Lg revenue generation revised

DECENTRALISATION

STUIDIESLG REVENUE GENERATION

CPA Kandole Patrick

[email protected]

21 January 2015

Lg revenue generation Kandole

PatrickFCCA, CPA 2

Revenues represents an inflow of

financial resources into Lgs from

communities, Donors and GoU

Historic perspectives

Uganda was create basing on the 1894

This phenomenon introduced total supremacy of the British government over Uganda in matters of “….assessment and collection of taxes ….also the disposal of the revenues…..”

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Historic perspective

In 1920 the hut tax was reformed into the Poll Tax, a head tax for every adult male.

Poll Tax was reformed into a Graduated Tax, in 1954 for vertical equity.

The tax was abolished in 2005 due to its regressive regime. Was the largest revenue source

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Legal framework The Local Government (Rating) Act . The

Act provides for levy of rates on property by

local governments within their areas of

jurisdiction.

The Trade Licensing Act, This Act regulates

businesses and indicates rates of licenses payable

at each level of governance by business type.

The Public Health Act, The issuance of

trading licenses is subject to health and safety

regulations and inspections.

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Legal framework LGST - Guidelines 2009. These require

employers to deduct at source and remit tax

recoveries from employees to the appropriate

LGs.

The Land Act, in respect to ground rent and

premium.

LGA schedules

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Revenue sources

Local Revenue

1. Local service tax,

2. Property tax;

3. Market dues; Fees (user, fines, licenses,

permits, parking etc.);

4. Rents; Cess on produce;

5. Fines, penalties, Charges ;

6. Donations, Hotel tax

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Concept of revenue generation

The nature of revenue source depend on

the nature of service to be rendered.

Services may be categorized as pure

public goods, or mixed public goods

Mixed goods- education, housing,

recreation

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Funding community services

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Mixed Public goods

Such services may include education, where the general public benefits from services of a child who becomes a doctor and the individual and family have an exclusive benefit in terms of earnings and status.

Collection of garbage removes diseases from the community but it also rids your dwelling of discomforting smells and unwelcome flies.

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Lg revenue generation Kandole PatrickFCCA, CPA

Pure public goods

A situation where the impact of the service has far and wide externalities, outcomes that are beyond both the location of consumption and the real consumer of a service. {cost for construction of roads, immunization, Malaria control, construction of infrastructure}.

On a national scale this represents costs of national security, fire brigade services, justice, the Parliament.

Such services are ideally funded by mass taxation.

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Why LG revenues?

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Purpose:The purpose of

taxation (revenues) is to: ''

mobilise public resources for

management of public goods for

the public good.'‘

Rationale for revenue collection

GoU has a duty and obligation to provide

services to the population using all

available resources at its disposal.

It is a constitutional duty to pay taxes at

any level

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Rationale

Local governments have to meet the costs of social and infrastructure.

Changing population service demands have created pressure for more and better quality services leading to increased costs and service gaps.

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Rationale

Revenues can only be adequate if there is a

positive relationship between revenue growth and

the demands made on it and in line with the cost

trend.

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Elements in administration

Enforcement - Following up tax defaulters,

the regular checks on licences, rates to ensure

that all those who should pay actually pay and

they pay the right amount.

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Collection - Collection of revenue

from the taxpayers, mode and procedures for

payments

Sensitisation and Publicity-Involves holding

workshops and seminars for the revenue

collectors and the taxpayers and other forms of

awareness campaigns on the importance of

paying taxes say, radio announcements,

advertising, drama. The MoLG is working on a

strategy for mass revenue tax awareness campaigns

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PatrickFCCA, CPA 17


Collection - Collection of revenue

from the taxpayers, mode and procedures for

payments

Sensitisation and Publicity-Involves holding

workshops and seminars for the revenue

collectors and the taxpayers and other forms of

awareness campaigns on the importance of

paying taxes say, radio announcements,

advertising, drama. The MoLG is working on a

strategy for mass revenue tax awareness campaigns

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PatrickFCCA, CPA 18

Revenue policy implementation

Rising sufficient revenues however is not the onlytask.

Principles of taxation

Equity, fairness-Inequity may raises levels ofunwillingness to pay if people feel they are beingasked to pay more than they can reasonably afford.

Elasticity

Adequacy of yield

Political/community acceptance-Revenues must beraised fairly. The perceived unfairness has oftenattracted political intervention.

Administrative feasibility

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Despite the numerous

initiatives at all levels of

governance, Revenue

sufficiency at Lgs still

remains a challenge that

threatens to undermine

gains made by the

decentralization policy!

Challenges for LRRs

Low tax base

Poor payer attitude

Poor downward accountability

Low incomes

Poor legal framework- trading Act, LST

guidelines, Property rates

Tax administration challenges and costs

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PatrickFCCA, CPA

Best practices

Contracting out

Tax payer convenience

Accountability

Direct banking of revenues

Fair assessment and collection

Fair enforcement

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PatrickFCCA, CPA

Best practices

Link payment of taxes to levels of service delivery

and show that more revenues will result in better

and more services. Downward accountability and

value for money.

A clear visibility of services that are appreciated

by Taxpayers may result in increased willingness to

pay more.

Publication of plans, implementation framework. A

public accountability. Where the money went and

where it came from

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Accountability

Service visibility may

increase willingness to

pay.

Programme ownership

and participation

Do transfers increase

public motivation to pay

local taxes

Most development is

funded by CG Transfers!

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Show me the money!

Under-funded services due to

steep demand on current

finances. Revenues are

insufficient to meet costs of

garbage collection and

disposal, unattended roads,

unmet needs for classroom

space, luck of operation

and maintenance cash.

21 January 2015Lg revenue generation Kandole PatrickFCCA, CPA

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How can we do better? Governance that

works.

Ensure tax payer convenience at payment, and

assessment

Promote fairness in assessment of taxes and

utilization of funds

Transparent dealings, accountability and

provision of relevant Value for Money services.

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PatrickFCCA, CPA

Where is the money? Where is the impact of

policy? Where are we now? Is allocation poverty

sensitive?

High poverty levels, poor

redistributionBetter infrastructure, service delivery?

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Emerging issues in fiscal policy

Kandole Patrick FCCA,CPA, Msosc 27

Revenue enhancement strategy

from Corrective action results

Improvement in data management

Improved assessment and cost management

Improved tax payer relations

Improvement in control systems.

New revenue sources

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THE END

Local revenue generation

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PatrickFCCA, CPA

Government & Nonprofit

Lg revenue generation revised