Accountability and graduated tax in the context of decentralization Anne Mette Kjær University of Aarhus Meeting on Fiscal Decentralization Copenhagen 18 August 2005

Museveni’s change of mind  Those opposed to graduated tax are okuremaza (lunyankole for crippling our people). The graduated tax is not bad because it contributes to your own development. President Museveni September,  The government has decided to abolish graduated tax.. because it has been regressive and unpopular…The tax collectors have been using crude and primitive methods in enforcing payment and this is unacceptable to us. President Museveni, June, 2005.

Outline of presentation 1. Graduated tax and decentralization 2. Formal and informal accountability relations 3. Councillors vis-a-vis residents 4. Councillors vis-a-vis administrators 5. Conclusion

1. Graduated tax and decentralization  Declining local revenues  Two reasons for decline: a. Increase in central transfers b. Politicization of graduated tax  Implications for accountability?

Local Officials Local Councilors Community members Figure 1. Accountability relations at the local level Citizens elect council members Officials are accountable to the council Equality and fairness In service delivery and tax collection The local authorities answer to the centre

2. Formal and informal Accountability  The formal rules in the Local Government Act  The informal rules: Clientelism and accountability  Broad and narrow accountability

3. Councillors vis-a-vis residents 1. Retrieval of campaign money while in office 2. Local politicians may interfere in the collection process 3. Local politicians more involved in information about “the 25%”

3.1 Councillors vs residents We are campaigning for the LC5 elections at the moment and it is too expensive for me, I have to spend so much money, people want this and that. Some people are only interested in whether I have done some community projects but many also want drinks, they are interested in personal things. Even if I have built schools, they say they want salt, beer or sugarcane (District councilor, Mbarara). We are campaigning for the LC5 elections at the moment and it is too expensive for me, I have to spend so much money, people want this and that. Some people are only interested in whether I have done some community projects but many also want drinks, they are interested in personal things. Even if I have built schools, they say they want salt, beer or sugarcane (District councilor, Mbarara).

3.2. Councillors vs residents The LC1s are afraid of loosing votes so if you ask them to assess people’s property, those who have will become have-nots! We should be encouraging people to pay but in fact it is the opposite in some places. To have cheap popularity. I once rounded up 60 people in a parish so now they don’t vote for me! I think that’s why I did not get re-elected this time. In general, the councillors want people to feel they’re helping them not pay (LC3 Chairman) The LC1s are afraid of loosing votes so if you ask them to assess people’s property, those who have will become have-nots! We should be encouraging people to pay but in fact it is the opposite in some places. To have cheap popularity. I once rounded up 60 people in a parish so now they don’t vote for me! I think that’s why I did not get re-elected this time. In general, the councillors want people to feel they’re helping them not pay (LC3 Chairman)

3.3: Councillors vs residents  This money is eaten by officials. The 25 % does not come down from the sub-county level –it stays there. They ask us about our preferences, as to how the money should be spent, but we never see the money. We are supposed to be part of the decision making process, they should not just make decisions above our heads. The villagers are not heard. There is also a lack of transparency with regard to the use of the money (village focus group).  In our area we use the 25% to get a borehole. Some of the class rooms we have are there as a result of taxes. Text books have been supplied in primary schools and in some secondary schools (village focus group).

3.3: councillors vs residents  Whenever we get the 25% we call a village meeting, declare the money and we decide how to use that money. The only problem is that, that money is always little.  What happens with that 25% that stays at LC1 depends entirely on the leaders. In some villages the money has been spent on services, in others it is used as allowances.

3.3: Councillors vs residents Do you think your tax contributions to the local government are spent to improve services in the community? Yes all: 11 % Yes some: 46 % No: 32 % Who do you feel the local council members serve the most? The commu- nity: 55 % The central govern- ment 5 % Theirowninterests: 35 %

4. Councillors vis-a-vis administrators  Councillors as watchdogs? LCs have a constituency. They have to be sympathetic and lenient with this constituency….. If we have arrested someone, they say, take them out of jail, he will pay later. They tell us not to harass defaulters. This has played a big role in recent years. LCs have a constituency. They have to be sympathetic and lenient with this constituency….. If we have arrested someone, they say, take them out of jail, he will pay later. They tell us not to harass defaulters. This has played a big role in recent years.

4. Councillors vs officials  Watchdogs? The LC chairmen should in general be more educated, so that they, as politicians, are better able to control the administrators. … The problem is that the sub-county chiefs are usually more educated than the LC3s that should control them. The LC chairmen should in general be more educated, so that they, as politicians, are better able to control the administrators. … The problem is that the sub-county chiefs are usually more educated than the LC3s that should control them.

5. Summing up: is abolishing g-tax a good idea? Would you be willing to pay more if the government did more for your community? Yes: 75 % Yes, maybe: 17 % 17 % No, I pay enough: 7 % There is a basic understanding of quid-pro-quo There is a basic understanding of quid-pro-quo Criticism not of the tax itself but of methods and anti-poor bias Criticism not of the tax itself but of methods and anti-poor bias Crude but broad accountability-relations were being established Crude but broad accountability-relations were being established These will be undermined with the abolishment of g-tax These will be undermined with the abolishment of g-tax