REVENUE MOBILISATION IN LOCAL GOVERNMENTS Training Slides for Lower Local Governments

Revenue Mobilisation in Local Governments 2 Revenue Mobilisation in LGs: Course Objectives Identify the major sources of LG revenue Understand the importance of each revenue source Understand the legal framework governing revenue mobilisation Describe the procedures for revenue assessment, collection, recording and accounting Explain the roles o f the Stakeholders involved in mobilisation of revenue Identify best practices in revenue mobilisation Mobilise revenue from donors

Revenue Mobilisation in Local Governments 3 Session One: Theoretical Aspects of Revenue Mobilisation What is LG Revenue ? Revenue is income collected and received by a Local Government Local Governments collect, record, control and account for revenue Local Governments finance their development projects, pay salaries, allowances and other costs Types of LGs revenue: Grants from Central Government; Local revenue; Grants from donors.

Revenue Mobilisation in Local Governments 4 Sources of Local Revenue: Personal graduated tax (G.T); Property tax; Fees; Rents; Interest; Charges; Cess on produce etc. Main activities of Revenue Mobilisation: Registration; Enumeration; Assessment; Collection; Sensitisation and publicity; Enforcement.

Revenue Mobilisation in Local Governments 5 General consideration in Revenue Mobilisation: Adequacy; Elasticity; Equity; Administrative capacity; Political acceptability; Economic Impact.

Revenue Mobilisation in Local Governments 6 Session Two: The Legal Aspects of Revenue Mobilisation Revenue Mobilisation Powers: Article 152 of the Constitution; Article 191 of the Constitution; Section 78 and 81 of Local Government Act; The Local Government (Rating) Decree, 1979; The Trade Licensing Act, 1969; Public Health Act, 1994; Graduated Tax Payments; Employees – Guidelines, 1989.

Revenue Mobilisation in Local Governments 7 Session Three: The Roles of Stakeholders in Revenue Mobilisation The Stakeholders in Local Governments revenue mobilisation are: The Chief Executive; The Chief Finance Officer; Revenue Collectors and Cashiers; Executive Committee; The Council; The Local Government Public Accounts Committee; Local Government Finance Commission.

Revenue Mobilisation in Local Governments 8 Session Four: Registration, Enumeration and Sensitising Key Stakeholders The process of Revenue Mobilisation starts with identification of taxable issues, registration, enumeration and sensitisation of tax payers. Local Governments should maintain good revenue databases. Revenue databases are necessary for: Making accurate revenue forecasts; Tracing defaulters; Making accurate and reliable assessments.

Revenue Mobilisation in Local Governments 9 Session Five: Assessment Tax Assessment Committee carries out tax assessment. The nature of tax payable determines the basis and method of assessment. After assessment the a TAC issues out a certificate of assessment to the tax payer. Assessment forms are used by assessors. Assessors keep records. A person exempted from tax payment is issued a certificate of exemption. A tax payer can appeal against a tax liability.

Revenue Mobilisation in Local Governments 10 Session Six: Revenue Collection The Process of revenue collection: Provision of necessary stationery; Receiving of revenue; Recording of revenue; Documentation; Revenue registers; Tax collection records; Custody and banking of revenue.

Revenue Mobilisation in Local Governments 11 Constraints in revenue collection: These include: Political interference; Corruption; Delays in collection; Insecurity; Lack of enough personnel; Distrust of tax payers.

Revenue Mobilisation in Local Governments 12 Revenue collection Good practices: Privatisation; Collection teams; Incentives to revenue collectors; Using community leaders etc.

Revenue Mobilisation in Local Governments 13 Session Seven: Donor Funds Mobilisation Local Governments receive donations in forms of actual cash or physical assets. Donors can also: Supervise project implementation; Provide good governance procedures; Provide technical assistance; Provide capacity building. Main donors: European Union (EU); Danish International Development Agency(Danida); Department For International Development – United Kingdom(DFID-UK); Netherlands; African Development Fund(ADF); Austrian Government; United Nations Development Program (UNDP); International Development Association (IDA) etc.

Revenue Mobilisation in Local Governments 14 Session Eight: Graduated Tax Revenue What is Personal Graduated Tax ? It is a direct tax levied annually on the wealth or income of an individual. Basis of Personal Graduated Tax collection. PGT paid in one’s area of residence. Due on the first day of the financial year. paid within the first six months of the year. The scales of tax are determined by Local Governments. Personal Graduated Tax collection process: Registration and Enumeration; Assessment; Collection; Enforcement.

Revenue Mobilisation in Local Governments 15 Session Nine: Trade Licences Revenue The Trade (Licensing) Act,1969 provides the legal framework Constraints: Lack of relevant data; Unregistered business; Corruption. Best Practices: Deregulation project recommendations; Computerised registers; Privatisation of collection; Direct payment.

Revenue Mobilisation in Local Governments 16 Session Ten: Property Tax Revenue Property refers to buildings of a commercial, industrial or residential nature and land. Property tax is defined as a tax levied on immovable property within the area of jurisdiction of a council. The assessment system: Annual rental value of the property; Capital value of property. Constraints: Old legislation; Lack of registers; Corruption.

Revenue Mobilisation in Local Governments 17 Best Practices: Sensitisation; Privatisation; Computerrisation.

Revenue Mobilisation in Local Governments 18 Session Eleven: Markets and Other Revenue Sources Local Governments collect substantial revenue from markets in form of rent, permits, dues, cess tax etc Mobilisation of Market Revenue Constraints: Informal evening markets in unrecognised places; Unregistered traders. Best Practices: Fence of market areas; Privatisation of collection; Performance bonds; Data Bank on Revenue Sources.

Revenue Mobilisation in Local Governments 19 Session Twelve: Contracting out the Collection of Revenue Private participation in delivery of Local Government services is widely recognised as a good practice in effective service delivery. Benefits of contracting out: Increased revenue collection; Lower costs of collection; Better services offered; Better cash flows; Creation of jobs.

Revenue Mobilisation in Local Governments 20 Constraints: Lack of adequate capacity of private sector; Dishonesty; Political interference; Corruption; Lack of data.