Workshop Summary Innovations in Local Revenue Mobilization World Bank Workshop Sponsored by the Tax Policy and Administration and Decentralization Thematic Groups, World Bank Institute and Lincoln Institute of Land Policy 23-24 June 2003

Rationale for Local Revenue Mobilization? Increasing local level independence or autonomy Increasing accountability and transparency of government to the citizens Efficiency of decisionmaking Differences in local tastes and preferences Creates ownership—linked to payment. Allows for innovation on part of local government Cash flow management Importance of strategic sequencing for sustainability

Property Tax Design Considerations? Intergovernmental fiscal system framework Need to understand the context (shortcoming and strengths) to effectively design reform. Mobilize stakeholder acceptance and support through improved taxpayer service, reducing compliance costs, etc. And communication strategy Incremental and strategic reform implementation. Taxpayer acceptance and affordability (link base and rate) Design considerations on tax base definitions, valuation definitions (capital vs rental), tax rate structure. Revenue potential and administration costs tradeoffs. Setting up oversight and quality control framework, and a strong appeal system. Capacity development issues Property tax “non-tax” considerations Legal design considerations—but need for a firm legal basis. Long term sustainable plan for keeping values up to date. Need for effective collection and enforcement is critical Possible use of revenue neutral strategy in initial stages—especially if one can broaden the tax base coverage Issues of tax relief/mitigation

User Charge Design Considerations? Identify appropriate services for charges. Design considerations: level of cost recovery, offsetting externalities; equity issues (both vertical and horizontal), administration issues Enforcement issues Elasticity considerations for specific services

Business Tax Design Considerations? Administration simplicity Interjurisdictional tax competition (“race to the bottom”) Assessment approaches (presumptive versus record based approach) Mobilize business community for support Linkage of revenue and regulatory functions Tax base and possible exemptions Linkages with national level taxation Overall administration strategy—with compliance, enforcement.

Tax Administration Design Considerations? Joint and cooperative administration issues—exchange of information Consider innovative options—tailored to local situation. Minimize administrative and compliance costs Tradeoffs between central and local administration by tax type and functions Need for accountable and transparent administration