- REPUBLIC OF KENYA PARLIAMENT Vao0c0c07ltlTlo NATIONAL ASSEMBLY BILLS (Bill No. 10 of 2025) THE DIVISION OF REVENUE BILL, 2025 (A Bill published in the Kenya Gazette Supplement No. 38 of 2025 and passed by the National Assembly, without amendments, on 9" April,2025) N.A. /B/No. 10/2025 es
The Division of Revenue Bill, 2025 THE DIVISION OF REVENUE BILL, 2025 ARRANGEMENT OF CLAUSES Clause 1—Short title. 2—Interpretation. 3—Object and purpose of the Act. 4—Allocations to national and county governments. 5—Variation in revenue. SCHEDULE EQUITABLE SHARE OF REVENUE RAISED NATIONALLY BETWEEN THE NATIONAL AND COUNTY GOVERNMENTS FOR THE 2025/26 FINANCIAL YEAR. APPENDIX EXPLANATORY MEMORANDUM TO THE DIVISION OF REVENUE BILL, 2025
The Division of Revenue Bill, 2025 THE DIVISION OF REVENUE BILL, 2025 A Bill for AN ACT of Parliament to provide for the equitable division of revenue raised nationally between the national and county governments in the 2025/26 financial year, and for connected purposes. ENACTED by Parliament of Kenya, as follows— 1. This Act may be cited as the Division of Revenue Act, 2025. 2. In this Act, unless the context otherwise requires, "revenue" has the meaning assigned to it under section 2 of the Commission on Revenue Allocation Act. 3. The object and purpose of this Act is to provide for the equitable sharing of revenue raised nationally among the national and county governments in the 2025/26 financial year in accordance with Article 203(2) of the Constitution. 4. Revenue raised nationally in respect of the 2025/26 financial year shall be shared equitably among the national and county governments as set out in the Schedule to this Act. 5. (1) If the actual revenue raised nationally in the financial year falls short of the expected revenue set out in the Schedule, the shortfall shall be borne by the national government. (2) If the actual revenue raised nationally in the financial year exceeds the projected revenues set out in the Schedule, the excess revenue shall accrue to the national government, and may be used to reduce borrowing or pay debts. Short title. Interpretation. Cap.428. Object and purpose of the Act. Allocations to national and county governments. Variation in revenue.
The Division of Revenue Bill, 2025 SCHEDULE (s.4) ALLOCATION OF REVENUE RAISED NATIONALLY BETWEEN THE NATIONAL GOVERNMENT AND COUNTY GOVERNMENTS FOR THE 2025/26 FINANCIAL YEAR Type/level of allocation Amount in Kshs. | Percentage (%) of 2020/21 audited and approved Revenue i.e. Kshs. 1,570,562,945,014 A. Total Sharable Revenue 2,835,040,979,609 B. National Government 2,419,382,005,336 C. Equalization Fund 10,589,554,076 Of which: a) 0.5 Per Centum 7,852,814,725 D. County equitable share 405,069,420,197
The Division of Revenue Bill, 2025 APPENDIX EXPLANATORY MEMORANDUM TO THE DIVISION OF REVENUE BILL, 2025 Background 1. This memorandum has been prepared as an attachment to the Division of Revenue Bill (DoRB), 2025 in fulfilment of the requirements of Article 218(2) of the Constitution and section 191(5) of the Public Finance Management Act (Cap. 412A), 2. Article 218(2) of the Constitution requires that the Bill be submitted to Parliament every year together with a memorandum explaining: a) the proposed revenue allocation set out in the Bill; b) the extent to which the Bill has taken into account the provisions of Article 203(1) of the Constitution; and c) a summary of any significant deviation from the recommendations of the Commission on Revenue Allocation (CRA), with an explanation for each such deviation. 3. Section 191 (5) of the Public Finance Management Act (Cap. 412A) requires that the Bill be accompanied by a memorandum which explains: a) how the Bill takes into account the criteria listed in Article 203(1) of the Constitution; b) the extent of the deviation from the Commission on Revenue Allocation's recommendations; c) the extent, if any, of deviation from the recommendations of the Intergovernmental Budget and Economic Council; and d) any assumptions and formulae used in arriving at the respective shares mentioned in section 191(2) and (3) of the Public Finance Management Act (Cap. 412A). Explanation of the Allocations to the National and County Governments as Proposed in the Bill County Governments' Equitable Share 4. The Bill proposes to allocate County Governments Kshs. 405.1 billion for the financial year 2025/26 as equitable share of revenue raised
The Division of Revenue Bill, 2025 nationally, translating to an increase of Kshs. 17.6 billion from a base of KSh.387.4 billion allocated in the financial year 2024/25. 5. In the financial year 2024/25, the Division of Revenue (Amendment) Act, 2024, allocated Kshs. 387.4 billion to County Governments as equitable share resulting from mediation between the National Assembly and the Senate. 6. The National Treasury has proposed an allocation of Kshs. 2,419.4 billion to the National Government; and Kshs. 405.1 billion to County Governments in financial year 2025/26, translating to an increase of Kshs. 17.6 billion (see Table 1). 7. The proposed County Governments' equitable revenue share allocation of Kshs. 405.1 billion is informed by the following factors: a) Trends in the performance of revenue (this was taken into consideration in determining the Kshs. 17.6 billion increase in equitable share of revenue in financial year 2025/26); c) The Government commitment to implement a fiscal consolidation plan targeting to reduce the fiscal deficit to 4.3 percent of GDP in financial year 2025/26. This is designed to slow down accumulation of public debt, improve primary surplus thereby achieve fiscal sustainability; b) Increased expenditures for National Government for purposes of debt servicing coupled with a weakened shilling against the dollar; d) Financing constraints due to limited access to finance in the domestic and international financial markets; e) Low ordinary revenue collections attributed to the ongoing geopolitical shocks. The global economy is on a recovery path from the negative shocks in supply chain constraints and the CGT ITEM Amount (KSh. million) CC«C8 Baseline (ie. allocation in the previous 2024/25) 87,425 | 1. FY Yr rS—=*7,6 44 | 2. Adjustment for Revenue Growth Share allocation for FY 2025/26 405,069 — Revenue Table 1: Equitable Revenue Share Allocation to County Governments, Financial Year 2025/26 Source: National Treasury
The Division of Revenue Bill, 2025 17.6 billion higher than the allocation of Kshs. 387.4 billion for financial year 2024/25. This is an unconditional allocation which means that the County Governments can independently plan, budget and spend the funds. With the resources, therefore, County Governments are able to prioritize projects and allocate resources, thus optimizing their potential for economic development. 24. Stable and Predictable Allocations of County Governments' Vertical Share of Revenue: The County Governments' equitable share of revenue raised nationally has been protected from reductions that may be occasioned by shortfall in revenue raised nationally more so in the advent of the effects of projected global economic downturn in 2025. According to Clause 5 of the Division of Revenue Bill (DoRB) 2025, the National Government will bear any shortfall in revenue raised nationally. 25. Need for Flexibility in Responding to Emergencies and Other Temporary Needs: The National Government equitable share of revenue has an allocation of Kshs. 5 billion for the Contingencies Fund established pursuant to Article 208 of the Constitution. This Fund will be used to meet the demands arising from urgent and unforeseen needs in all Counties that suffer from calamities in the manner contemplated under sections 19 -21 of the Public Finance Management Act (Cap. 412A). In addition, the Public Finance Management Act (Cap. 412A) requires each County Government to set up a County Emergency Fund. County Governments are, therefore, expected to set aside budgets to respond to emergency functions. 26. It should be noted that after taking into account all the other factors contemplated under Article 203(1) of the Constitution, including the needs of County Governments, there are no resources left to finance other National Government needs, such as defense, roads, energy among others. In fact, the National Government is left with a deficit amounting to KSh. 64.6 billion to finance needs of other non-discretionary expenditures such as salaries of National Government staff. To bridge this financing gap, the National Government will require additional borrowing which may negatively impact on the fiscal consolidation plan. Summary of Deviations from the Recommendations of the Commission on Revenue Allocations 27. The Division of Revenue Bill, 2025 proposes to allocate county governments an equitable share of Kshs. 405.1 billion from the shareable revenue raised nationally to be shared among county governments on the third basis formula for sharing revenue approved by Parliament under Article 217 of the Constitution. The CRA, on the other hand, recommends County Governments' equitable share of revenue of Kshs. 417.4 billion as WS