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… Cess collection accounts for about 2% of countys’ revenue and it’s recommended that counties should continue charging it since it’s an important source of income. However, revenue collection from cess has been low and is attributed to visual estimation of trucks load capacity by collectors without verifying the quantities or weight charged for. Improving cess collection thus requires rethinking the collection procedures and methods.

Cess is a levy imposed on tradeable agricultural produce by county governments. It is intended to help improve production and distribution of agricultural commodities. Before the new Constitution became effective, Agriculture Act Cap 318, Section 192A gave powers to Local Authorities through consultation with and the consent of Minister for Local Government to collect produce cess. The Act also directed that 80 percent of the cess collected be used to maintain and improve infrastructure and other services for the agriculture sector. The promulgation of the new Constitution (2010) ushered in two types of governments, national and the county governments thus rendering the old laws redundant. The counties were authorized to collect taxes, including cess to deliver services to their people. Contrary to opinion held by Millers and the public in general, cess is not charged in every county while maize is on transit. It is charged at the source county and destination markets. Transporters only need to show proof of payment at the source county.
While this is an important source of revenue, losses have been reported which could be attributed to lack of verification of the actual number of bags of maize being transported. It has been established that cess collectors instead opt for arbitrary levying depending on their agreement with the transporters. It is a common practice by many traders to fill the vehicles way beyond the required capacity in order to minimize the unit cost.

While the new Constitution allows counties to charge cess, there are perceptions that rates have increased in the counties, which may not necessarily be the case. In the counties visited by the Tegemeo Institute research team, cess rates have changed little if at all, from what was charged by local government authorities. What has changed is the number of collection points, which could be a basis of this perception. Traders aggregating maize pay cess in all the counties where they source the commodity as well as the county in which they are based. They have devised various ways to avoid/lower taxation mainly by use of extended bags. For instance, a standardized bag of potatoes weighs 50 kg but traders use extended bags that weigh up to 70 kg, but still pay the same amount of KES 40 as cess levies.

The survey conducted by Tegemeo Institute established that cess contributes about 5% to the overall cost of marketing maize in Kenya. It is the main levy charged on maize and Irish potatoes, with trade licenses being the other form of taxation. County revenue officials justified levying cess to support infrastructure development in the counties and other services including agriculture. Cess collection goes to the general treasury pool to be used together with other county funds and is allocated based on the priorities of counties.

According to Nicholas Odhiambo, a researcher at Tegemeo Institute, Cess collection seems to benefit the destination markets more than the source county. For example Trans Nzoia county charges KES 17 for a bag of maize, while the same bag is charged KES 70 in Nairobi. In trading 15 million bags of maize, North Rift counties will collect KES 255 million, while Nairobi County would collect KES 954 million. Odhiambo adds that the study suggests the restructuring of cess collection mechanisms at the county level. “County governments should think of introducing appropriate technologies for weight measurement and verification. This approach will reduce loss of revenue at cess collection points”, he says. Adoption of electronic receipts which are already being implemented in Nakuru County can streamline and enforce compliance with cess collection procedures to increase revenue. In addition, counties should collaborate and introduce heavy fines on offenders at each county to discourage defaulting.

Report by Nthenya Kinyumu and Nicholas Odhiambo

Tegemeo's Research Associates