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Public Revenue and Expenditure

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Sources of Public Revenue

In definition, public revenue is the the money that the government receives from various sources like taxes, fees, and foreign exchange.

The various sources of revenue for national government include;

  • Direct taxes like Pay As YouEarn (PAYE), Income tax, Airport tax, Game Park, Museum fees, entrance fees by tourists
  • Indirect taxes: eg. Value Added Tax (VAT), Excise duties, sales taxes, export tax, import tax or custom duties, traffic revenue taxes, investment revenue tax, loan interests, land rates, house rates
  • Loans from International Financial Institutions
  • Profits from parastatals
  • Revenue charged on government investment
  • Grants from other foreign countries
  • Sale of government bonds
  • Aviation revenue

The various sources of revenue for county governments include;

  • Grants from the national government
  • Donations from corporates and wealthy people
  • Fines from law breakers
  • Rates from plots and land
  • Loans from financial institutions
  • Cess- taxes charged on cash crops eg. Tea and coffee
  • External grants from foreign countries
  • Market fees collected from traders

Expenditure and Management of Public Revenue

Governments spend revenue in two ways; recurrent and development expenditures

Recurrent Expenditure

This refers to funds used by the government to sustain and maintain the existing facilities and services and may include the following;

  • Wages and salaries for governmenmt workkers
  • Purchase of equipment
  • Purchase of drugs
  • Purchase of stationary
  • Repair and maintenance of buildings and roads

Development Expenditure

This is used in reference to the money that is set aside by government for development projects.
It could include the following;

  • The establishment of essential facilities such as schools, colleges, dams, and irrigation projects
  • Infrastructural development such as roads, air ports, bridges, and port harbours
  • Provision of social services like health and education

Financial Management

The revenue that has been raised in the country should be shared in an equal manner between the national government and the county governments.
There are three accounts for financial controls of both levels of governmenmt as follows;

  • Consolidated fund made up of all the money raised or received by or on behalf of the national government
  • Equalization fund that receives one half of the total annual revenue to provide basic services in marginalized areas
  • Revenue accounts in different county governments that receive all the money raised or received on behalf of the respective county government

The Commission on Revenue Allocation

Commission of Revenue Allocation is an institution established under the Constitution of Kenya to assist the government in offering efficient services to the citizens.
The commission is given the main responsibility to give recommendations to the Ministry of Finance on how to allocate finances to national and the county governments.
The following are the main functions of the revenue commission;

  • Decide the basis for the sharing of revenue raised by the national government
  • Encourage fiscal responsibility and financial accountability among the national and county governments
  • Make recommendations on how finances should be managed by the county governments as required by the Kenyan Constitution
  • Submit the recommendations to the Senate, the National Assembly, the National Executive, County Assemblies and County Executives
  • Determine, publish and regularly review a policy which sets the criteria for identifying the marginalized areas.

Test Your Knowledge

Click below to generate a short, interactive 5-question quiz based on this lesson.

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