Kongwa, Kondoa, Bahi, Mpwapwa Districts, and Dodoma Municipal)

REVENUE STUDIES FOR FIVE LOCAL GOVERNMENT AUTHORITIES (KONGWA, KONDOA, BAHI, MPWAPWA DISTRICTS, AND DODOMA MUNICIPAL)

LOCAL INVESTMENT CLIMATE (LIC)

SEPTEMBER 28, 2015

Dr.Victor George Dr. Alex Kira Mr. David Mwakapala Mr. Sunga Mabeja and Mr. Elia John

Executive Summary The revenue study was conducted in order to draw detailed evidence to Local Government Authorities (LGAs) (Kongwa, Bahi, Mpwapwa, Kondoa, and Dodoma Municipal) on the best ways of increasing revenues without creating misunderstanding with private sector. The main objective of this study was to assess the revenue potential of the Kongwa, Bahi, Mpwapwa, Kondoa, and Dodoma Municipal. The study employed multiple methods of data collections ranging from document reviews to Key Informant Interviews. The following were the key study findings: • LGA’s revenue collection structure and trend: It was noted that Bahi, Kondoa, Kongwa and Mpwapwa had the same revenue collection structure that was divided into three main phases, (i) Using Councils staff (ii) Using WEOs and VEOs and (iii) Outsourced agents. Dodoma Municipal Council had a varied structure, where by each revenue source has a manager who reports to Revenue Collection Committee.

• Revenue Collection Trend: It was observed that Dodoma Municipal council had the highest revenues compared to other LGAs. It was followed by Kongwa, Kondoa, Mpwapwa and Bahi. The estimates and actual collections have shown a mixed trend. The size of revenue collection within the surveyed LGAs had a reflection of economic activities on the respective LGAs.

• Major sources of Revenue for surveyed LGA’s: The five surveyed LGAs has different sources of revenue ranging from service levy, crop cess, billboards, rentals, penalties, licenses, markets, auctions, forest products, property tax to halls and entertainments. However, the contributions of these sources to LGAs revenues had variations depending on the environment, major economic activities and stage of growth of the LGA.

• Revenue rates setting: Except for the revenues that are governed by the national main acts, other revenues that are determined by by-laws had different rates charged by the LGAs. It could also be observed that some items of the same category are differently charged by different LGAs. Table 13 below shows rates for selected major sources of revenues across the surveyed LGAs. The variations observed create difficult environment for conducting business in LGAs where they charge high and discourage compliance of the same.

• Revenue collection processes including strengths and weakness: Local government tax collection is the responsibility of the council’s staff; the process starts from the formulation of identifying sources of revenue and formulating by-laws to guides its collection. The collection of revenue in the LGAs it is organized around three levels, namely the council headquarters, the

wards and the villages. To enhance revenue collections, LGAs tend also to outsource revenue collection to private agents.

• Strength of the revenue collection processes: availability of skilled man power at the district council level, Presence of by-laws that guides collection of revenues and Institutionalization of the PPRA regulation is among the strength of revenue collection process.

• Weakness of the revenue collection processes: The process of revenue collection is associated with the following weaknesses; Lack of Motivation, Insufficient equipment, Inadequate proper rating, Political interference, Lack of Training, Loopholes on contract management, Lack of monitoring mechanism, Poor Revenue forecast and planning, Lack of designated areas for easy collection of revenues

• Level of dependency of specific LGA’s to the central government: The study finding shows that on average, the contribution of five LGAs surveyed had a capacity to finance their budget by less than 5% which is less by the national average of 6%. Over the past three years the capacity has been declining from 4.4% (2012/13) to 4.3% (2013/14) and raised to 7.2% (2014/15).

• Effects of dependency of LGA’s to the central government: The effect of the dependency of LGAs to intergovernmental transfers results into a gap that leads to having a stalk on implementing development projects. Furthermore, the LGAs priorities are not followed but rather priorities of the Central Governments that are determined by budget allocations

• Establishment of By-Laws: Collection of revenues at LGAs level is mainly guided by by-laws in respective councils. Each local government Authorities has powers to formulate their own by-laws within their area of jurisdiction. The power to do so are vested by Local Government (District Authorities) Act CAP 287 and Local Government (Urban Authorities) Act CAP 288 (RE 2002). Under the local government (District Authorities) Act No. 7 of 1982, the procedure to make by - laws is provided under section 150(1), (2), (3), (4) and (5) of the law

• Strength of existing by-laws used for revenue collection: The main strength of the existing by-laws in the surveyed LGAs include;Endorsement, applicability and its enforcement in guiding revenue collection.

• Weakness of existing by-laws used for revenue collection: Across all the surveyed LGAs, participation of private sector and bureaucratic procedure in the formulation of the By-Laws are the main challenges found in the study area.

• Qualities of responsible staff: Establishment of job positions in public offices is guided by scheme of service, thus public staff are employed on their merit of qualifications and experience. Notably, the qualifications of other parties involved in revenue collections i.e WEO, VEOs and private agents were questionable.

• Challenges facing private sector on revenue collection process: the study findings shows that private sector faces the following challenges in the process of revenue collections; prohibitive rate settings (e.g service levy, licensing fees), Lack of participation of private sector during formulation of by-laws at district level, Lack of education and awareness of by-laws established by council, Poor or no services provided to the public to reflect the taxes/levies paid to local government.

Basing on the study findings, the study recommends the following:

• New possible new sources of revenue for the LGA: The study came up with recommended new sources of revenue per LGA. The sources includes, capitalizing on property tax, parking fees, garbage collections and building long term investments such as apartments and shopping centers for the surveyed LGAs.

• Possible electronic systems to be used to improve revenue collection for the LGA’s: The study analysis shows that the councils that are in full operation of the electronic systems are performing much better. This has been the case with Kinondoni Municipal. The system that is recommended to other LGAs is Local Government Revenue Collection and Information Systems (LGRCIS). Further to the system, the study recommends installation of Point of Sales (PoS) gadgets for proper functioning. The system requirements include:Identification of tax payers of different category, Computers (Monitors and CPU); Server (For Internet); Printers; and Software.

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• Feasible ways introducing by-laws responsible for taxes and levies with private sector participation of private sector engagement: The study recommends a more participatory approach on introducing by-laws with inclusion of all relevant stakeholders. Moreover, community awareness should be raised on issues pertaining to formulation of the by-laws.

• Improvement of the revenue collection processes a rates setting: Many problems on the process lies within lack of commitment and motivation. The study recommends the following; Staff Motivation and compensation, training, availability of facilities, and introduction of electronic revenue collection system. Further to that, the study recommends participatory rate setting that would equitably involve both public and private sector. Additionally, the study recommends harmonized system for rate setting and homogenous rates for identical commodities within Dodoma region.

• Strategies for each LGA on how to increase LGA revenue in a more sustainable manner: The study recommends all LGAs to do the following in order to increase and have a sustainable revenue collection: Focus on education to taxpayers, conduct regular and strategic meetings between council and taxpayers, Introducing taxpayer’s data base that will enable all council tax payers to be registered, Priorities should be given to local agents for outsourced revenue collection and other contracts and Improvement in public services which can be incentives for tax payers to pay taxes voluntary as see the benefits of paying taxes.

Table of Contents

1.0 Introduction ...... 1 1.1 Background to the Study ...... 1 1.2 Objective of the Study ...... 1 2.0 The Study Approach and Methodology ...... 3 2.1 Sampling Frame ...... 3 2.2 Data Collection Methods ...... 4 3.0 LGA in Tanzania ...... 5 3.1 An Overview of LGAs in Tanzania ...... 5 3.2 LGAs Revenues in Tanzania ...... 6 3.3 Laws/Acts guiding LGAs Revenue Collection ...... 6 4.0 Study Findings ...... 8 4.1 LGA’s revenue collection structure and trend ...... 8 4.2 Major Sources of Revenue for the Five LGA’s ...... 11 4.3 Revenue collection processes including strengths and weakness ...... 24 4.4 Level of Dependency of Specific LGA’s to the Central Government and Its Effects to the LGA Plans ...... 26 4.5 Strength and Weakness of Existing By-Laws Used for Revenue Collection ...... 29 4.6 Qualities of Responsible staff for Revenue Collection ...... 32 4.7 Challenges Facing Private Sector on Revenue Collection Process ...... 34 4.8 Revenue Collection Systems ...... 35 5.0 Study Recommendations ...... 38 5.1 Recommendations on the Possible New Sources Of Revenue For The LGA ...... 38 5.2 Recommendations on the Possible Electronic Systems to be used to Improve Revenue Collection for the LGA’s ...... 40 5.3 Recommendation on the Feasible Rates of Taxes and Levies ...... 42 5.4 Recommendations on Feasible Ways Introducing By-Laws Responsible for Taxes and Levies with Private Sector Participation of Private Sector Engagement ...... 42 5.5 Recommendations for Improvement of the Revenue Collection Processes and Rates Setting ...... 43

5.6 Recommendation on Strategies for each LGA on how to Increase LGA Revenue in a More Sustainable Manner ...... 44 6.0 Appendices ...... 45

List of Tables Table 1: Sampling Frame ...... 3 Table 2: Revenue Collection Trend at Five Councils ...... 10 Table 3: Sources of Revenue at Bahi District Council ...... 12 Table 4: Source of Revenue at Dodoma Municipal Council ...... 13 Table 5: Source of Revenue at Kondoa District Council ...... 15 Table 6: Source of Revenue at Kongwa District Council ...... 16 Table 7: Source of Revenue at Mpwapwa District Council ...... 17 Table 8: Trend of Revenue Collection at Bahi District Council ...... 18 Table 9: Trend of Revenue Collection at Dodoma Municipal Council ...... 19 Table 10: Trend of Revenue Collection at Kondoa District Council ...... 20 Table 11: Trend of Revenue Collection at Kongwa District Council ...... 21 Table 12: Trend of Revenue Collection at Mpwapwa District Council ...... 22 Table 13: Rates charged by LGAs ...... 23 Table 14: Intergovernmental Transfers to Five Councils...... 27 Table 15: Percentage Actual Central Government Transfers to Five Councils ...... 28 Table 16: Cases for By-law Weakness ...... 31 Table 17: Revenue Collection Staff for LGAs ...... 33 Table 18: Revenue Source of Revenue ...... 38 Table 19: Recommended Places for PoS Installation ...... 41 Table 20: Recommended Feasible Rates ...... 42

List of Figures Figure 1: LGA Revenue Collection Structure ...... 8 Figure 2: Revenue Collection Structure at DMC ...... 9 Figure 3: LGAs Actual Revenue Collection Trend ('000,000) ...... 10 Figure 4: LGAs Ability to Budget Estimates ...... 11 Figure 5: Major Sources of Revenue at Bahi District Council ...... 13 Figure 6: Major Sources of Revenue at Dodoma MC ...... 14 Figure 7: Major Sources of Revenue at Kondoa District Council ...... 15 Figure 8: Major Sources of Revenue at Kongwa District Council ...... 16 Figure 9: Major Sources of Revenue at Mpwapwa District Council...... 18

Acronyms CHF Community Health Fund CPU Central Processing Unit DED District Executive Director DLDF District Livestock Development Fund DMC Dodoma Municipal Council DT District Treasurer FY Financial Year HOD Head of Department IT Information Technology ITA Income Tax Act LGA Local Government Authority LGRCIS Local Government Revenue Collection and Information System LGRP The Local Government Reform Programme LIC Local Investment Climate MoF Ministry of Finance NHIF National Health Insurance Fund NWSSP National Water Supply and Sanitation Programme OC Other Charges PE Personal Emoluments PMO-RALG Prime Ministers’ Office-Regional Authority and Local Government PoS Point of Sales PPRA Public Procurement Regulatory Authority TCCIA Tanzania Chambers of Commerce Industry and Agriculture TFDA Tanzania Food and Drugs Authority TRA Tanzania Revenue Authority TZS Tanzanian Shillings URT United Republic of Tanzania VAEO Village Agricultural Extension Officers VEO Village Executive Officer WAEO Ward Agricultural Extension Officers WEO Ward Executive Officer

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1.0 Introduction

1.1 Background to the Study Local Investment Climate (LIC)is mandatedto supportLocal Government Authority (LGA) in developing strategies of expanding and improving revenue collection from own sources without creating chaos to private sector. Experience gained within one year of project implementation indicate that, Local governments impose (and collect) many different types of levies and fees through different approaches.

Most local taxing is undertaken without a clear understanding of the impact of this activity on the local business sector or the overall revenue of the LGA and in some instances has resulted into a serious misunderstanding between LGA’s and private sector. It is against this background that, LIC has commissioned this assignment to consultants in order to draw detailed evidence to LGAs (Kongwa, Bahi, Mpwapwa, Kondoa, and Dodoma Municipal) on the best ways of increasing revenues without creating misunderstanding with private sector.

1.2 Objective of the Study

1.2.1 Main objective The main objective of this study was to assess the revenue potential of the Kongwa, Bahi, Mpwapwa, Kondoa, and Dodoma Municipal.

1.2.2 Specific Objectives More specifically, the study aimed at generating information that will result into developing strategic approaches of improving revenue collection for the five LGA’s. The study also aimed at institutional strengthening for improved fiscal and management capacities of the LGAs and improving the capacities for authorities to increase their local revenue base. Moreover, the study centered on providing the following information and recommendations: • LGA’s revenue collection structure and trend • Clear description of Major sources of Revenue for three LGA’s (with rates) • Description of revenue collection processes including strengths and weakness • Level of dependency of specific LGA’s to the central government and its effects to the LGA Plans • Strength and weakness of existing by-laws used for revenue collection • Description of qualities of responsible staff • Recommendations on the new possible new sources of revenue for the LGA

• Recommendations on the possible electronic systems to be used to improve revenue collection for the LGA’s • Recommendation on the feasible rates of taxes and levies • Clear description of challenges facing private sector on revenue collection process • Recommendations on feasible ways introducing by-laws responsible for taxes and levies with private sector participation of private sector engagement. • An elaborate description of recommendations for improvement of the revenue collection processes a rates setting. • Recommendation on strategies for each LGA on how to increase LGA revenue in a more sustainable manner.

1.2.3 Scope of the Study The study objectives and recommendations have been met and developed through adhering to the following scope of work to: i. Review and analyze existing documents related to existing situation of the 5 LGAs (i.e. Kongwa, Bahi, Mpwapwa, Kondoa, and Dodoma Municipal)

ii. Review main laws guiding LGA’s revenue collection and their bottlenecks of 5 LGAs(i.e. Kongwa, Bahi, Mpwapwa, Kondoa, and Dodoma Municipal)

iii. Identify and asses all existing sources of revenues for the 5 LGA’s (i.e. Kongwa, Bahi, Mpwapwa, Kondoa, and Dodoma Municipal)and rank from the major contributor to the minor for the past three years (including rates imposed).

iv. Assess contribution of respective LGA to their budget from own sources of revenue for the past three year.

v. Assess and analyze all means of revenue collection and its efficiency and weaknesses of the 5 LGAs (i.e. Kongwa, Bahi, Mpwapwa, Kondoa, and Dodoma Municipal)

vi. Assess qualities of responsible staff in the 5 LGAs (i.e. Kongwa, Bahi, Mpwapwa, Kondoa, and Dodoma Municipal)

vii. Assess and establish the level of dependency from central government and how does it affect district plans of the 5 LGAs (i.e. Kongwa, Bahi, Mpwapwa, Kondoa, and Dodoma Municipal) viii. Assess flow of funds from the central government for the past three years of the 5 LGAs (i.e. Kongwa, Bahi, Mpwapwa, Kondoa, and Dodoma Municipal)

ix. Identify and prioritize possible new sources of revenue for the 5 LGAs (i.e. Kongwa, Bahi, Mpwapwa, Kondoa, and Dodoma Municipal)

x. Identify and prioritize possible electronic systems to be used to improve revenue collection for the 5 LGA’s (i.e. Kongwa, Bahi, Mpwapwa, Kondoa, and Dodoma Municipal)

xi. Identify and list challenges facing private sector on revenue collection process.

xii. Assess processes engaged on imposing by-laws responsible for taxes and levies and level of private sector engagement. xiii. Assess how to improve local revenues from business that will complement and strengthen the Tanzania Strategic Cities Project activities.

2.0 The Study Approach and Methodology

The study employed mixed methods approach i.e. participatory and analytical. Whereas participatory approach was employed during field surveys and interviews with identified respondents. The analytical (or non-participatory processes) was employed during the synthesis of the various documents that were gathered from the, Central government, LGAs, TRA and client as well as during production of the report.

2.1 Sampling Frame The study was conducted in the five districts of Dodoma region namely, Dodoma Municipal, Bahi, Kongwa, Kondoa and Mpwapwa. The sampling frame for this study were at two levels i.e the Public sector and Private sector as illustrated below

Table 1: Sampling Frame

SNo. Public Sector Private Sector 1 District Executive Director TCCIA Members 2 District/Municipal Treasurer Other Tax payers (Non-TCCIA members) 3 District/Municipal Trade Officials 4 District/Municipal Human Resource Officials 5 District/Municipal Economist/planning officials 6 District/Municipal Lawyers 7 Council members 8 Municipal/City IT Department

2.2 Data Collection Methods Multiple methods of data collection were used for the purpose of enriching this study. Details of each method have been described below.

2.2.1 Desk Study Desk study was instrumental for collecting secondary data that were of great use in this study. The pertinent documents that were reviewed included but not limited to: 1. Districts/Municipal Medium Term Budget and Planning Frameworks 2. LGA Financial Act 3. Public Finance Act 4. Income Tax Act 5. Districts/Municipal profiles 6. Districts/Municipal Strategic Plans 7. Districts/Municipal by-laws 8. Relevant revenue studies1

The information reviewed from the above documents was used to enrich findings of the study and guided the study in triangulating and cross validating primary data that was collected from the field.

2.2.2 Key Informants Interviews Primary data for this study were mainly collected through key informant interviews (KIIs). In this regard a checklist that were addressing study objectives were designed to guide the interviews. The key informants were sampled from both public and private sectors. From the public sector, officials that were dealing with revenue collections (see Table 1 above) were all interviewed. Likewise from the private sector a sample of TCCIA members and non-members were also included for the study purposes.

1(Some of the key readings included: 1. Fjeldstad, Katera and Ngalewa (2008), Outsourcing Revenue Collection: Experience from LGAs in Tanzania, 2. PMO-RALG (2013), A Study on LGAs Own Source Revenue Collection. 3. Braathen, E, Chaligha, A, and Fjeldstad, O (2005),Local Governance,Finances and Service Delivery in Tanzania. 4. Mugoya, P and Chikongoye J (2011), Revenue Potential Study for Masasi District Council ) 4

3.0 LGA in Tanzania 3.1 An Overview of LGAs in Tanzania The Government of the United Republic of Tanzania is a unitary republic, administratively divided into 31 regions 26 on the mainland and 5 in Zanzibar. Regions are divided into districts, which are then further subdivided into divisions. The local government in Tanzania is divided into urban and rural authorities both on the mainland and Zanzibar. On the mainland Tanzania urban authorities consist of city councils, municipal councils and town councils, whereas included in the rural authorities are the district councils with township council and village council authorities. The district and urban councils have autonomy in their geographic area. District councils coordinate the activities of the township authorities and village councils, which are accountable to the district for all revenues received for day to day administration. The village and township councils have the responsibility for formulating plans for their areas. All together, the mainland hosts 22 urban councils, 92 rural councils and 97 district councils.

Generally speaking, the revenue base of local authorities is weak2 contributing to only 6- 20% of the total councils budget. In a move to strengthen this, "the Local Government Finance Act was amended in 1999 to appoint local authorities to be licensing authorities in respect of the business of commission agents, manufacturers' representatives, brokers, travel agents, buying and selling motor vehicles, import trade, regional trade, companies’ cooperative societies and so forth.

3.3.5 The Local Government Reform Programme (LGRP) Tanzania has been implementing the Local Government Reform Programme aiming to mobilize revenue collection to improve services delivery (URT, 1996). Main aspect of the revenue mobilization reforms is to increase the fiscal autonomy of local authorities in improving local investment climate. A key factor in this process is the measures to strengthen LGAs revenue generation capacity. In local business environment, LGAs is the one which impose (and collect) many different types of levies and fees on behalf of the government, internally and externally.The LGRP had five components. But the focus of this study is of finance.The main objectives of the finance component are to increase the overall resources available to local authorities and increase the efficiency of their usage through changing the incentive structure of the existing intergovernmental fiscal system. The main reforms include increasing the proportions of shared revenues going to local government, introducing supplementary intergovernmental transfers, improving local revenue collections, improving local financial management through rolling out the integrated financial management/accounting system (platinum) and training local officials.

2Kakwesigabo, 2010, Fjeldstad, 2007

3.2 LGAs Revenues in Tanzania LGAs revenue is the compulsory contributions imposed by local authorities on residents, having jurisdiction, to defray the cost of their activities. In revenue collection powers of local governments are set out in the Local Government Finances Act of 1982 and the Urban Authorities (Rating) Act of 1983. LGAs have different major sources of funding: own revenues, central government transfers, and development aid. In addition, user charges and various forms of self-help activities contribute to the running and maintenance of public services such as primary schools and health facilities. Local government authorities in the country have the mandate to raise certain revenues from taxes, levies and fees.

Most of the LGAs revenue comes from government allocations, which amount for 72% of the entire local authority budget. In 2001/2002 the aggregate revenue for local government was TZS 251.8 billion (US$ 282m). LGAs can also raise revenue locally. The main sources of local income come from: Fees including taxi registration, bus stands, forestry products, valuation, scaffolding, inoculation and ambulance; Licenses including road, liquor; Property taxes and rents; Charges including for refuse collection, cess, hire of vehicles, markets; Fines and Others including sale of assets and recovery of public fund.

3.3 Laws/Acts guiding LGAs Revenue Collection There are several tax laws and regulation which guide revenue collections in Tanzanian LGAs include Income Tax Act, 2004; LGA Finance Act, CAP 290; Public Finance Act; and Constitution of the United Republic of Tanzania

3.3.1 Income Tax Act, 2004 The Income Tax Act, 2004 was enacted to make provision for the charge, assessment and collection of income tax, for the ascertainment of income to be charged and matters incidental thereto. Income tax act provides a road map on how to charge tax on employment, business and investment. No tax is payable unless by express provision in the statute (Article 138 of the Constitution). Every taxing statute has a charging section and provisions laying down the procedure to assess the tax, interest and penalties; and method of their collection and may also contain provisions to prevent pilferage of revenue. The nature of tax charged by taxing statute has to be paying more attention section than to the basis or machinery adopted for assessment and collection of tax.

3.3.2 LGA Finance Act The Act impose and alter internal taxes, duties, levies, fees and amend certain written laws relating to the collection and management LGA revenue collection. These internal sources of LGAs revenue include crop cess, or farm gate tax, on crops and sometimes at different stages in the value chain (e.g., on sunflower, sunflower cake and sunflower oil),

hotel levies (based on turnover), town levies (based on revenue), local brew levies, market levies (charged on market operators, usually in the form of a daily fee), and property tax. Others include; local markets taxes and levies excluding any market where government finance is involved, Bicycle, truck canoe, wheelbarrow and cart fees, other than a mechanical propelled truck, Permits and fines charged by Courts Local Government Business Investment, Fees from schools established by the local governments, shops and kiosks rate, on and off Liquor License fees, Slaughter slab fees, Marriage, birth and death registration fees, Cattle tax payable by cattle farmers only, Signboard and advertisement permit fees, Radio and Television license fees (other than radio and television transmitter), Vehicle radio license fees, Wrong parking charges; Public convenience, sewage and refuse disposal fees; Fees collected from amusement centers established and operated by the local authority and that of Tourist centers and Tourist attractions, Rents, Fees on Private Institution, Motor park levies, Domestic and license fees etc. Most LGAs have contracted agents to collect some these taxes while others are not collected by Tanzania LGAs.

3.3.3 Public Finance Act This is an Act to repeal the Exchequer and Audit Ordinance in order to make better provisions for the more effective control, management, and regulation of the collection and use of the finances of the United Republic of Tanzania (URT) and for enhancing Parliamentary control; supervision of public funds and resources; and for related matters. Public Finance provide direction regarding URT public Revenues and expenditures, all laws related to revenues collections and spending including by-laws of local government authorities must be within the frame work of Public Finance Act, 2001 as amended time to time.

3.3.4 United Republic of Tanzania Constitution LGAs have external sources of revenue from local government finance includes: statutory allocation from the central government within the constitution of The United Republic of Tanzania of 1977; states that the National Assembly or the House of Representatives must provide for local government through legislation. Article 146 provides that one of the objectives of the local government is to enhance the democratic process within its area of jurisdiction and to apply the democracy for facilitating the expeditious and faster development of the people. Statutory allocation include support from the government budget to the local governments, government’s grants and aid, borrowing from state government and other financial institutions.

4.0 Study Findings 4.1 LGA’s revenue collection structure and trend

4.1.1 LGAs Collection Structure Local Government Authority revenue collections are guided by LGA Financial Acts of 2010. The LGAs revenue structure is basically divided into three main sources; Own sources and Intergovernmental transfers and local borrowing. The structure of collection at LGAs own sources are dominated by two channels; the LGA itself and commissioned agencies. On the first channel, the LGA uses its own staff under revenue department to collect tax whereas on the second channel, the LGA tend to source and commission some of the revenue channels to agencies. With exceptional to Dodoma Municipal council where every source has been identified and managed by revenue source manager all other councils (Bahi, Kondoa, Kongwa and Mpwapwa) have more or similar structure. Figure 1 below presents the LGAs revenue collection structures.

DED

District Treasury

Trade Revenue Accountant Officials

Accountants WEO Agents

Business All other Commisioned Property Tax registration Levies levies and Licencing

Figure 1: LGA Revenue Collection Structure The revenue collection structure for Dodoma Municipal differs significantly with other LGAs (i.eBahi, Kondoa, Kongwa and Mpwapwa) in the region. Its structure is composed

8 of Municipal Director and revenue collection committee3. The committee had other 12 team members who manages different revenue sources as depicted in figure 2 below.

Service Levy

Parking

Property tax

Bill Boards

Penalties and Fines

Auctions Revenue Collection Municipal Director Committee (RCM) Rentals

Crop Cess

Forest Products

Hall and Entertainment

Licence

Markets

Figure 2: Revenue Collection Structure at DMC

4.1.2 Revenue Collection Trend The study was also interested to analyze the revenue collection trend for the five LGAs. It was observed that Dodoma Municipal council had the highest revenues compared to other LGAs. It was followed by Kongwa, Kondoa, Mpwapwa and Bahi(See Table 2). The estimates and actual collections haveshown a mixed trend. The size of revenue collection within the surveyed LGAs had a reflection of economic activities on the LGAs. Dodoma Municipal being urban authority had a mixed of activities dominated with business (Off- farm) activities while all other LGAs were depending much on agricultural activities. In this view the revenue structure of Dodoma MC depends much on business related revenues while the other LGAs had more dependency on agricultural based revenues

3 The committee is composed of Head of Human Resources, Municipal Treasurer, Municipal Economist and Municipal Environmental Officer

(crops and livestock’s). There was an increasing trend on actual revenue collection for Dodoma Municipal and Kongwa District Council, while there was a decreasing trend of revenue collection for Kondoa and Mpwapwa District Councils whilethere is inconsistence in revenue collection for Bahi District Council(see figure 3 below) the details of the fluctuations are found on section 4.2 of this report.

Table 2: Revenue Collection Trend at Five Councils (‘000,000)

2012/13 2013/14 2014/15 ACTUAL ACTUAL ACTUAL DISTRICT ESTIMATES ESTIMATES ESTIMATES REVENUES REVENUES REVENUES Bahi 354.28 298.16 450.44 218.04 722.88 504.45

Dodoma MC 1,925.35 2,048.52 2,880.49 2,878.49 3,541.89 3,076.26

Kondoa 2,327.29 1,761.68 1,241.78 1,227.46 1,290.96 873.69

Kongwa 1,245.27 800.26 1,535.75 970.49 1,496.61 1,053.22

Mpwapwa 1,610.18 923.02 1,429.62 908.98 1,269.64 875.61

3500

3000

2500

2000 Bahi Dodoma MC 1500 Kondoa Kongwa 1000

Tanzanian Shillings '000,000 Mpwapwa

500

0 2012/13 2013/14 2014/15 Years

Figure 3: LGAs Actual Revenue Collection Trend ('000,000) 4.1.3 LGAs Ability to Meet Budget Estimates The study noted a mixed trend on the ability to meet budget estimates on the surveyed LGAs. For example, in Bahi the LGA was able to meet 84.2% (2012/13) of the estimates

10 which declined to 69.8% (2013/14) and increased slowly t0 69.8% (2014/15). At Dodoma Municipal there was huge collections amounting to 106% (2012/13) and declined consistently to 99.9% (2013/14) and 86% (2014/15). The same trend was observed in Kongwa whereby in 2012/13 the LGA was able to meet 64.3% of the estimate and declined to 63.2% (2013/14). Marginal increment was observed in 2014/15 where the LGA collected 70.4%. Kondoa and Mpwapwa had different story where by the LGAs had relatively low collections in 2012/13 and a rise in the subsequent years. In 2012/13 Kondoa was able to meet 75.7% of the estimates. There was a hike in collections up to 98.8% (2013/14) and a notable decline to 67.7% in 2014/15. Mpwapwa district met only 57.3% (2012/13) and increased in 2013/14 to 69.0%. The collections declined again in 2014/15 by 5.6% to reach 63.6% see (Figure 4). The data implies inability of the LGAs to meets its own budget estimates. These might be a result of faulty planning or implementation of the plans or both. Furthermore, it could be a reflection of the LGAs not being able to identify other new sources of revenues.

120.0 106.4 99.9 98.8 100.0 84.2 86.9 80.0 75.7 69.8 67.7 70.4 69.0 64.3 63.2 63.6 57.3 60.0 48.4

40.0

20.0

0.0 Bahi Dodoma MC Kondoa Kongwa Mpwapwa

2012/13 2013/14 2014/15

Figure 4: LGAs Ability to Budget Estimates

4.2 Major Sources of Revenue for the Five LGA’s

4.2.1 Major Sources of Revenue The five surveyed LGAs has different sources of revenue ranging from service levy, crop cess, billboards, rentals, penalties, licenses, markets, auctions, forest products, property tax to halls and entertainments. However, the contributions of these sources to LGAs

revenues had variations depending on the environment, major economic activities and stage of growth of the LGA. This sub-section will provide the sources of revenue for the 5 surveyed LGAs.

4.2.1.1 Sources of Revenue in Bahi District Bahi District Council depends on various sources of revenue including agricultural crops i.e. rice, maize, sorghum; and livestock i.e. cows, goats, chickens; small businesses and mining activities i.e. gravels, salt. As shown on Table 3 below. It was observed that, in the financial year 2014/15, more than 97.9 % of the Revenues were derived from only 4 sources in the following order; Auctions (289,122,000.00), Fees and Charges (127,683,714.24), NHIF (74,213,382.00); CHF (72,538,000.00); Crop cess (70,935,000.00) and Cost sharing (37,000,000.00). The structure of revenue collection of Bahi Council is much inclined to auctions, fees and charges; NHIF, CHF, Cost sharing and crop cess sources of revenue. The findings are the indicator of limited economic activities at the council.

Table 3: Sources of Revenue at Bahi District Council

Sources Amount % Auctions 289,122,000.00 39.9 Fees and charges 127,683,714.24 17.6 NHIF 74,213,382.00 10.2 CHF 72,538,000.00 10.2 Crop Cess 70,935,000.00 9.8 Cost Sharing 37,000,000.00 5.1 School fees 26,615,559.00 3.7 Other sources 11,772,000.00 1.6 Forest Product levy 5,974,600.00 0.8 License 4,158,935.00 0.6 Billboards 4,005,000.00 0.6 Land Rent 744,146.00 0.1 Rentals 390,873.00 0.1 Penalties and Fines 322,000.00 0.0 725,475,209.24 100.00

The percentage contributions of major sources of revenue in Bahi are found in figure 5.The findings show that auctions contributes 39.9% followed by fee and charges 17.6%, NHIF 10.2%; CHF 10.0%; Crop cess 9.8%; Cost sharing 5.1% and all other sources contributing 7.4%.

Cost Sharing 5.1%

Crop Cess 9.8% CHF Auctions 39.9% 10.0%

NHIF 10.2%

Fees & Charges 17.6%

Figure 5: Major Sources of Revenue at Bahi District Council

4.2.1.2 Sources of Revenue in Dodoma Municipal Generally, Dodoma Municipal Council depends on various sources of revenue as shown on Table 4below. It was observed that, in the financial year 2014/15, more than 84 % of the revenue was derived from only six sources in the following order; License (595,151,798.33), Billboards (464,233,418.63), Fees and Charges (435,545,935.78), Property tax (299,534,133.89), Parking (290,558,400.00), service levy (256,931,447.22) and market levy (250,952,900.00). The structure of revenue collection of Dodoma Municipal Council is much inclined to non-farm activities as opposed to other LGAs. This shows the diversity of economic activities prevailing at the municipal.

Table 4: Source of Revenue at Dodoma Municipal Council

Sources Amount (TZS) % Contribution License 595,151,798.33 19.3 Billboards 464,233,418.63 15.1 Fees and charges 435,545,935.78 14.2 Property tax 299,534,133.89 9.7 Parking 290,558,400.00 9.4 Service Levy 256,931,447.22 8.4 Market levy 250,952,900.00 8.2 Other Sources 174,273,768.00 5.7 Rentals 119,263,261.00 3.9

Crop Cess 61,696,710.00 2.0 Auctions 54,948,750.00 1.8 Penalties and Fines 36,642,300.00 1.2 Halls and Entertainment 18,960,500.00 0.6 Forest Product levy 17,568,500.00 0.6

The Percentage contributions of major sources of revenue in Dodoma are found in figure 6 it shows that licensing contributes 19.3% followed by billboards 15.1%, fees and charges 14.2%, property tax 9.7%, parking 9.4%, service levy 8.4%, market levy 8.2% and all other sources contributing 15.7%.

Others License 16% 19% Market levy 8%

Service Levy Billboards 8% 15%

Parking 10% Fees and charges Property tax 14% 10%

Figure 6: Major Sources of Revenue at Dodoma MC

4.2.1.3 Sources of Revenue in Kondoa The data of revenue for the financial year of 2014/2015 regarding Kondoa LGA are provided in Table 5below. The table presents the revenue source, actual amount collected, and the percentage contribution of each source of revenue to the total actual contribution. The table shows that crop cess (331,440,000.00), other sources (comprising of education fund, development fund, and health fund (309,078,729.00)), auctions (84,399,100.00) are the dominant sources of revenue while land rent (243,000.00) and forest product levy (4,383,990.00) have the smallest contribution to Kondoa LGA revenue.

Table 5: Source of Revenue at Kondoa District Council

Revenue source Actual Collection % Contribution Service Levy 12,560,000.00 1.44 Crop Cess 331,440,000.00 37.94 Property tax 2,460,000.00 0.28 Land Rent 243,000.00 0.03 Billboards 15,000,000.00 1.72 Market levy 24,834,300.00 2.84 Rentals 4,924,910.00 0.56 Forest Product levy 4,383,990.00 0.50 License 44,280,700.00 5.07 Auctions 84,399,100.00 9.66 Fees and charges 40,090,217.00 4.59 Other Sources 309,078,729.00 35.38 Total 873,694,946.00 100.00

The patterns of the main sources of Revenue for Kondoa LGA are presented in the figure 7 below. It can be seen that crop cess (38%) is the leading source of revenue followed by other sources (education fund, development fund, and health fund (35%)). The third main of source Revenue is auctions (10%) followed by license (5%), fees and charges (5%), market levy (3%), and others (billboards, service levy, rentals, forest product levy, property tax, and land rent (4%)) in that particular order.

Fees and charges Market 0thers 5% levy 4% 3% License 5%

Crop Cess Auctions 38% 10%

Other Sources 35%

Figure 7: Major Sources of Revenue atKondoa District Council 4.2.1.4 Sources of Revenue in Kongwa Generally, Kongwa District Council depends on various sources of Revenue as shown on Table 6below. It was observed that, in the financial year 2014/15, more than 83 % of the

Revenue were derived from only three sources in the following order; Crop Cess at Kibaigwa (381,426,919), Crop Cess (348,162,700), Social Contributions (147,406,950). The structure of revenue collection of Kongwa District Council is much inclined to farm activities. Kibaigwa international Market for Crop is the leading contributor (36%) of the total revenue of Kongwa District Council.

Table 6: Source of Revenue at KongwaDistrict Council

Source Amount % Contribution Crop Cess at Kibaigwa 381,426,919 36 Crop Cess (Excluding Kibaigwa Market) 348,162,700 33

Social Contributions 147,406,950 14 Different Fees 56,327,889 5 Other Levies 26,110,300 2 Licenses 25,557,652 2 Animal Auction Levy 20,624,000 2 Collections from District Council Properties 20,048,095 2 Service Levy 12,521,298 1 Market Auction Levy 8,647,970 1 Market Levy 6,382,100 1 TOTAL REVENUES 1,053,215,873 100

The Percentage contributions of major sources of revenue in Kongwa district Council are found on figure 8 it shows that Kibaigwa Crop Cess contributes 36% followed by Crop Cess 33%(Excluding Kibaigwa Market), Social contribution 14%, Different Fees 5%, and all other sources contributing 12%.

Other Levies Licences Animal Auction Levy Other Collections 3% 2% 2% from Distric Diffeerent Fees Council 6% 2%

Social Contributions Crop Cess at Kibaigwa 14% 37%

Crop Cess 34%

Figure 8: Major Sources of Revenue at Kongwa District Council

4.2.1.5 Sources of Revenue in Mpwapwa The study has found seven major sources of revenue for Mpwapwa District in year 2014/15 which contributes more that 90% of total revenue table 7 and figure 9 below, these are education fund (388,050,900.00), business license (91,698,279.59),produce cess (89,769,000.00), fee and charges (79,675,608.09), auctions (72,657,715.00),rentals (41,473,757.70), community health fund (30,948,000.00)and others include service levy, fishery levy, billboard fee, market levy, property tax and land rent together contribute only (81,336,697.00)of the total revenue, it was noted that education fund contributed a major part of revenue 44.32% for Mpwapwa District Council because of President’s directives to all local government in Tanzania to build laboratories in all government schools, while education fund could not be a sustainable source of revenue at Mpwapwa District Council business license and crop cess comparatively are leading source of revenue with a total contribution of 20.72%.

Mpwapwa District Council main source of revenue has been depending much on unsustainable sources. For example, compensation which depends on government willingness to disburse the budgeted amount, the source of revenue from community health fund has been on decreasing trend from Tshs. 142m in 2013/14 to little as 30m in 2014/15 due to the reason that contributions from community is not guided by any law so is voluntarily so most members have decided not to join again because they get the services expected. The study has also noted a significant amount of revenue Tshs. 388m from education fund in year 2014/15 as the result of this year’s government initiative to build school laboratories.

Table 7: Source of Revenue at Mpwapwa District Council

Sources Amount (TZS) % Contribution Education Fund 388,050,900.00 44.32 Business License 91,698,279.59 10.47 Crop Cess 89,769,000.00 10.25 Fees and charges 79,675,608.09 9.10 Auctions 72,657,715.00 8.30 Rentals 41,473,757.70 4.74 Community Health Fund 30,948,000.00 3.53 Others 81,336,697.00 9.29 Total 875,609,957.38 100.00

Rentals Others Community 5% 9% Health Fund Eductaion Fund Auctions 4% 44% 8% Fees and charges 9% Crop Cess Business License 10% 11%

Figure 9: Major Sources of Revenue at Mpwapwa District Council 4.2.2 Trend of the Revenue Sources for the Past Three Years

4.2.2.1 Bahi District Council The source of revenue at Bahi District Council has been changing for the past three years. For example in financial year 2012/13, auctions were the main contributor of revenue accounting for 58.2% followed by fees and charges (19.3%) and CHF (18.7%) but over the years these sources show a declining trend in percentage contribution(see Table 8). In 2013/14 same sources were leading by at decreasing rate Auctions (39.3%); Fees and charges (16.3%); CHF (11.0%); and other sources raised include crop cess (15.1%); and cost sharing (10.7%). The same sources remained the leading sources of revenue in 2014/15. Bahi being a new District Council still have opportunities to be harnessed to contribute as source of revenue.

Table 8: Trend of Revenue Collection at Bahi District Council

Revenue Sources 2012/2013 2013/2014 2013/2015 Actual Collection % Actual Collection % Actual Collection % Crop Cess 6,678,200.00 3.1 76,309,500.00 15.1 70,935,000.00 9.8 Land Rent 171,236.40 0.1 225,000.00 0.0 744,146.00 0.1 0.6 Billboards 4,005,000.00 Rentals 176,388.80 0.1 929,095.00 0.2 390,873.00 0.1 Forest Product levy 276,000.00 0.1 1,322,000.00 0.3 5,974,600.00 0.8 License 70,000.00 0.0 7,185,000.00 1.4 4,158,935.00 0.6 Penalties and Fines 673,000.00 0.3 60,000.00 0.0 322,000.00 0.0 Auctions 126,922,700.00 58.2 198,000,000.00 39.3 289,122,000.00 39.9 Fees and charges 41,999,729.00 19.3 82,434,349.09 16.3 127,683,714.24 17.6 CHF 40,802,500.00 18.7 55,478,000.00 11.0 72,538,000.00 10.0 2.2 10.2 NHIF 11,014,489.00 74,213,382.00 10.7 5.1 Cost Sharing 53,823,778.00 37,000,000.00 3.3 3.7 School fees 16,662,110.00 26,615,559,.00 Other Sources 269,088.85 0.1 1,010,000.00 0.2 11,772,000.00 1.6 218,038,843.05 100.0 504,453,321.09 100.0 725,475,209.24 100.0

4.2.2.2 Dodoma Municipal Council There had been a dynamic shift of main sources of revenue at Dodoma Municipal council for the past three years. For example in financial year 2012/13, service levy was the main contributor of revenue accounting for 19.4% followed by property tax (18.1) and billboards (18.1%) but over the years these sources show a declining trend in percentage contribution and being overtaken by licensing, fees and other charges (see Table 9). The explanation behind this dynamic change could rest on the growth of the council and promising trend business formalization. The growth of the Municipal provides more potentials and opportunities of generating more revenues for the Council.

Table 9: Trend of Revenue Collection at Dodoma Municipal Council

2012/13 2013/14 2014/15 Revenue Sources Actual Collection % Actual Collection % Actual Collection % Service Levy 398,088,210.97 19.4 331,085,436.61 11.5 256,931,447.22 8.4 Crop Cess 169,981,650.00 8.3 157,069,160.00 5.5 61,696,710.00 2.0 Property tax 371,691,477.46 18.1 436,694,899.31 15.2 299,534,133.89 9.7 Billboards 371,127,813.55 18.1 225,492,749.49 7.8 464,233,418.63 15.1 Market levy 114,335,961.50 5.6 131,725,700.00 4.6 250,952,900.00 8.2 Rentals 93,496,499.00 4.6 141,494,850.00 4.9 119,263,261.00 3.9 Halls and Entertainment 25,226,000.00 1.2 26,080,000.00 0.9 18,960,500.00 0.6 Forest Product levy 44,192,500.00 2.2 21,738,800.00 0.8 17,568,500.00 0.6 License 31,426,800.00 1.5 388,305,336.81 13.5 595,151,798.33 19.3 Penalties and Fines 22,041,000.00 1.1 94,839,585.00 3.3 36,642,300.00 1.2 Auctions 52,189,400.00 2.5 40,437,360.00 1.4 54,948,750.00 1.8 Parking 108,238,200.00 5.3 204,086,000.00 7.1 290,558,400.00 9.4 Fees and charges 102,785,006.66 5.0 524,323,207.00 18.2 435,545,935.78 14.2 Other Sources 143,699,224.00 7.0 155,119,908.67 5.4 174,273,768.00 5.7 Total 2,048,519,743.14 100.0 2,878,492,992.89 100.0 3,076,261,822.85 100.0

4.2.2.3 Kondoa District Council The Table 10below indicates the general trend of revenue collected from Kondoa LGA for the past three years. Contrary to the expectations, the trend shows that the total amount of revenue collected is decreasing with time. The total actual collected revenue for the financial year of 2012/2103, 2013/2014, and 2014/2015 is TZS1,761,679,737.00, TZS1,227,463,788.00, and TZS873,694,946.00 respectively. Furthermore, the results signify that crop cess has been the most consistent and leading contributor of revenue for each financial year despite its dip in 2013/2014 before rising again in 2014/2015. On the other hand auctions have revealed an encouraging trend as its revenues have been steadily increasing over the period of three year years. However, it can be seen that for the rest of revenue sources there a lot of irregularities and contradictions regarding the amount of revenue collected for the past three years. This might be due to the reason that the manual system which is used for revenue collection, makes revenue monitoring and control difficult resulting in non collection of some own source of

19 revenues over the years. In addition, feasibility studies, procedures, and plans to outsource and contract private agents are not efficiently done to ensure that the value for money is realized. Likewise, because of lack of monitoring some of the revenue collecting agents fail to pay the collected amount to the council. This concern was also addressed by District Treasurer (DT) and District Executive Director (DED) as revenue outsourcing challenges.

Table 10: Trend of Revenue Collection at Kondoa District Council

2012/2013 2013/2014 2014/2015 Revenue source Actual % % % Actual collection Actual collection collection Service Levy 12,080,000.00 0.69 5,003,029.00 0.41 12,560,000.00 1.44 Crop Cess 483,644,200.00 27.45 274,669,000.00 22.38 331,440,000.00 37.94 Property tax 0.00 0.00 0.00 0.00 2,460,000.00 0.28 Land Rent 0.00 0.00 0.00 0.00 243,000.00 0.03 Billboards 2,010,000.00 0.11 7,500,000.00 0.61 15,000,000.00 1.72 Market levy 86,881,000.00 4.93 30,325,100.00 2.47 24,834,300.00 2.84 Rentals 3,414,200.00 0.19 21,834,596.00 1.78 4,924,910.00 0.56 Forest Product levy 4,647,400.00 0.26 1,202,500.00 0.10 4,383,990.00 0.50 License 18,923,811.00 1.07 69,492,000.00 5.66 44,280,700 5.07 Penalties and Fines 310,508,872.00 17.63 259,562,767.00 21.15 0.00 Auctions 53,740,000.00 3.05 86,063,450.00 7.01 84,399,100.00 9.66 Guest house levy 5,460,000.00 0.31 0.00 0.00 0.00 0.00 Fees and charges 42,298,401.00 2.40 38,256,050.00 3.12 40,090,217.00 4.59 Compensation 644,798,062.00 36.60 333,689,118.00 27.19 0.00 0.00 Other Sources 93,273,791.00 5.29 99,866,178.00 8.14 309,078,729.00 35.38 Total 1,761,679,737.00 100.00 1,227,463,788.00 100.00 873,694,946.00 100.00

4.2.2.4 Kongwa District Council The main sources of revenue for Kongwa District council for the past three years have been the same, mainly contributed by Kibaigwa market and Crop Cess outside Kibaigwa market. Other sources contribute little on the total revenue of the council own source, crop cess other than that of Kibaigwa shows some encouragement trend (see Table 11). For example there has been a rising trend of crop cess from the financial year 2012/123, 2013/14 and 2014/15 crop cess contribute 22.6%, 33.2% and 33% respectively. Study findings show that there has been little or no contribution of some sources (weak sources), for example Guest House levy contributed very little for the FY 2012/123, 2013/14 and nothing collected for the year 2014/15. Other council own sources have minor contribution and needs improvement, sources like rentals, licenses, fees and chargeshave low rate contribution to council’s own source, for example for the FY 2014/15 altogether contributed only 9% of the total collections.

Table 11: Trend of Revenue Collection at Kongwa District Council

2012/2013 2013/2014 2014/2015 Source Actual % Actual Collection Collection % Actual Collection %

Crop Cess 181,200,000 22.6 312,699,600 32.22 348,162,700 33.0

Crop Cess at Kibaigwa 328,169,190 41.0 354,845,384 36.56 381,426,919 36.0

Service Levy 8,573,948 0.4 18,144,407 1.87 12,521,298 1.0

House Levy 3,110,000 0.4 115,745 0.01

Market Auction Levy 3,939,825 0.5 2,171,800 0.22 8,647,970 1.0

Market Levy 1,917,190 0.2 4,025,100 0.41 6,382,100 1.0

Auction Levy 41,997,495 5.2 7,175,700 0.74 20,624,000 2.0

Other Levies 7,408,600 0.9 10,563,350 1.09 26,110,300 2.0

Licenses 4,271,350 0.5 40,129,400 4.13 25,557,652 2.0

Fees and Charges 39,401,517 4.9 38,811,875 4.00 56,327,889 5.0

Rentals 21,145,935 2.6 64,384,946 6.63 20,048,095 2.0

Social Contributions 159,125,944 19.9 117,427,630 12.10 147,406,950 14.0

TOTAL 800,260,994 100.0 970,494,936 100.00 1,053,215,873 100.0

4.2.2.5 Mpwapwa District Council The study has found a shift of main sources of revenue at Mpwapwa District Council for the past three years. For example in financial year compensationwas the main contributor of revenue accounting for 36.95% followed by other source (15.73%) and community health fund (13.05%) but over time the compensation has declined and even there was no contribution in 2014/15 as such been taken by other source (23.14%) in 2013/14 and education fund (44.32%) in 2014/15 see table 12 below.

Table 12: Trend of Revenue Collection at Mpwapwa District Council

Source of Revenue 2012/2013 2013/2014 2014/2015 Actual Actual Actual Collection % Collection % Collection %

Compensation 341,086,195.00 36.95 124,046,417.00 13.65 0 -

Community Health Fund 120,465,545.00 13.05 142,647,590.50 15.69 30,948,000.00 3.53

Education Fund 0 - 0 - 388,050,900.00 44.32

Other Sources 145,218,602.82 15.73 210,356,189.88 23.14 0 -

Crop Cess 87,879,100.00 9.52 138,703,780.00 15.26 89,769,000.00 10.25

Fees and charges 78,143,400.00 8.47 75,944,872.40 8.35 79,675,608.09 9.10

Auctions 44,016,050.00 4.77 81,793,860.00 9.00 72,657,715.00 8.30

Rentals 43,387,547.65 4.70 33,792,119.00 3.72 41,473,757.70 4.74

License 4,812,900.00 0.52 24,395,000.00 2.68 91,698,279.59 10.47

Service Levy 16,454,851.94 1.78 24,460,632.74 2.69 17,816,905.00 2.03

Fishery Levy 15,112,500.00 1.64 14,603,300.00 1.61 18,000,000.00 2.06

Penalties and Fines 14,546,419.72 1.58 22,409,600.00 2.47 17,961,192.00 2.05

Billboards 2,420,400.00 0.26 1,000,000.00 0.11 15,500,000.00 1.77

Market levy 2,050,000.00 0.22 3,768,000.00 0.41 7,282,100.00 0.83

Guest house levy 4,526,200.00 0.49 300,900.00 0.03 0 -

Property tax 2,606,200.00 0.28 3,650,000.00 0.40 2,036,500.00 0.23

Forest Product levy 121,000.00 0.01 6,788,000.00 0.75 0 -

Land Rent 176,449.80 0.02 322,449.80 0.04 2,740,000.00 0.31

Total 923,023,361.93 100.00 908,982,711.32 100.00 875,609,957.38 100.00

4.2.3 Rates/Charges for the Major Sources of Revenue Except for the revenues that are governed by the national main acts, other revenues that are determined by by-laws had different rates charged by the LGAs. It could also be observed that some items of the same category are differently charged by different LGAs. Table 13 below shows rates for selected major sources of revenues across the surveyed LGAs. The variations observed create difficult environment for conducting business in LGAs where they charge high and discourage compliance of the same. For example, a simple analysis of major sources of revenue in the surveyed LGAs excluding Dodoma MC indicates agricultural related business/activities take a lead. One would expect charges of the crops within the same region would be equal, but that’s not the

case. For example charges on maize crops in Kongwa (2,500/- at Kibaigwa market and 1,000/- other places per bag), Kondoa (5% of market price but charging 1,000/- per bag), Mpwapwa (1,000/= per bag), and Bahi (5% of market price).

The Local Government Finance Act (1982) provides for such standardized Rating Rules to be established by PMO-RALG with consultation of the Ministry of Finance (Section 13:2-3). However, such Rating Rules have not been developed and/or put in place. Thus ratings depends much on the established By-Laws which has been leading to inconsistence rating and administration of the revenue. The prevailing rate setting governed by established by-laws is highly challenged by being non-participatory especially with respect to private sector.

Table 13: Rates charged by LGAs

Revenue Sources Bahi Dodoma Kondoa Kongwa Mpwapwa Service Levy 0.3% of Annual Turn-Over License 10,000-300,000 10,000-300,000 10,000-300,000 10,000-300,000 10,000-300,000 Crop Cess Maize (per bag) 1000 400 1200 1000 1000 Beans (per bag) 1000 400 2000 3000 1000 Rice/Paddy (per bag) 1000 400 1000 1000 Groundnuts (per bag) 1000 400 2000 1000 Sunflower (per bag) 1000 400 1000 1000 1000 Sesame (per bag) 1000 400 2000 1000 1000 Sorghum (per bag) 1000 400 1200 1000 1000 Cowpeas (per bag) 2000 1000 1000 Onions (per bag) 400 1000 1000 Livestock Cattle (per head) 2000 2000 1000 3000 3000 Goat /Sheep/Pig (per head) 1000 1000 500 1500 1000 Chicken (per head) 50 Fishery Levy (per fish) 20 Billboards (10/= per cm2) 30,000-50,000 50,000-120,000 5000-30,000 5000-30,000 5000-30,000 Property tax 5000-25000 5,000-10,000 Land Rent (per sq m) 20 – 30 Parking 200-1000 Market levy (per day) 400 400 200

Furthermore, it was observed that, stakeholders from the business community (Private sectors) had differed opinions on the rates charged. For example across all the surveyed LGAs and Municipal council service levy was perceived negatively as being too high and does not reflect back the service offered by the LGAs. Moreover, license fees were also perceived negatively as being too high; basis of paying for the license fee basing on type

23 of business were challenged by private sector. It was observed for example a stationery business worth TZS 200,000,000/= had the same fee of TZS 100,000/= as the one worth TZS 200,000/=; another example, in Bahi auctions same rate for all traders which is unfair treatment i.e. maandazi hawkers (with a capital of TZS 2,000) pay TZS 500as market levy while bar operators (with a capital TZS 300,000) pay the same. This has been challenged as a prohibitive measure to business formalization and licensing.

4.3 Revenue collection processes including strengths and weakness

4.3.1 Revenue Collection Processes Local government tax collection is the responsibility of the council’sstaff; the process starts from the formulation of identifying sources of revenue and formulating by-laws to guides its collection. The collection of revenue in the LGAs it is organized around three levels, namely the council headquarters, the wards and the villages. 1. At the council headquarters: the responsibility for tax collection rests with the council treasury, headed by the District/Municipal Treasurer.

2. At the ward levels: the responsibility rests with the office of the Ward Executive Officer (WEO). The WEO handles developmental issues and law-and-order functions at that level. The local militia is at their disposal. In wards with greater revenue potential there will also be a ward revenue collector (WRC) to support the WEO.

3. At the village level: the responsibility rests with the office of the village executive officer (VEO). The VEO is also responsible for supervising village developmental activities and for maintaining law and order. Additionally, the VEOs often function as Village Council secretaries.

The process and administration of tax collection varies between LGAs. For example, it was noted that is some LGAs tax collection ends to the ward level while others goes further to village level.

In order to enhance revenue collections, most LGAs have reformed their tax collection systems by outsourcing tax collection to private agents. In this order the process of outsourcing is governed by Local Government Reform Program (LGRP) and PPRA regulations. All five surveyed LGAs admitted their adherence to PPRA procedures and regulations for getting revenue collection agencies.

4.3.2 Strength and Weaknesses

4.3.2.1 Strength of the Processes • Availability of skilled man power at the district council level is one of the basic advantages of the LGAs revenue collection processes. In this regard the councils have lawyers to aid in formulation and implementation of the by-laws.

Furthermore, the councils have professional accountants, planners, statisticians to assist the planning, collection and reconciliation of the revenues. Additionally, presence of trained police force is another advantage especially in time of non- compliance. • Presence of by-laws that guides collection of revenues is also treated as another advantage of the revenue collection process. • Institutionalization of the PPRA regulation is among the strength of revenue collection process. This is more appropriate when outsourcing revenue collection to private agency. LGAs have to follow regulations from advertising the bids, opening, evaluation, selection and commissioning. The regulation ensures consistency between LGAs and also creates sense of transparency and accountability.

4.3.2.2 Weakness of the Processes • Lack of Motivation:The revenue collection process is criticized at all levels from the council, wards and villages by lacking motivations to individuals involved in revenue collections • Insufficient equipment: Low awareness of tax payers and non-compliance to paying tax necessitates close follow-up of the revenue collectors to tax payers. The follow up requires vehicles to facilitate transportation of staff; almost all LGAs reported insufficient transportation to facilitate revenue collections. Moreover, computers and printers are also insufficient. • Inadequate proper rating: It has been noted from above that, the ratings of levies are not participatory and sometimes acts as burden to tax payers • Political interference: This has also been noted as weakness of the revenue collection processes at LGAs. Technocrats have been complaining of being interfered in their technical advice to enhance revenue collection by politicians from all levels. Much critiqueis directed to councilors for sometimes being biased in order to save their votes from tax payers while jeopardizing revenue collections. • Lack of Training: Involvement of Ward Executive Officers (WEOs) and Village Executive Officers (VEOs) is also criticized in the sense that, these officials are sometimes does not possess relevant education to warrant their performance in revenue collections. Loopholes on contract management: It was noted that, contract favor agents than councils, hence LGAs loose revenue due to agents failure to honor their contracts. For example, it is easier for an agent to discuss with councils when they fail to reach contract ceiling but they never go back to re-negotiate if they collect super profits above normal. A case of this was observed in Mpwapwa where by an internal auditor asserts that; ,“Last year we contracted an agent to collect produce cess on behalf of

Mpwapwa District Council; the estimation was to collect a total amount of TZS. 87m, however after auditing our books it was found that the agent collected a total amount of TZS. 405m, the council couldn’t do anything due to loophole on the contract, hence the agent got big share than LGA” (Emmanuel Kayeta – District Internal Auditor) • Lack of monitoring mechanism: It has been noted that there is weakness in trackingrevenue collection due to shortages and underfunded staff who cannot efficiently manage to monitor collection of revenue. For example in Kongwa DC, apart from using receipt there is no any other mechanisms to monitor revenue collectors ( WEO or VEO) who are entrusted to collect revenue on behalf of of the council, It’s difficult to know exactly the amount collected and the amount submitted. • Another case was observed in Bahias it was reported by the chairman of UWABINIDO (Umoja wa Wafanyabiashara Waendao Minadani Dodoma) that in some auctions in Bahi they were issued a receipts without Bahi District Council logo. They recognize the illegality of the receipts in which they reported to the council without proper resolution; they also report to PMO-RALG officials without their concern being handled properly.

• Poor Revenue forecast and planning: Planning and budgeting process involves Mpwapwa council do estimate own source revenue collection. The best estimate depends on how much information at hand to each respective source; hence there is no revenue collection extensive study which can guide planning. • Lack of designated areas for easy collection of revenues: the study found out that, some sources of revenues lack proper collection mechanisms, for example in Mpwapwa District Council charcoal levy has not been taxed properly as a result of not being able to track traders who sell directly to households. • During the research it has been revealed that some private agents in Mpwapwa and Dodoma Municipal Council do not abide to what have been agreed on the collection procedures of the respective source that they have been signed for implementation. The main problem was the compliance on remittance procedures of the revenues, agents do not remit as agreed as a result lead to defaults

4.4 Level of Dependency of Specific LGA’s to the Central Government and Its Effects to the LGA Plans

4.4.1 Intergovernmental Transfers to LGAs Literature suggest that, Local governments’ own revenues represent less about 6 % of total national tax revenues in Tanzania and the share has been almost unchanged since

19964. Inter government transfers contribute between 80% - 90% of the council’s total budget. This trend limits fiscal autonomy of district councils with respect to revenues and expenditures as councils’ own contribution to budget is between 10% - 20% only. The same trend has been observed within the surveyed LGAs. Table 14 below shows the trend of Intergovernmental Transfers to LGAs.

Table 14: Intergovernmental Transfers to Five Councils

2012/13 ('000,000) 2013/14 ('000,000) 2014/15 ('000,000) % LGA % LGA % LGA LGA Own Source Total Budget Contr. Own Source Total Budget Contr. Own Source Total Budget Contr.

Bahi 218.04 8,231.92 2.6 504.45 17,761.31 2.8 725.48 10,968.34 6.6

Dodoma 2,120.62 25,024.44 8.5 2,847.42 28,837.29 9.9 3,091.34 8262.05 37.4

Kondoa 1,761.68 63,137.68 2.8 1,227.46 67,991.55 1.8 873.69 23,229.04 3.8

Kongwa 800.26 18,483.83 4.3 970.49 21,667.75 4.5 1,053.22 23,402.45 4.5

Mpwapwa 923.02 18,835.13 4.9 908.98 15,570.98 5.8 875.61 25,124.40 3.5

Total 5,823.62 133,713.00 4.4 6,458.81 151,828.89 4.3 6619.34 90,986.28 7.3

The study finding shows that on average, the contribution of five LGAs surveyed had a capacity to finance their budget by less than 5% which is less by the national average of 6%. Over the past three years the capacity has been declining from 4.4% (2012/13) to 4.3% (2013/14) and raised to 7.3% (2014/15). The observed decline in LGAs capacity to meet their budget estimates has largely been contributed by having almost the same of revenue sources while the demand of services and developmental needs escalates.

4.2.2 Effects of LGA dependency to Central Government

Literally, the planning and budgeting processes in the LGAs are guided by the ‘Guidelines for the preparation of LGAs’ Medium Term Plans and Budgets’ issued by PMORALG. These guidelines reflect and interpretation of the national plan and budget guidelines issued annually by Ministry of Planning and Economy and Empowerment (MPEE) and Ministry ofFinance (MOF). Beside the guidelines, the preparation of budgets observes the requirements of the Local Government Finance Act no. 9 of 1982, section 43 (1), which requires the councils to havean approved annual budget two months before the beginning of the financial year.

4Fjeldstad 2003 27

The plan and budgets in the LGAs are prepared basing on the priorities of respective LGAs which are found in the strategic plans. Nevertheless, it has been observed that all surveyed LGAs depends on Central Government by almost 90%, especially on Personal emoluments, other charges and development funds. Figures shows that the government has been able to meet PE and OC for almost (43-92%) and while development budget has been meeting for an average ranging between (40-82%) see Table 15.It could be noted that urban authorities are disadvantaged in terms of intergovernmental transfers as compared to district authorities. This has been so because of the perception that urban authorities has more sources of income as compared to districts.

The effect of the gaps results into having a stalk on implementing development projects. Furthermore, the LGAs priorities are not followed but rather priorities of the Central Governments that are determined by budget allocations. For example, inadequate funding in Dodoma MC has caused delays in program/project implementations; For example the National Water Supply and Sanitation Programme that was scheduled to be implemented from July 2015-June 2016. SEDP and District Livestock Development Fund also face the same challenge of inadequate funding.

Another example was observed at Mpwapwa District Council in their mid-year report from July 2013 to December 2013, out of 107 activities planned to be implemented only 14 (13%) activities were achieved, all the remaining activities were not done with the reason that funds not yet released from the central government.

Table 15: Percentage Actual Central Government Transfers to Five Councils

Actual % from Gvt to LGAs 2012/13 2013/14 2014/15 Average Bahi PE 48.9 90.3 62.7 67.3 Development 50.9 98.6 34.9 61.5 Dodoma PE 62.7 60.4 5.9 43.0 Development 50.8 70.1 28.2 49.7 Kondoa PE 99.9 79.6 79.0 86.2 Development 90.8 81.6 18.3 63.6 Kongwa PE 98.1 91.6 84.7 91.5 Development 57.1 76.7 111.6 81.8 Mpwapwa PE 83.5 53.7 92.7 76.6

Development 93.3 66.7 51.3 70.4

4.5 Strength and Weakness of Existing By-Laws Used for Revenue Collection

4.5.1 Establishments of LGA By-Laws Collection of revenues at LGAs level is mainly guided by by-laws in respective councils. Each local government Authorities has powers to formulate their own by-laws within their area of jurisdiction. The power to do so are vested by Local Government (District Authorities) Act CAP 287 and Local Government (Urban Authorities) Act CAP 288 (RE 2002). Under the local government (District Authorities) Act No. 7 of 1982, the procedure to make by - laws is provided under section 150(1), (2), (3), (4) and (5) of the law

Section 150 (1): Provided that, where a district council proposes to make any by laws, it shall give notice to the inhabitants of the area of its intention, in such manner as may most probably ensure that the notice shall come to the notice of all persons likely to be affected by the by laws proposed, and calling upon all interested person within the areas to lodge any objections or representations in writing with the council within such time as may be prescribed.

Section 150 (2):If, upon the expiration of the notice, no objections or representations are received, or no person raising ,an objection satisfies the council that there is no need for the by-laws proposed, the district council shall proceed to make the by-laws, taking into account any other kind of objections or representations made

Section 150 (3):Provides that, after the by-laws have been made by the district council, they shall be lodged to the Regional commissioner in the region in which the council is situated for comment by him; and the Regional Commissioner shall as soon as practicable comment upon the by-laws and then submit the by-laws to the Minister for is approval.

Section 150 (4): provides that, the Minister may consent, or give or withhold his consent on such conditions as he may specify, to any by-laws submitted to him and may, upon the date of giving his consent , fix the date for the coming into the operation of those by laws.,

Section 150 (5): provides further that, the minister may, before approving any by law which affects a reserve or specific area or any other enacted law consult the Minister responsible for the relevant law or matter as the case may be.

Under the local government (Urban Authorities) Act No. 8 of 1982, the procedure to make by - laws is provided under section 81(1), 81(2), 81(3) and (4) of the law:

Section 81(1): The Act provides that, where urban authority proposes to make any by- laws it shall, at authority makes by- least two weeks before the meeting of the authority, at which it is proposed to consider the by-laws, give notice to the inhabitants of the area of its jurisdiction of its intention, in such manner as may most probably bring the notice to the attention of all persons likely to be affected by the by-laws indicating the precise purport of the by-laws proposed, and calling upon all interested persons within the area to lodge any objections or representations in writing with laws the authority within such time as may be prescribed

Section 81(2): The Act furthers states that, If, upon the expiration of the notice, or not less than threeclear days before the authority's meeting at which it is intended to consider the proposed by-laws, no objections or representations are received, or no person raising an objection satisfies the council that there is no need for the by-laws to be made, the authority shall proceed to make the by-laws proposed, taking into account any other kind of objections or representations made.

Section 81 (3): Provides that, after any by-law or by-laws has or have been made or amended by the authority, the by-law, by-laws or amendment shall be submitted for the approval of the Minister, together with- (a) A copy of the minutes of the meeting of the authority at which the by-law or amendment was adopted; (b) A certificate by the Director that the preceding provisions of this section have been complied with; (c) Copies of any objections against the adoption of the by-laws or amendment which may have been lodged in writing with the authority, or, if none have been lodged, a statement tothat effect.

Section 81 (4): Where any objection has been lodged and has not beenwithdrawn, the Minister may approve, alter or reject any by-law oramendment and consent to the by- law or amendment so submittedto him.

Section 81 (5):Upon consent being given by the Minister to any by-law oramendment, with or without alteration pursuant to subsection (4),the by-laws or amendment shall be published in the Gazette, andshall have full force of law within the area of the urban authorityfrom the date of publication or the date of commencementspecified in the by- law or amendment.

4.5.2 Strength and weaknesses of the existing by-laws

4.5.2.1 Strength of the By-Laws As it has been stated above, the By-Laws are formulated pursuant to the existing national acts and laws. The main strength of the existing by-laws in the surveyed LGAs are:

• Endorsement of the by-laws after fulfillment of all required procedures and stages of by-laws formulation

• The applicability and its enforcement in guiding revenue collection is another strength of the existing by-laws across all surveyed LGAs

4.5.2.2 Weakness of Existing By-Laws Despite its applicability and enforcements of existing By-Laws, several weaknesses have been observed across different LGAs, in this case we categorize weaknesses into; general weakness and then describe specific cases

General Weakness of Existing By-Laws

• Across all the surveyed LGAs, participation of private sector in the formulation of the By-Laws was a major challenge. It was noted that, private sector are highly involved during implementation of the same rather than formulation. To some extent this creates resistance or non-compliance to tax payers as they see some of the by-laws being burden to them • Bureaucratic procedure in formulation of the by-laws; this results into having outdated rates and by-laws that inhibit revenue collections • Inadequate participation of private sector and other stakeholders results into low awareness of the same on the existing by-laws and thence affecting their compliance

Specific Cases for the By-Laws weaknesses:

Dodoma Municipal Council

• The By-Laws used are a collection of various by-laws from different LGAs in Tanzania (See Table 16). The problem does not lie in adopting the By-laws from other LGAs but rather on the differences that exist between the LGAs in terms of economic activities and level of LGAs growth. Copying and pasting the LGAs without any customization would affect revenue collections

Table 16: Cases for By-law Weakness

By-Law Formulated to serve Property Tax Njombe District Council Environmental Cleanliness Njombe District Council Market Levy Songea Municipal Council Abattoir Levy Kibaha Environmental Conservation Mbeya District Council Health Services Arusha

• Challenge in interpreting the Existing By-Laws

The other challenge which exists is poor interpretation of the existing By-Laws. For example, the Parking fees for private vehicles which are not meant for business is supposed to be TZS 200/= per day, but agencies/the municipal charges TZS 200/=per hour.

Kongwa District Council

• The main challenges that have been existing at Kongwa District Council have been absence of endorsed By-laws. This has been posing a tug of war between public and private sector though initiatives are in place to approve the same. • Crop levy regulations at Kibaigwa market has been regarded as prohibitive to business community.

Mpwapwa District Council

• Introduction of waste and garbage collection fee to the public community without the existence of by-laws to support the enforcement.

4.6 Qualities of Responsible staff for Revenue Collection Establishment of Local Government Authorities both districts and urban acts had a provision that, the head of the paid service is the District Executive Director in the district authorities and the Town/Municipal/City Director in the urban authorities. Below the below the Director there are a number of Heads of Department. The Departments may include the following: personnel and administration; planning and finance; engineering or works; education; trade and economic affairs; urban planning; health and social welfare; co-operative, agriculture and livestock development; and community development. Each department serves for a specific or multiple task depending on the nature of activities under its.

Collection of revenues for the LGAs is a function of the whole council. Nevertheless, the Treasury department is overseeing the collections. The study among other things was interested in describing qualities of staff involved in revenue collections. Staff under Treasury department, trade, Planning and Ward Executive Officers were analysed.

It was found that, establishment of the departments and staff in LGAs are well stipulated in the scheme of services. Qualifications of each post and job responsibilities are clear located. The study found out that, across all the surveyed LGA, Head of

Departments in the Treasury, Planning, Law, Trade and Human resources were graduates from different colleges see Table 17. However, the problem lies in inadequate staffing of the departments. To some extent this results into low pace of revenue collections.

Table 17: Revenue Collection Staff for LGAs

LGAs Category of Staff HoD No. of Staff Required Existing Gap Bahi Human Resource Graduate 2 3 1 Treasury Graduate 8 8 0 Trade Graduate 1 2 1 Planning Graduate 6 8 2 Law Graduate 1 2 1 Dodoma Human Resource Graduate Treasury Graduate 5 10 5 Trade Graduate 4 10 6 Planning Graduate 4 10 6 Law Graduate 2 4 2 Kondoa Human Resource Graduate Treasury Graduate 14 17 3 Trade Graduate 4 4 0 Planning Graduate 4 8 4 Law Graduate 3 4 1 Kongwa Human Resource Graduate Treasury Graduate 8 8 0 Trade Graduate 5 4 1 Planning Graduate 4 4 0 Law Graduate 2 1 1 Mpwapwa Human Resource Graduate Treasury Graduate 0 Trade Graduate 1 3 2

Planning Graduate 7 7 0 Law Graduate 1 2 1

On the other hand, the LGAs have been using WEO to collect some of the levies such as property tax, local brew bars and some auctions. Since the WEOs are not directly linked with revenue collections, their qualifications does not necessarily require someone with accounts/finance or mathematical background. For proper functioning of this approach, training to WEO would be more appropriate to enhance the process of revenue collections.

Staff qualities of outsourced private agents contracted by LGAs in many cases are questionable. Company’s outsourced to collect revenue hire staffs with poor or inadequate revenue collection skills or training. For the purpose of maximizing profit, most of agents use unqualified staff or cheap labourers.

4.7 Challenges Facing Private Sector on Revenue Collection Process The Government of Tanzania recognizes the role of private sector in bringing about socio-economicdevelopment through investments. It encourages Public-Private Dialogue that would lead into effective and efficient business environment to both ends. While the private sector is investing and paying tax, the government has to provide services basing on the collected revenues. In this case a synergy between the two is highly needed. However, in the due course of paying tax the private sector face a number of challenges as described below

Revenue collection process is guided by government acts and by-laws formulated at LGAs. Many challenges facing private sector emanates from these acts and by-laws, For example:

• The processes of setting rates are not participatory and sometimes become more prohibitive. Example the licensing charges that base on type of business is a challenge and results into non-compliance to small/emerging business. One of TCCIA member asserts that, “…Assume you have TZS 2,000,000/= and you want to establish a small business of selling cement then you have to pay a sum of 200,000/= for license, while again for large business person with a capital of more than 500,000,000 involved in the same business will pay the same amount of TZS 200,000/=. To some extent these demotivate formalization of small business…”

• Payment of the service levy: Private sectors are not satisfied with payments of service levy which is equivalent to 0.3% of annual turn-over. This has been so because the bases of determining annual turnover are not clear and consistent. Moreover, the service levy is supposed to be accompanied by improvement in

service provision from the LGAs of which the private sectors are not satisfied with. • Paying Licensing fees on annual basis: These fees are a good source of revenue to LGAs but its essence of being on annual basis is questioned by the private sector. The set-up and pricing of licensing fees raises a big challenge to private sector. • Lack of participation of private sector during formulation of by-laws at district level; by-laws are no transparent enough for private sector to pay taxes voluntarily. • Lack of education and awareness of by-laws established by council. • Lack of participation of local private sector in the process of revenue collection since most of contracts are given to companies which are outside of the respective council. • Poor or no services provided to the public to reflect the taxes/leviespaid to local government e.g. in Mpwapwa the local market and auction centre are so poor, no toilet, cleaning is done by traders, hence there is no incentive to pay taxes. The Bahi auctions the same case applies. • Overlapping taxes with other central government taxes (OSHA, TFDA, Fire Brigade, Health) • Most LGA with exceptional of Dodoma MC business are seasonal depending on agriculture production but taxes imposed by local government doesn’t take into consideration of such nature of business e.g. most sunflower processors do operate few months but taxes are charged monthly • Enforcement of the by-Laws: Using militia and police force in the process of revenue collection is yet another challenge to private sector. Albeit this is a result of non-compliance, but its implementation sometimes is associated with what can be called “excessive force” and leads to conflicts between private and public sector.

4.8 Revenue Collection Systems Revenue collection systems include methods of collecting revenues from different sources of the council and the recording process of information regarding collected revenues. Council revenue collection may either be manual or electronic system. However, mostly of Tanzania councils still use manual system while some shifted to electronic system. Electronic system is believed to be more effective and efficient than manual of which has been reported by councils visited as benchmark. Effectiveness of the system was justified by the improvement of actual collection against estimates; minimize leakage of revenue collected and record management.

4.8.1 Manual Collection System This is the revenue collection system practiced by all councils in the Dodoma region and also practiced in mostly councils in Tanzania. The system uses officers such as WEO, VEO, Ward Agricultural Extension Officers (WAEO),Village Agricultural Extension

Officers (VAEO)and other appointed agents to collect revenue on behalf of the council through vouchers and then submit to responsible officers (DT offices) for recording to the required system for further processing. The collections received from collection officers at the Councils are also processed manually.

The system is not effective enough since the study findings shows there is a lot of fund lostduring manual system. Manual collection system is associated with many loopholes that could lead into leakage of revenue.

4.8.1.1 Problems orChallenges of using Manual systems in Revenue Collection As mentioned above the study revealsmanual system is not effective for collection of council revenues, some of challenges includes.

• Poor collections (budgeted compared to actual) • Difficulties in records (inconsistence of information) – collection agents presenting less amount as per receipt books submitted to the council. • Unfaithful officers or agents’ officers sometimes can easily temper with revenues; i.e. parking fees – officers they do collect fees without issuing receipts or below the charged fee. • Corruption – In dealing with individuals involved in revenue collection may create rooms for corruptions and poor management of funds. • Risk - there is a risk of lots of money to be lost in transit from collection point to the council revenue collection point. • Possibility of tax/levies’ avoidance and evasion - paying though officers manually may stimulate some tax payers to evade council payment due to troubles or difficulties in paying those payments. • Lack of required skills on revenue collection – Most of WEOs and agents’ officers lack appropriate skills in revenue collection.

4.8.2 Electronic Revenue Collection System This revenue collection system is not popular for Tanzanian Local Authority Councilsalthough it is the one recommended by the central government to be used by all LGAs as per 1st October 2015. Few councils including Mbeya CC, Mwanza CC, Kinondoni MC and Temeke MC, started to implement Electronic revenue collection System known as Local Government Revenue Collection and Information System (LGRCIS) for at least a year and shows improved trend on revenue collections. LGRCIS is the system whereby revenues are mobilized electronically from sources and information are automatically processed and easily retrieved when needed. Most ofpublic institutions in Tanzania are moving from manual system to electronic system. The system enhances record

management, control of revenue collection information; appropriate payment of charged rates; improved internal control and auditing of revenue collected.

Four councils (Mbeya CC, Mwanza CC, Kinondoni MC and Temeke MC) were visited during the study as benchmark to learn how LGRCIS practiced. The use of the system in those councils is due to the initiatives done by the Central government to mobilize the use of electronic system on revenue collection for all of its 164 LGAs. The aim of the reform on revenue collection start by using electronic systems for various activities such as bill generation, bill payments, cash collection, receipt issuing, valuation roll for property taxes; service levy, billboards, parking, wrong parking and business licenses.

The LGRCIS used in connection with Banks, PoS and mobile money facilities such as Max Malipo; M-pesa, Tigo pesa and Airtel money to facilitate the process and to make sure each taxpayer conveniently pay the tax or levies or fees required on time.

4.8.2.1 Reasons for Recommending LGRCIS as Electronic Revenue Collection System for LGAs Among many advantages of electronic collection systems the following was noticed during the study survey: accelerating work processes; delivering services to citizens and businesses;increasing transparency and accountability;lowering costs of operation; improvement of revenue collection trend;minimization of poor management of fund;minimize a room of corruption;increase taxpayers’ compliance;increase record keeping and management; and ensure record consistency.

Specific example on the improvement of revenue collection in Kinondoni MC; Revenues source from Mwananyamala Hospital for February 2014, March 2014, April 2014 and May 2014 they collect 86,646,066.65, 86,444,108.03, 89,214,712.18 and 113,788,483.99 respectively after introduction of Electronic collection system compared to June 2013, July 2013, August 2013, September 2013 collection amounted to 61,673,200, 71,140,200, 59,124,300 and 73,848,500 respectively before introduction of the system. Generally,the introduction of LGRCIS in Kinondoni MC raised revenues by 73%.

4.8.2.2 Challenges Facing LGRCIS on Revenue Collection The following challenges (which differ according to LGAs) were noticed during the study for implementing LGRCIS in LGAs which needed to be taken into consideration: Staff/employee resistance to change and networking problem.

4.8.2.3 Requirement for Adoption of LGRCIS • Special IT building withfurniture and fixtures • Computers, printers and software • Network infrastructures • Point of Sale (PoS) – which stand for books (machines with network)

• Man power or experts – special system administrator for LGRCIS; Accountants; Trade officers and officers from each department responsible for revenue collection. • Special training for implementers of the system – time to time trainings to adopt the system; special trainer is required as expert of the system; HoDs should be most targerted for LGRCIS i.e. DED, DT, Revenue Accountant, Planning officer etc. • Financier – Training; Maintenance; computers and savers

5.0 Study Recommendations

5.1 Recommendations on the Possible New Sources Of Revenue For The LGA Through interviews and reading LGAs profiles and other related documents the study was able to come up with recommended possible sources as indicated in the table 18 below

Table 18: Revenue Source of Revenue

Source Type Description Number Estimated Rates/Unit Estimated Annual District Income(TZS) Valuation of Property tax Starting few amounts i.e. for grass roofed 10,000 (i) 2,000 - 5,000 Property houses Tshs 2,000 -5,000; Mud blocks (ii) 5,000 - 15,000 53,750,000.00 Bahi from Tshs 5,000-15,000; Standard House (iii) standard rate as (metal roofed and decorated) - Valuer to per valuer rate the house Parking area Parking Since a lot of lories are parked along the 5000 road; DC to set special parking lot with 15,000 75,000,000.00 security for long distance to park Rental (Space) Rental 1. The mainsource of revenue is auctions 200 shops 1. 10,000 Per Month2. i.e. Kigwe, Nkhome; Bahi; and Kongongo. @Bahi 30,000 Per Month 132,000,000.00 The council could capitalize on this Auction bybuilding rental spaces (Cubes) as well as tables offering necessary social services (with (Kigwe,

charges) i.e. water, toilets, fence, health Nkhome, services; security to attract traders. Bahi; 2. Since Bahi is a new DC and town is not Kongongo developed; DC to start a small pilot rental shops to let to traders Minerals Mining fees To start a small scale (support from SIDO) 1,000,000 100 per kg to process and purify salt from Ilindi, 80,000,000.00

Fishing Fishing fee, 1. DC to build a dam to collect water from 1.fresh depends with the size water bills different stream and use the water a water 2.fish of reservoir 10,000,000.00 source of clean fresh water and reservoir

9collect water Mzakwe and Manyoni. 2. Fish keeping (aquaculture) in the dam. 3.Irrigation Mining Minerals Bahi is a potential mining zone. Initiative to put in action to map and explore minings are imperative Bus stand Fees and To start a bus stop for town busses and for 500 9,000,000.00 charges busses which pass in Bahi to other places 18,000

(in Auctions and at the DC Stand)

Dodom a MC Valuation of Property Tax Under TSCP the MC has received support 5000 50000-100,000 200,000,000- Properties to value properties in Dodoma MC; the 500,000,000/= (Houses) project will value 5000 properties. It is expected this properties to be charged per value of the house Parking area at Parking Developing a parking area at Kizota 400 3000Perday Kizota industrial area. The area has capacity to 328,500,000.00 accommodate 400 Trucks on daily basis Parking area at Developing a parking area at Town Centre 100 500 Per Day 12th Road along 12th Road Street. The area has 18,250,000.00

capacity to accommodate 100 vehicles on daily basis Development of Rentals Developing investment areas at Business center Community Centre. and Apartments Developing and Building Apartments along

UDOM road Reviewing of MC Rentals Reviewing rental fees for municipal 20 200,000 rentals premises at Mambo poa (Currently 48,000,000.00 standing at <20,000 per month Reviewing rental fees for municipal 240 100000 premises at Majengo Market (Currently 288,000,000.00 standing at <10,000 per month

Water supply Fees and Improve water supply of which would Kondoa charges enhance more revenue resulting from water bills Tourist Fees and Better use of tourist attractions such as destinations charges spring water and KondoaIrangi historical sites Trucks parking fee Parking Reserve a parking space for trucks 30

5,000.00 46,950,000.00 Radio station Starting a council radio station

Valuation of Property Tax Charging from grass roofed houses 3000 - 3000 - 6000; Properties 6000, mud blocks 10,000 - 15,000; 12,000 10,000 -15000; 132,000,000.00 Kongwa standards house (Metal roofed and standards Rates as per decorated - Valuer to the rate of house. valuer

Trucks parking fee Parking Reserve a parking space for trucks 200 4000 per day ( Mbande and 288,000,000.00 Kibaigwa) Billboards Fees and Charging billboard fees according to 500 6 sm^2 charges space and quality of the board: 50,000,000.00

Conference and Fees There are no good halls for Conferences or 60 200,000 - 300,000 12,000,000 - Entertainment Hall entertainment or any social activities, the 18,000,000

hall can be acquired at moderate price of 200,000 - 300,000 per day. Charging Waste Waste and Start charging waste and garbage levy for 6000 2000 per Month and Garbage garbage levy business building, permanent local market 144,000,000.00

Collection and residential houses

Improvement of Auctions Improve social service provisions (E.g Auctions Toilets, water supply and security and

hence charges of the same

Mpwap Mining and Loyalty Fee Charge loyalty fee for the extraction of There is no data ~ wa minerals mining Valuation of Property Tax Review the current rate and carry out 20000 3000 - 6000;

Properties evaluation to the whole district 12,000 -20,000 240,000,000.00 Waste and Charging Start charging waste and garbage 6000 >2000 Per Month Garbage Waste collection fee for business building, 144,000,000.00 Collection Collection permanent local market and residential Fee houses current Mpwapwa LGA is incurring cost Introduction Parking fee Introduce new source of revenue for car 200 500 per day

packing fee packing 36,500,000.00 Establish charcoal Charcoal fee Formalize charcoal business, establish market centre specific establish market - heavy fine

should be introduced, control environment Establish digging Sand and Introduce specific areas for digging sand areas of sand and Gravel fee and gravel for construction - heavy fine gravels for should be introduced to control construction environment damage Rental (Space) Rental fee Construct modern shops and market at 100- 200 50,000 Per Month for land owned by Mpwapwa District and Shops 10,000 84,000,000.00 start charging rental fee Per Month atMarket place

5.2 Recommendations on the Possible Electronic Systems to be used to Improve Revenue Collection for the LGA’s The PMO-RALG has issues notice to all LGAs to transform their systems of revenue collection from manual to electronic come October this year (2015). The aim is to enhance and improve collections. The study analysis shows that the councils that are in full operation of the systems are performing much better. This has been the case with Kinondoni Municipal. The system that is recommended to other LGAs is Local Government Revenue Collection and Information Systems (LGRCIS). Further to the system, the study recommends installation of Point of Sales (PoS) gadgets for proper functioning. The PoS reduces burden of the central revenue collection offices and it

eases the process of collection by being closer to tax payers. The system requirements include:

• Identification of tax payers of different category (this could be done through survey commissioned to consultant) • Computers (Monitors and CPU); Server (For Internet); Printers; and Software.

Proper implementation and functioning of the system requires skilled individuals or frequent training to personnel’s involved with the system. If the system has been installed, the study recommends piloting of the PoS to see its functioning before embarking into full force implementation. The study recommends PoS to be stationed in high return revenue sources. The Following Table 19 shows place of installations for the PoS across the surveyed LGAs. Facilitation of these activities might involve DED office; LIC and service providers.

Table 19: Recommended Places for PoS Installation

Current revenue of the LGA PoS Stations recommended Stations (TZS) Kigwe Auction 130,678,640.00 Bahi Nkhome Auction 57,531,733.00 Bahi Auction 32,338,100.00 Dodoma MC-Trade Office 607,315,098.33 Dodoma Dodoma Bus Terminal 76,950,000.00 Majengo Main Market 155,337,000.00 Market 24,834,300.00 Main Bus Stand 15,427,050.00 Kondoa Bukulu Auction 84,399,100.00 Road Block-for collecting crop levies 331,440,000.00 Kibaigwa International Market 381,426,919.00 Auctions 20,624,000.00 Kongwa Kongwa Market 8,647,970.00 Kongwa&Kibaigwa Bus stand Main Auctions in Mpwapwa (Chipogoro, 72,657,715.00 Ilolo, Msangali, Rudi, Ilolo and Kibakwe) Combine Road Block-for collecting (crop 96,557,000.00 cess, Forest product) Mpwapwa 6,300,000.00 Mpwapwa bus stand 18,000,000.00 Mtera fishing area 7,282,100.00 Market levy

5.3 Recommendation on the Feasible Rates of Taxes and Levies The study has noted differences in rates and charges existing within the same region. Interviews with stakeholders arise into the following recommended rates:

Table 20: Recommended Feasible Rates

Revenue Sources Bahi Dodoma Kondoa Kongwa Mpwapwa Service Levy To have a base of calculating tax to be 0.3% of the profit not turnover License To reflect type of business; size of the business; location of the business Crop Cess To base on the market price that does not exceed 5% Livestock Cattle 3000 3000 3000 3000 3000 2000 2000 2000 2000 Goat /Sheep/Pig 2000 Chicken 200 200 200 200 200 Fishery Levy 100 per kg Billboards 30,000-50,000 50,000-120,000 30,000-50,000 30,000-50,000 30,000-50,000 To reflect a certain percentage of the value of the house after valuation. Property tax However, re-categorization of the house is required toestablish the amount of property tax to be charged which could be a flat rate 2,000-100,000 based on the category. Parking 200-3,000 200-3,000 200-3,000 200-3,000 200-3,000 Market levy 250 400 250 250 250

5.4 Recommendations on Feasible Ways Introducing By-Laws Responsible for Taxes and Levies with Private Sector Participation of Private Sector Engagement It has been clearly noted that establishment of by-laws is guided by LGAs acts. However, its actual implementation is highly challenged by private sector especially on their inclusiveness in the whole process. Section 150 (1) of the LGA authority clearly puts that:

“where a district council proposes to make any by laws, it shall give notice to the inhabitants of the area of its intention, in such manner as may most probably ensure that the notice shall come to the notice of all persons likely to be affected by the by laws proposed, and calling upon all interested person within the areas to lodge any objections or representations in writing with the council within such time as may be prescribed”.

The study had an observation that many problems lies in the line of communication to enforce this act. Therefore, the study recommends the following: • Whenever the LGA is proposing by-laws, the notice should reach VEO for simply circulation to the community. Further to that, the notice should also be availed to TCCIA for private participation. • Community awareness on the importance of their participation in formulation of by-laws is also very important. These could be channeled through WEO and VEOs. • In order to reach private sector at lower level, the study recommends formulation of business forums at ward levels. These forums will act as platform for advocating and addressing different issues related to business at lower levels and will be the basis of formulating the District Business Forums.

5.5 Recommendations for Improvement of the Revenue Collection Processes and Rates Setting It has clearly been stated that the process occurs at three folds involving council staff, WEO and VEO and private agents. Many problems on the process lies within lack of commitment and motivation. • Staff Motivation and compensation - staff involved in revenue collection should me motivated and compensated according to risks involved. (Office of the DED and other Development stakeholders are responsible) • Training – LGAs and agents staff involved in revenue collection should attend frequent trainings on revenue collection. General public also should be educated on revenue collection and on new by-laws issued to raise awareness and compliance.(Stationed key trainer in each LGAs to support the training) • Facilities – Provision of facilities which facilitate revenue collection such as vehicles. (Office of the DED is responsible) • Introduction of electronic revenue collection system – to increase efficiency and effectiveness in revenue collection. (Office of the DED, service provider; Central Government; and other Development stakeholders are responsible)

Setting of rates has been attributed to by-laws and income tax act. The more prominent approach at LGA is to base on By-Laws. We therefore recommend a more

participatory approach of formulating By-laws and rates that would start at local levels through established ward Business forums.

5.6 Recommendation on Strategies for each LGA on how to Increase LGA Revenue in a More Sustainable Manner In order for LGAs have a proper planning and budgeting, there is a need to conduct a comprehensive study which will consider the proper market condition, assessment of revenue potential, merits of outsourcing and development of a risk management plan. We recommend also all LGAs to do the following in order to increase and have a sustainable revenue collection:

• Focus on education to taxpayers, regular and strategic meetings between council and taxpayers (Responsible - DED office, Service Provider, Private Sector; Agency and Training Institutions) • Introducing taxpayer’s data base that will enable all council tax payers to be registered (Responsible - DED office, Service Provider, TRA) • Priorities should be given to local agents for outsourced revenue collection and other contracts e.g. constructions of local government roads for easy monitoring and economic empowerment for local private sector (Responsible - DED office, Private Sector). • Some of the sources of local government revenue should not be necessary outsourced to agents as it easy to set up a simple system for tax payers to voluntary pay their taxes e.g. Market Levy can be easily collected by registering and coding all traders at the local market, payment be done monthly through either mobile phone or bank (Responsible - DED office, Service Provider) • Improve public services which can be incentives for tax payers to pay taxes voluntary as see the benefits of paying taxes (Responsible - DED office, Private Sector)

6.0 Appendices

6.1 Terms of Reference TERMS OF REFERENCE FOR

REVENUE STUDIES FOR FIVE LOCAL GOVERNMENT AUTHORITIES (KONGWA, KONDOA, BAHI, MPWAPWA DISTRICTS, AND DODOMA MUNICIPAL)

1.0 Background Local investment climate project among other things is also mandated to support the preparation of an LGA finance assessment for all LGAs in the subcomponent regions and formulation of a local revenue strategy, which provides a long-term strategy for improving local revenues and the role of local business taxes and fees. Experience gained with one year of implementation is that Local governments impose (and collect) many different types of levies and fees. This includes crop cess, or farm gate tax, on crops and sometimes at different stages in the value chain (e.g., on sunflower, sunflower cake and sunflower oil), hotel levies (based on turnover), town levies (based on revenue), local brew levies, market levies (charged on market operators, usually in the form of a daily fee), and property tax. Most LGAs have contracted agents to collect these taxes. Most local taxing is undertaken without a clear understanding of the impact of this activity on the local business sector or the overall revenue of the LGA and in some instances has resulted into a serious misunderstanding between LGA’s and private sector.

2.0 Objective Local investment climate project plans to conduct these detailed revenue studies for five LGA’s of Kongwa, Mpwapwa, Dodoma municipal, Konda and Bahi in order to provide detailed evidence to LGAs on best ways of increasing revenues without creating misunderstanding with private sector. LIC intends therefore to engage a professional consultant to undertake this assignment which will specifically result into developing strategic approaches of improving revenue collection for the three LGA’s. This study is also aimed at institutional strengthening for improved fiscal and management capacities of the LGAs and improving the capacities for authorities to increase their local revenue base.

3.0 Scope of Work

• Review and analyze existing documents related to existing situation of the 5 LGAs i.e due diligence report – IMED, mapping report;

(Expenditure budget, District Revenue Ranking (TRA), Council approved budget for the past five years, Planned vs Actual, revenue reports from collection agents, Altenative Sources of Revenue for LGAs): Document review

• Review main laws guiding LGA’s revenue collection and their bottlenecks (Main Income Tax Act, Public Finance Act, Local Government Act (June 2000), LGAs By-Laws): Document review

• Identify and asses all existing sources of revenues for the 5 LGA’s and rank from the major contributor to the minor for the past three years (including rates imposed). (Council actual budgets trend for the past three years, Budget Actual allocations from central gvt)

• Assess contribution of respective LGA to their budget from own sources of revenue for the past three year (Council actual budgets trend for the past three years) • Assess and analyze all means of revenue collection and it’s efficiency and weaknesses (Actual vs Budget council budgets), KII • Assess qualities of responsible staff (Govt Standing Orders, Actual qualifications), KII__DAP • Assess and establish the level of dependency from central government and how does it affect district plans (Council actual budgets trend for the past three years, Budget Actual allocations from central gvt), KII— District Planning Officials) • Assess flow of funds from the central government for the past three years (Budgeted vs Actual from Central Gvt for the past three years) • Identify and prioritize possible new sources of revenue for the LGA (Documents, KIIs, Benchmarking from Other EAC and SADC countries) • Identify and prioritize possible electronic systems to be used to improve revenue collection for the LGA’s (Benchmarking from other LGAs within and outside Tanzania) • Identify and list challenges facing private sector on revenue collection process (KII-TCCIA and Non-members) • Assess processes engaged on imposing by-laws responsible for taxes and levies and level of private sector engagement. (Review acts, KII—Councilors, TCCIA, District Council Staff members) • Assess how to improve local revenues from business that will complement and strengthen the Tanzania Strategic Cities Project activities. (Benchmarking, KIIs)

4.0 Deliverables

A report showing: • LGA’s revenue collection structure and trend • Clear description of Major sources of income for three LGA’s (with rates)** five LGAS • Description of revenue collection processes including strengths and weakness • Level of dependency of specific LGA’s to the central government and its effects to the LGA Plans • Strength and weakness of existing by-laws used for revenue collection • Description of qualities of responsible staff • Recommendations on the new possible new sources of revenue for the LGA • Recommendations on the possible electronic systems to be used to improve revenue collection for the LGA’s • Recommendation on the feasible rates of taxes and levies • Clear description of challenges facing private sector on revenue collection process • Recommendations on feasible ways introducing by-laws responsible for taxes and levies with private sector participation of private sector engagement. • An elaborate description of recommendations for improvement of the revenue collection processes an rates setting • Recommendation on strategies for each LGA on how to increase LGA revenue in a more sustainable manner.

1st draft report not exceeding 45 pages excluding annexes Presentation of the draft report to LIC management 2nd draft presentation to stakeholders Final report with incorporated comments from LIC and stakeholders Final report in MS word and statistic and financial analysis in MS excel all in soft copies

5.0 Required Qualifications

Financial analysis and management expertise Experience on revenue and tax management Consultancy engagement experience

6.0 Timing Pre-planning & Field work (data collection) Draft & final reports preparation 3 days 50 man days (for 5 LGA) = 5days 10days

7.0 Payment 50 % at signing the contract 30% at after stakeholder draft presentation 20% of LIC final accepted report

8.0 Quotation The quotation must be divided in professional fees and reimbursable fees. The quotation must state the professional experts The quotation must include all transport costs (LIC does not provide any kind of transport). All local taxes, withholding taxes must be paid by the consultant The consultants should cover their own insurance expenses (LIC does not provide) The quotation must be in TZS only to a TZ bank Payment is done by bank transfer

6.2 Checklist A. LOCAL GOVERNMENT COUNCIL LEVEL 1. What are the main economic activities in your council? 2. Do you have any financial plan or policy? If yes, please explain briefly? Is the plan or policy incorporated in your Council Strategic Plan? 3. Does the Council use Local Government Management Database (LGMD) in preparing your plans and budget? 4. What are approaches/methods used by your LGA in revenue collection; how efficient is the method. 5. Does your council use electronic system in collecting its revenue? 6. If NOT, What are the LGA plans towards adopting electronic revenue collection system? 7. How many sources of LG own source revenue do you have? Please List. Does each source have its own by-law? 8. What are the major sources of revenue in your LGA? 9. For each source, how do you come up with the budget figure? Do the budget figures relate to LGMD data? 10. For each source, how do you collect revenue? Briefly explain your revenue collection system? 11. For each source, what was the planned budget and actual revenue collection for the past five years? (2008/09 - 2014/15) 12. What are the challenges faced in revenue collection? What should be done? 13. What is the relationship between revenue/intergovernmental transfers received from central government and the needy of the council? 14. What are procedures adopted by your council in establishing revenue collection bylaws? (Involvement of the key stakeholders and main laws?) 15. If stakeholders were involved, what is their response during implementation? 16. What is your view regarding the formulation of revenue collection bylaws? 17. What are challenges facing revenue collection bylaws implementation? 18. What do you think could be added as new area for collecting revenue? (Please specify the rates that would be feasible) 19. Do you use Revenue agents (outsourcing facility) in revenue collection? 20. If yes, which sources have been outsourced? 21. What criteria are used to select revenue agents? 22. Did you conduct a feasibility study before deciding to outsource on the value of outsourcing and your capacity to manage outsourced activities so that value for money can be achieved? 23. Before outsourcing, did you prepare risk management plan to make sure that the outsourced activity poses low risk on the part of Council? 24. For each source how did you arrive at the margin given to the revenue agent to collect? 25. Who are involved in the preparation of the contracts for outsourcing activity? 26. How do you monitor or follow up the performance of revenue collection agents?

27. Is there any specific person assigned to supervise the collection agents? 28. Do you request the Revenue agents to submit monthly financial and operational reports to the Council in order to observe revenue collection trend? 29. What challenges face LGAs with respect to own source revenue i.e. from planning, budgeting, collection and in expenditure?What should be done to overcome the challenges? 30. Do you conduct routine based inspections so as to identify weaknesses and problems on agent’s performances? 31. Who is (are) responsible to monitor the Council own source revenue collection including agents collection? What is (are) their qualifications? Are they trained on revenue management? 32. What are the challenges faced in regard to outsourcing revenue? What should be done? 33. What are the Councils’ incentives to the community to enable them pay tax voluntarily? 34. Any other valuable comment on revenue collection process?

B. COUNCIL REVENUE STAKEHOLDERS (TAXPAYERS) 1. What type of levies are you charged by LGA? 2. Can you say something on fairness of the levies charged by LGA? Are you paying those levies voluntarily or you just pay after being forced? 3. Do you participate in formulation of council’s revenue collection’s bylaws? 4. In your views what are the challenges associated with council’s revenue collection bylaws? 5. What should be done to enhance the situation? 6. On your opinion how the Council contributes on the development or improvement of services offered? As a Taxpayer are you satisfied with the services offered by your council? If NO, Why? 7. What can you say about those taxes charged by TRA and those charged by the LGAs? 8. Are you comfortable with the rates charged as compared to what you earn as your income? 9. On your opinion what taxes/levies do you think that do not suit and what you think is proper to be charged? 10. If you were to identify new sources of revenue for the council, which sources could you recommend? (Please specify the rates that would be feasible) 11. Any other comments?

C:Revenue collection System of LGAs ( Local Government Revenue Information System – LGRIS): Benchmarking at Kinondoni, Mwanza and Mbeya City Councils 1. What motivate your council to introduce electronic systems in revenue collections? 2. What laws governed the introduction of the LGRIS system and what was the procedures 3. What was the necessary requirements for introduction of the system 4. How does the LGRIS system work 5. What are the Infrastructures and device needed to implement LGRIS system 6. What qualification are needed to operate the LGRIS system 7. Are there any training needed for the LGRIS system? If yes what kind of training are needed? 8. Who is responsible for Maintenance of the system and devices 9. Who is responsible in controlling LGRIS system and the watchdog/monitoring involved to make sure the system is working efficiently? 10. What are the Procedures and regulations applied to involve/commission collection agencies like maxmalipo and telecommunication agencies? 11. Who was the Financier of LGRIS system in your council? 12. Can you compare revenue collection before and after introduction of LGRIS? (Are there any changes?). 13. Which collection channels have shown significant changes than the other? 14. What are the challenges facing the system / does the system work as expected? 15. Any other view or comments.

6.3 List of Contacted Respondents

Sn. Name Position Contact LGA 1 Mr. Boniface Human Resource Officer +255784546910 Dodoma MC 2 RukiaBakari Economist +255717129221 Dodoma MC 3 Mama Katwange Municipal Treasurer +255713762586 Dodoma MC 4 Morris Mlanya Revenue Accountant +255755994250 Dodoma MC 5 Gerald Marik Trade Officer +255767620822 Dodoma MC 6 Flora Sanyire Legal Officer +255763147601 Dodoma MC 7 Fred B. Azaria Regional Executive Officer-TCCIA +255754265354 Dodoma MC 8 MsuyaKigwe Officer in Charge (Kigwe Auction) +255767111695 Bahi DC 9 Benaderta January Acting. DED +255713586971 Bahi DC 10 PonsianoKirumbi District Treasurer Bahi DC 11 Martha Chamwela District Legal Officer +255752716149 Bahi DC 12 Gabriel Mayo Revenue Accountant +255754468933 Bahi DC 13 MrPangani Acting. District Treasurer +255767868908 Bahi DC 14 Urassa Planning Officer +255754532247 Bahi DC 15 Mathias Lyamunga Politician +255765346970 Bahi DC 16 KawinaKawete Human Resources Officer +255713586971 Bahi DC 17 MjeshiJuma Pastoralist +255754228141 Bahi DC 18 Mzee Rashid Pastoralist &Kigwe Watchman +255766054689 Bahi DC 19 TadeiMtundu Pastoralist & Businessman +255765286985 Bahi DC 20 Raphael Maluku Pastoralist & Farmer +255753283848 Bahi DC 21 Khalid Salum Businessman +255754329820 Bahi DC 22 AmosiStanelMhenjele Businessman +255785017216 Bahi DC 23 Elia Shola Pastoralist & Businessman +255759201155 Bahi DC 24 Mary Aman Businesswoman +255754201230 Bahi DC 25 Mage Kigwe Businesswoman +255652988933 Bahi DC 26 Lini Thomas Silayo Trade Officer 0787868311 Kondoa DC 27 AbubakariKuhuli Planning Officer 0716992222 Kondoa DC 28 Emmanuel Chinduwoli Human Resource Officer 0758213234 Kondoa DC 29 Brown Makacha Legal Officer 0784847118 Kondoa DC 30 YonaKaravuze District Treasurer 0782377888 Kondoa DC 31 Emmanuel Mvungi Ag. District Executive Director 0718665236 Kondoa DC 32 Rashid Kijaji Chairperson-TCCIA 0754873691 Kondoa DC 33 SalamaJumaTamim Business man 0784369767 Kondoa DC 34 MumbaJumaMumba Business man 0784669365 Kondoa DC 35 Veronica Kimambo Business woman 0784664332 Kondoa DC 36 Mohamed Kasim Business man 0784669376 Kondoa DC 37 Wilson Mrema Business man 0784625125 Kondoa DC

38 Rashid Idd Business man 0788626361 Kondoa DC 39 BakariShaaban Business man 0784724393 Kondoa DC 40 Latifah Business woman 0752041336 Kondoa DC 41 KhalfanHamis Business man 0784970170 Kondoa DC 42 SalimSuta Doo Business man 0784820366 Kondoa DC 43 John Mwaipopo Ag. DED 0787636919 Kongwa DC 44 Shigela Ganja Planning Officer 0754384712 Kongwa DC 45 RamadhanMhando District Treasurer 0715123535 Kongwa DC 46 White Zuberi Chairman of the Council 0768565664 Kongwa DC 47 YohanazMchome Trade Officer, 0788497618 Kongwa DC 48 OswardKinabo Revenue Collection officer 0753597925 Kongwa DC 49 Ally Abdallah Kongwa Market Traders-Leader 0784569953 Kongwa DC 50 Eng. Kevela TCCIA-Chairperson Kongwa DC 51 KhamloNjovu Acting DED 0783747481 Mpwapwa DC 52 ShabanMillao District Planning Officer 0754373738 Mpwapwa DC HamisMkusa Assistant Revenue Accountant 0784491238 53 Mpwapwa DC 54 MussaMsananga Accountant 0754751114 Mpwapwa DC 55 Bilton Ditto Trade Officer 0714883629 Mpwapwa DC 56 SamwelKoyi Procurement Officer Mpwapwa DC 57 DorrisDarco Legal Officer Mpwapwa DC 58 Davis Mlowe Principal Forest Officer 0786741422 Mpwapwa DC District Land and Natural Resources Louis Ndumbaro 0784387533 59 Officer Mpwapwa DC 60 Emmanuel Kayeta Internal Auditor Mpwapwa DC 61 DismasPesambili Statistician 0787159978 Mpwapwa DC 62 BenardMosha Chairperson - TCCIA 0767466544 Mpwapwa DC 63 NassonMwedimage Secretary – TTCIA Mpwapwa DC 64 EwaldSindato Trader 0656870608 Mpwapwa DC 65 Juma Said Trader 0786071995 Mpwapwa DC 66 Hussein Rehani Trader 0786140446 Mpwapwa DC 67 Said Sadari Trader 0784707119 Mpwapwa DC 68 Asia Omary Trader 0712221249 Mpwapwa DC 69 Philemon Chiwile TRA – District Manager Mpwapwa DC 70 Kennedy Tabuji TRA - Tax Officer Mpwapwa DC 71 Hamis Ally Trader – TTCIA Member 0785355460 Mpwapwa DC 72 Ally Zaidi Trader 0787840240 Mpwapwa DC 73 Dominic Kalolo Trader 0682635837 Mpwapwa DC

Trader, District Chairperson- CastusMarandu 0785888032 Tanzania Business Community 74 Mpwapwa DC

75 Judith Ngulwa Mbeya LGRCIS-Specialist +255765929044 Mbeya 76 Romana District Treasury - Mbeya CC +255764794025 Mbeya 77 MzeeNgombe Mwanza City-Treasurer +255754098098 Mwanza 78 Happy Mishwaro Mwanza City-Accountant +255753338969 Mwanza 79 Jackson Kiema LGIRS Expert-Kinondoni +255717924100 Kinondoni MC 80 MaxmilianSabona Municipal Treasurer-Kinondoni +255222170173 Kinondoni MC