The Nature of Local Revenue Decisions within the Decentralized Structures in Kenya
IntroductionLocal revenue structures reflect the blend of the decisions made at the subnational government level and are affected by the local laws, historical patterns, competitive pressures and administrative realities (Bartle, Kriz & Morozov, 2011). In practice, country-specific factors play a crucial role when considering optimal ways of dividing revenue responsibilities between national and sub-national governments (Fjeldstad & Heggstad, 2012). The local revenue policy is a mixture of principles, practical considerations, political decisions, historical context, and interactions among local governments possibly involving strategic or self-interested behaviour by local actors (Bartle et al., 2011). Furthermore, the administrative capabilities of sub-national governments in developing countries must be taken into consideration when designing revenue decisions (revenue bases and rates) (Modica, Laudage, & Harding, 2018).Subnational governments are creatures of the state, and so the structure of state tax and expenditure policy largely determines the fiscal powers donated to local governments. States always determine which revenue instruments are available to subnational governments and impose tax and spending limits, which further constraints their revenue collection. Thus, the productivity of revenue systems of the subnational governments and their administrative and political acceptability is subject to change (Bartle, et al., 2011). A study by Bartle et al., (2011) reported that external economic, technological and demographic changes and trends are posing a significant challenge to the ability of the subnational governments to generate sufficient own source revenues. These trends are captured by the volatility in sales tax, decreasing property values and diminishing grants from central governments (Fjeldstad & Heggstad, 2012).