201. Principles of public finance
The following principles shall guide all aspects of public finance in the Republic—(a)there shall be openness and accountability, including public participation in financial matters;(b)the public finance system shall promote an equitable society, and in particular—(i)the burden of taxation shall be shared fairly;(ii)revenue raised nationally shall be shared equitably among national and county governments; and(iii)expenditure shall promote the equitable development of the country, including by making special provision for marginalised groups and areas;(c)the burden and benefits of the use of resources and public borrowing shall be shared equitably between present and future generations;(d)public money shall be used in a prudent and responsible way; and(e)financial management shall be responsible, and fiscal reporting shall be clear.202. Equitable sharing of national revenue
(1)Revenue raised nationally shall be shared equitably among the national and county governments.(2)County governments may be given additional allocations from the national government’s share of the revenue, either conditionally or unconditionally.203. Equitable share and other financial laws
(1)The following criteria shall be taken into account in determining the equitable shares provided for under Article 202 and in all national legislation concerning county government enacted in terms of this Chapter—(a)the national interest;(b)any provision that must be made in respect of the public debt and other national obligations;(c)the needs of the national government, determined by objective criteria;(d)the need to ensure that county governments are able to perform the functions allocated to them;(e)the fiscal capacity and efficiency of county governments;(f)developmental and other needs of counties;(g)economic disparities within and among counties and the need to remedy them;(h)the need for affirmative action in respect of disadvantaged areas and groups;(i)the need for economic optimisation of each county and to provide incentives for each county to optimise its capacity to raise revenue;(j)the desirability of stable and predictable allocations of revenue; and(k)the need for flexibility in responding to emergencies and other temporary needs, based on similar objective criteria.(2)For every financial year, the equitable share of the revenue raised nationally that is allocated to county governments shall be not less than fifteen per cent of all revenue collected by the national government.(3)The amount referred to in clause (2) shall be calculated on the basis of the most recent audited accounts of revenue received, as approved by the National Assembly.204. Equalisation Fund
(1)There is established an Equalisation Fund into which shall be paid one half per cent of all the revenue collected by the national government each year calculated on the basis of the most recent audited accounts of revenue received, as approved by the National Assembly.(2)The national government shall use the Equalisation Fund only to provide basic services including water, roads, health facilities and electricity to marginalised areas to the extent necessary to bring the quality of those services in those areas to the level generally enjoyed by the rest of the nation, so far as possible.(3)The national government may use the Equalisation Fund—(a)only to the extent that the expenditure of those funds has been approved in an Appropriation Bill enacted by Parliament; and(b)either directly, or indirectly through conditional grants to counties in which marginalised communities exist.(4)The Commission on Revenue Allocation shall be consulted and its recommendations considered before Parliament passes any Bill appropriating money out of the Equalisation Fund.(5)Any unexpended money in the Equalisation Fund at the end of a particular financial year shall remain in that Fund for use in accordance with clauses (2) and (3) during any subsequent financial year.(6)This Article lapses twenty years after the effective date, subject to clause (7).(7)Parliament may enact legislation suspending the effect of clause (6) for a further fixed period of years, subject to clause (8).(8)Legislation under clause (7) shall be supported by more than half of all the members of the National Assembly, and more than half of all the county delegations in the Senate.(9)Money shall not be withdrawn from the Equalisation Fund unless the Controller of Budget has approved the withdrawal.205. Consultation on financial legislation affecting counties
(1)When a Bill that includes provisions dealing with the sharing of revenue, or any financial matter concerning county governments is published, the Commission on Revenue Allocation shall consider those provisions and may make recommendations to the National Assembly and the Senate.(2)Any recommendations made by the Commission shall be tabled in Parliament, and each House shall consider the recommendations before voting on the Bill.
