Commission for Revenue Allocation intends to change the way revenues are allocated to counties. Their proposal, no. 1 below has however been countered by another allocation formula, no. 2 that has been floated by IBP.
- Allocate revenue based on the achievement of revenue collection targets for each county – the high achievers get high revenue allocation from the central government.
- Allocate revenue based on the marginal growth in revenue collection for each county – the higher your revenue margins grow year-on-year, the higher the allocation you get from the central government.
The flip side of the first is that counties may relax and have less ambitious revenue targets just to get a higher score and get more revenue allocation from the central government.
On the other hand, the second formula may result to counties also raising lower revenues deliberately and increasing their revenues gradually in an annual basis; in order to benefit from a bigger share from the central government for their year-on-year higher margins.
Either way, the intention of the CRA and IBP are good and for the benefit of the counties. However, between the two, which one makes more sense?