seeks to establish the location of the NRS servers, which has remained a mystery to City Hall administration and the county government ICT officials since its installation about three years ago.

All Nairobi county sector heads involved in revenue collection only have viewing rights to the system dash board. They cannot log in to query transactions, the officials who appeared before the Committee said.

KRA Deputy Commissioner Anastacia Githuba who heads the delegation from the Times Towers at the inquiry told the Ad hoc Committee that a national government policy was formulated to develop a revenue system that would serve all the 47 county governments.

Mr Okello said that upon execution of a Service Level Agreement between the county government Hall and KRA as a government agency, the Nairobi Metropolitan Services (NMS) introduced him to IBEC in search of an ideal revenue collection system for City Hall.

“The NMS introduced me to the Joint National and Resource Mapping (JOINARM), an inter – government agency that was under the Interior and Defence dockets, which was developing government revenue collection systems”, the KRA chief counsel told the Committee.

***Ad hoc Committee Chairman and Leader of Majority Jateso Peter Imwatok (left) and Vice Chairman Wilfred Odalo***

The Ad hoc committee is probing revenue systems and administration in Nairobi county government through a public inquiry. It also seeks to establish why the county revenue has been dwindling over the years.

For a period of two years, the defunct NMS was the government agency in charge of the devolved functions which had been transferred by Nairobi City County Government to the national government through a Deed of Transfer that was signed by Governor Mike Mbuvi Sonko in February 2020.

The County Assembly has constituted a 13 – Member Ad hoc Committee chaired by Makongeni Ward MCA and Leader of Majority, Jateso Peter Imwatok to carry out a public inquiry into the County revenue collection systems and administration since the advent of devolved government, between 2013 to 2023.

During the third sitting of the Committee on Friday, Mr Okello submitted that Clause 5.4 of a Service Level Agreement ( SLA) between Nairobi City County Government and KRA provided that the latter would provide a revenue collection platform for the county government customers.

“We wanted to collect revenue but an effective system was not available. We therefore had an obligation to provide a revenue platform for the customers”, he said.

The Committee heard that while in the process of developing a new revenue system for Nairobi county, KRA also considered a Sessional Paper that had been approved by the County Assembly for the county government to acquire a modern revenue collection system.

“One of the recommendations by the County Assembly was that the county government needed to get a modern system that was customer centric to support the its revenue collection, especially on integrated services”, the Committee was told.

At one stage during his submission, Mr Okello found himself in a tight corner when Committee Chairman Imwatok and Vice Chairman Wilfred Odalo demanded that he furnishes the Ad hoc secretariat with relevant communication on the process of acquiring a new system.

The Committee compelled him to make further submissions on oath after he became contradictory in his presentation, short of being declared hostile during the proceedings.

In the first three sittings of the public inquiry into the county revenue collection system and administration, county employees, the workers representatives and members of the public who appeared before the Ad hoc Committee described the NRS as an ‘opaque system’.

All the county heads of various sectors who appeared before the Ad hoc Committee concurred that the NRS had several administrative challenges, especially the aspect of opaqueness there was no access apart from viewing rights only.

Sector and sub-sector heads involved in revenue collection want the system done away with or made more user friendly if the county has to enabled improved revenue collection through system efficiency, accountability and effective monitoring.

Revenue streams facing challenges include markets, food hygiene, license and food handlers, building permits, construction boards/regulation of buildings, single business permits, billboards and advertising, fire inspection, parking fee and house rentals among others.

During the public proceedings at Charter Hall last week, the Ad hoc Committee heard that Kenya County Government Workers Union (KCGWU) advised Governor Johnson Sakaja to change the controversial revenue collection system that was introduced by the defunct Nairobi Metropolitan Services, to no avail.

“As a Union, we talked to the governor immediately he took office and advised him to get rid of the NRS if at all he wanted to get the potential revenue”, Mr Kennedy Malimo told the Committee.

The Union official recalled how Governor Sakaja had in his first Kamkunji with all the county employees upon taking office, asserted before the workers that “this NRS will go together with KRA”.

Mr Malimo who the Union’s Nairobi county branch chairman narrated to the attentive Committee how the governor chaired the first staff Rapid Results Initiative (RRI) meeting which was also attended by all the concerned KRA officials.

“Whenever an employee rose to complain about the NRS, he or she was shut down by the governor: Usituambie mambo ya system hapa…you people are failures. Don’t complain about systems”, the Committee heard.

Malimo explained that he had attended several staff meetings where county workers who complained about the system could either be shut down by Deputy Governor Njoroge Muchiri or the governor himself.

“Officers were chased out of the meetings for highlighting faults in the system. Some were chased out of staff meetings for querying the system challenges”, Mr Malimo said.

Members of the Committee are the Leader of Majority Peter Imwatok (Chairman), Paul Kados (Deputy Speaker), Anthony Kiragu (Leader of Minority), Joyce Muthoni (Deputy Minority Whip), Wilfred Odalo (Vice Chairman), Silas Matara, Nicholas Juma, Fathiya Abdilahi, Fredrick Njogu, Carrington Heho, Jane Musangi, Diana Katile and James Karis.

Nairobi Revenue Service was introduced at City Hall by the defunct NMS to administer revenue collection following a transfer of functions by the county government to the national government for two years under a Deed of Transfer.

Ms Githuba told the Ad hoc Committee that when KRA arrived at City Hall various several revenue collection platforms were in place but upon assessment, they were found to have gaps.

***Nairobi Count CECM for Finance Mr Charles Kerich at the Ad hoc Committee proceedings. On his right is the County Chief Officer Finance Asha Abdi***

Following the Deed of Transfer, the County Executive Committee Member for Finance and Economic Planning Planning had to appoint KRA as the principal revenue collection agent under provisions of the Public Finance Management (PFM) Act, for a period of 24 months, effective from 16th March, 2020.

The Deputy Commissioner pointed out that upon expiry of the Deed of Transfer, KRA left in September 2022.

However, Ms Githuba pointed out to the County Assembly probe Committee that Governor Sakaja wrote to the national tax Authority extending for two years her stay and nine other KRA officers whose names and duties were specified in his letter, for a further two years for transition purpose.

Nairobi County Secretary, Mr Patrick Analo in a brief response confirmed to the Committee that he was aware about the request. KRA had seconded 130 officers to the NMS.

A Committee Member, Diana Katile sought to know whether Anastacia and the nine other KRA officers were being remunerated by the county government. Ms. Katile further asked whether there was an extension of the contractual agreement between KRA and the county government after expiry of the Deed of Transfer.

In response the County Executive Committee Member (CECM) for Finance and Economic Planning, Mr Charles Kerich said: “I am aware about the governor’s request for a small team to remain behind for the transition purpose”.

However, the response stirred a hornets’ nest attracting a barrage of questions from Members of the Ad hoc Committee, whether there was a fresh contract between the county government and KRA after expiry of the Deed of Transfer.

The Leader of Minority, Anthony Kiragu raised concerns whether the governor had independent authority to extend the contract of KRA officers in the manner it was done.

***Kenya Revenue Authority Deputy Commissioner Anastacia Githuba and the Chief Manager Legal Services, Sylvester Okello at the Nairobi City County Assembly Ad hoc Committee hearing.***

KRA Deputy Commissioner told the inquiry team it was a request by the governor and the Service Level Agreement was not reviewed.

Further, she pointed out that the small team of 10 KRA staffers was not responsible for revenue collection.

But her statement was contradicted by KRA Chief Manager Finance, Mr Hanningto Ogare in his submission to the Ad hoc Committee. He confirmed the tax Authority was still collecting revenue belonging to the county government long after the Deed of Transfer expired.

“We still collect. We still have money being paid into the KRA collection account”, he said.