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Revenue Studies for 8 Lgas in Kigoma

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Revenue Studies for 8 Lgas in Kigoma REVENUE STUDIES FOR EIGHT LOCAL GOVERNMENT AUTHORITIES IN KIGOMA REGION LOCAL INVESTMENT CLIMATE (LIC) APRIL 10, 2017 Dr.Victor George Dr. Alex Kira Dr. Elia John Mr. Sunga Mabeja, Mr. Salum Ntomola, Miss Claudia Maswe Miss Jesca Kitogoro and Mr. Daudi Mwasantaja i Executive Summary This study was conducted in order to draw detailed evidence to eight Kigoma Local Government Authorities (LGAs) namely; Kigoma Municipal Council, Kigoma District Council, Uvinza District Council, Kasulu District Council, Kasulu Town Council, Buhigwe District Council, Kibondo District Council, and Kakonko District Council on the best ways of increasing revenues without creating misunderstanding with private sector. Furthermore, the study assessed existing and potential sources of revenue for these LGAs. The study employed multiple methods of data collections ranging from document reviews to Key Informant Interviews. The following were the key study findings: • 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 the Municipal Director/District Executive Director (DED) with the support of Head of Departments1 and LGA staff members. On the second channel, the LGA tend to source and commission some of the revenue channels to agencies. • Revenue Collection Trend: It was observed that collections have been rising with time across the region. However, the trend varies and is inconsistency between LGAs. The study has found that there was an increasing trend on actual revenue collection for Kakonko, Kibondo and Uvinza District Councils, while there was a decreasing trend of revenue collection for Kasulu and Kigoma District Councils. Moreover, the study has shown inconsistency in revenue collection for Buhigwe DC and Kigoma Municipal Council. • Ability to meet budget estimates: The study noted mixed results on the ability of the eight surveyed LGAs in Kigoma region to meet their own budget estimates. It was found that no LGA was able to meet its budget estimate for the past three years. Similarly, all LGAs with the exception of UVINZA DC have shown unsteady tendency in meeting their budget estimates. Some LGAs (especially the newly established ones like Buhigwe DC and Kakonko DC) have been observed to collect far below of their estimated budget while few LGAs (which are well established such as KMC and Uvinza DC) have somewhat managed to come close to their estimates in some financial years. This situation might be due to the reason that either budget estimation planning is done without feasibility study or it could be a reflection of the LGAs not being able to efficiently and effectively collect revenues from the existing sources. This state hampers the ability of the Councils to fund its operation and projects using internal sources of revenues. 1 Head of Departments are responsible to oversee revenue under their jurisdiction ii • Major sources of Revenue for surveyed LGA’s: Despite the large number of revenue sources across the region, the study found that a large percent of local revenues comes from few main sources. The lion’s share of local revenues comes from a combination of crop cess, livestock auction levies, and market levy and business licenses. Nevertheless, in some LGAs revenue sources indicated as others were observed to be the major source of income for a particular council. • Findings on the rates of major sources of revenue for LGAs show that many rates of revenue are determined by by-laws made of particular LGA. However, there are some few sources’ rates which are governed by the national main acts. It was noted that some items of the same category are differently charged by different LGAs. This variation creates difficulties in conducting business in LGAs where they charge high and discourage compliance of the same. • Revenue collection processes including strengths and weaknesses: The revenue process in LGAs starts with the identification of sources of revenue and formulation of by-laws that guide its collection. The process is organized in three levels, namely; the council headquarters, the wards and the villages. To enhance revenue collections, some LGAs tend to outsource private agents for revenue collection. Nonetheless, the process has both some strengths and weaknesses. On one hand, its strengths include presence of by-laws which determine rates, skilled man power for revenues collection and the use of electronic system has increased revenue collection. On the other hand, its weaknesses are lack of motivation to LGAs’ staff, poor communication between departments, inadequacy working facilities, lack of training to revenue collectors, poor working environment to revenue collectors, political interference, impersonation of revenue collectors, lack of taxpayers’ database and inadequate research to inform revenue estimation. • Level of dependency of specific LGA’s to the central government: The study finding shows that on average, the majority of LGAs were found to rely heavily on intergovernmental transfers to meet their total budget and hence implement their plans. It was noted that intergovernmental transfers accounted for about 95% of the LGAs’ total revenue. This leads to difficulties in implementing development projects. For example, inadequate funding in Kigoma MC has caused not to renovate three markets which could lead to an increase of revenue; Kigoma Municipal council also has failed to contribute in the Tanzania Strategic City Plan of which they depend fully on donors. In iii most LGAs in Kigoma region infrastructures is still very poor, probably due to high dependence on funds from the central government. • Establishment of by-Laws and it strengths and weaknesses: The powers of LGAs to make their own by laws emanate from Local Government (District Authorities) Act CAP 287 and Local Government (Urban Authorities) Act CAP 288 (RE 2002). These acts provides the procedures and guidelines under which District Councils and Urban Authorities can formulate by- laws. Ideally, under this act the process must involve all stakeholders. However, the process has both strengths and weaknesses. Its main strengths are endorsement of the by-laws after fulfillment of all required procedures and stages of by-laws formulation and the applicability and its enforcement in guiding revenue collection is strength of the existing by-laws across all surveyed LGAs. Whilst its major weaknesses are limited participation of private sector on formulation of by-laws and rate setting, adoption of by-laws from other LGAs without amendments that would reflect geographical and or economic differences and not having their own approved by-laws of which implies the legal mandate to collect revenue is questionable. • Qualities of responsible staff for revenue collection: The study found that in most cases there is good match of qualification and skills to staff in relation to their responsibilities. However, it was observed that there is a huge existing gap of number of staff employed in all LGAs of Kigoma region. Generally, LGAs of Kigoma region has an existing gap of almost half of the required staff which is 47%. • Challenges facing private sector on revenue collection process: In the process revenue collection, the study observed that private sector encounter several challenges such as little representation of private sector on Ward Councils, multiple road blocks, hostile means of revenue collection, mistrust between the government and private sector, multiple taxation, and limited participation on formulation of by-laws and rate setting as well as lack of adequate education on tax/levy issues. • Revenue Collection Systems: The study has found that all Kigoma LGAs are integrated to the Local Government Revenue Collection and Information System (LGRCIS) which is using electronic system in collecting their revenues. The system has been able to work after the support of devices by LIC to LGAs and the purchase of more machines by respective LGAs. It was observed that since the introduction of the electronic system. Significant increase in revenue collection to all LGAs has been observed after the introduction of electronic system. Nevertheless, the system is associated with some challenges which must be addressed to improve its performance. These challenges include, lack/inadequate training to agents/revenue collectors, unreliable network resulting into lags in reconciliation, lack of site supervision, inappropriate use of the machines and multiple IDs to taxpayers. iv Basing on the study findings, the study recommends the following: • Several new sources that can increase revenue collection base of these eight LGAs are recommended in theses study. These sources include capitalizing on property tax, parking fees, garbage collections and building long term investments such as ranches, agricultural irrigation scheme, apartments and shopping centers for the surveyed LGAs. • Improve electronic system for revenue collection. For better performance of the system the following has to be done: regular Training/Capacity building to agents/revenue collectors, reliable internet services, frequent site supervision/monitoring, reliable power supply and Acquisition of more support facilities for the system. • Improvement of the revenue collection processes a rates setting: Many problems on the process lies within lack of commitment and motivation to staff as well inadequate facilities. Therefore, the study recommends the following; improve motivation
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