110
Jesper Steffensen
Local politicians going for “quick wins” instead of sustainable solutions The strong increase in transfers from the central government, leading to less incentive to collect local taxes Unfavorable local government tax legislation Weak local government tax administration and enforcement capacity Lack of accountability and conducive links between local governments and citizens (low awareness, lack of trust) Increase in poverty in certain areas, although not a general trend. The discouraging trend in local government revenues has led to a number of recent initiatives to boost revenue mobilization and to mitigate the challenges. Several studies have clarified the main problems and areas in need of support. The Local Revenue Enhancement Coordinative Committee, with key players from central and local government levels, has been established to coordinate all initiatives on local government taxation. Inventories of best practices have been carried out, and the findings were widely disseminated to all district and city councils. Local governments are required to plan and budget for a revenue enhancement strategy, and the LGFC has generally played a more active role in supporting the local governments technically in the field of revenue mobilization. Probably most important, stronger incentives to improve local government revenues have been elaborated under the LGDP-II development transfer scheme, with performance rewards for good tax efforts in addition to cofunding obligations. Initiatives are under way to improve the legal framework for local government taxation—first and foremost, the Rating Act of 1979. LGDPII component 4 will assist in reforming some other tax assignments as well. T A B L E 3 . 2 Local Government Aggregate Own-Source Revenues (percent) Year
G-tax
Property tax
1997/98 1998/99 1999/2000 2000/01 2001/02
67.4 65.1 64.2 62.2 52.0
6.9 8.4 9.3 6.0 13.6
User fees and charges
12.7 13.9 14.7 10.8 18.5
Licenses
Other revenue
Total
2.0 2.8 3.0 1.8 3.6
11.0 9.8 8.9 19.2 12.3
100 100 100 100 100
Source: Steffensen, Tidemand, and Ssewankambo 2004. Note: The data should be treated with due caution; final accounts are not available for all districts, and extrapolations have been made. Totals may not equal 100 because of rounding.
