Chamwino and Chemba Districts)

LOCAL INVESTMENT CLIMATE (LIC)

REVENUE STUDIES FOR TWO LOCAL GOVERNMENT AUTHORITIES (CHAMWINO AND CHEMBA DISTRICTS)

FINAL REPORT

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

11/08/2016

Table of Contents Table of Contents ...... i List of Tables ...... iii List of Figures ...... iii Acronyms ...... iv 1.0 Introduction ...... 6 1.1 Background to the Study ...... 6 1.2 Objective of the Study ...... 6 2.0 The Study Approach and Methodology ...... 8 2.1 Sampling Frame ...... 8 2.2 Data Collection Methods ...... 9 3.0 LGA in Tanzania ...... 10 3.1 An Overview of LGAs in Tanzania ...... 10 3.2 LGAs Revenues in Tanzania ...... 11 3.3 Laws/Acts guiding LGAs Revenue Collection ...... 12 4.0 Socio-Economic Profile of Chamwino and Kongwa ...... 13 4.1 Socio-Economic Profile of Chamwino District ...... 13 4.2 Socio-Economic Profile of Chemba District ...... 14 5.0 Study Findings ...... 14 5.1 Revenue Collection Structure and Process ...... 14 5.2 Level of dependency of LGA’s to the central government and its effects to the LGA Plans 19 5.3 Revenue Collection Trend ...... 19 5.4 Sources of Revenue ...... 21 5.5 Rates/Charges for Main Sources of Revenue at Chamwino and Chemba District Councils ...... 27 5.6 Ability to Meet Budget Estimates ...... 29 5.7 Level of Dependency of Specific LGA’s to the Central Government and Its Effects to the LGA Plans 30 5.8 Strength and Weakness of Existing By-Laws Used for Revenue Collection ...... 32 5.9 Description of Qualities of Revenue Collection Staff ...... 36 5.10 Challenges Facing Private Sector on Revenue Collection Process ...... 37

5.11 Revenue Collection Systems ...... 39 5.12 Electronic Collection System ...... 39 6.0 Study Recommendations ...... 42 6.1 Recommendations on the Possible New Sources of Revenue for the LGA ...... 42 6.2 Recommendations on the possible electronic systems to be used to improve revenue collection for the LGA’s ...... 43 6.3 Recommendation on the feasible rates of taxes and levies ...... 44 6.4 Recommendations on Feasible Ways Introducing By-Laws Responsible for Taxes and Levies with Private Sector Participation of Private Sector Engagement ...... 45 6.5 Recommendations for Improvement of the Revenue Collection Processes and Rates Setting ...... 46 6.6 Recommendation on Strategies for each LGA on how to Increase LGA Revenue in a More Sustainable Manner ...... 46 7.0 Appendices ...... 48

List of Tables Table 1: Sampling Frame ...... 8 Table 2: Revenue Collection Trend for Chamwino District ...... 20 Table 3: Revenue Collection Trend for Chemba District ...... 21 Table 4: Main Source of Revenue for Chamwino District ...... 22 Table 5: Sources of Revenue for Chemba District Council ...... 24 Table 6: Main Source of Revenue for Chemba District Council ...... 26 Table 7: Rates and Charges for Main Source of Revenue for Chamwino and Chemba District Councils ... 28 Table 8: Own Source Budget Estimates against Actual Collected for Chamwino District Council (TZS in Millions) ...... 29 Table 9: Own Source Budget Estimate against Actual Collected for Chemba District Council ...... 30 Table 10: Budget Dependency to Central Government for Chamwino District Council...... 31 Table 11: Budget Dependency to Central Government by Chemba District Council ...... 31 Table 12: Percentage Actual Central Government Transfer to Chamwino District Council Error! Bookmark not defined. Table 13: Percentage Actual Central Government Transfers to Chemba District Council ...... Error! Bookmark not defined. Table 14: By-Laws that needs review ...... Error! Bookmark not defined. Table 15: LGA Staff Qualifications at Chamwino District ...... 36 Table 16: Revenue Collection Staff for Chemba District Council ...... 37 Table 17: Revenue Collection at Mwananyamala Hospital ...... 40 Table 18: New Source of Revenue for Chamwino and Chemba District Council ...... 42 Table 19: Recommended Places for PoS Installation for Chemba District Council ...... 44 Table 20:Recommended Rates for Chamwino District Council ...... 45

List of Figures Figure 1: Revenue Collection Structure for LGAs ...... 15 Figure 2: Revenue Collection Trend for Chamwino District ...... 20 Figure 3: Revenue Collection Trend for Chemba District ...... 21 Figure 4: Main Source of Revenue for Chamwino District 2014/15 ...... 23 Figure 5: Sources of Revenue for Chemba District 2014/15 ...... 25 Figure 6: Main Source of Revenue for Chemba District Council ...... 26 Figure 7: percentage Own Source Budget Estimate against Actual Collected for Chamwino District Council...... 29 Figure 8: Percentage Own Source Budget Estimated against Actual Collected for Chemba District Council ...... 30

iii

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

1.0 Introduction

1.1 Background to the Study Local Investment Climate (LIC) is mandated to support Local 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 Chamwino and Chemba 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 Chamwino and Chemba LGAs

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 two 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 two 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 2 LGAs (i.e. Chamwino and Chemba)

ii. Review main laws guiding LGA’s revenue collection and their bottlenecks of 2 LGAs (i.e. Chamwino and Chemba)

iii. Identify and asses all existing sources of revenues for the 2 LGAs (i.e. Chamwino and Chemba) 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 2 LGAs (i.e. Chamwino and Chemba)

vi. Assess qualities of responsible staff in the 2 LGAs (i.e. Chamwino and Chemba)

vii. Assess and establish the level of dependency from central government and how does it affect district plans of the 2 LGAs (i.e. Chamwino and Chemba) viii. Assess flow of funds from the central government for the past three years of the 2 LGAs (i.e. Chamwino and Chemba)

ix. Identify and prioritize possible new sources of revenue for the 2 LGAs (i.e. Chamwino and Chemba)

x. Identify and prioritize possible electronic systems to be used to improve revenue collection for the 2 LGAs (i.e. Chamwino and Chemba)

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. This study was an extension of the study that was conducted on five LGAs (Dodoma Municipal, Bahi, Kongwa, Kondoa and Mpwapwa) of Dodoma region. It involved the remaining two LGAs i.e. Chamwino and Chemba.

2.1 Sampling Frame The study was conducted in the two districts of Dodoma region namely, Chamwino and Chemba. To ensure representation of both public and private sector, 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 Treasurer Other Tax payers (Non-TCCIA members)

3 District Trade Officials Revenue Collection Agents

4 District Human Resource Officials

5 District planning officials

6 District Legal officers

7 Council members

8 District IT Department

9 Ward Executive Officials

10 Village Executive Officials

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

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 ) 5. LIC (2015), A Study on Revenue for Five LGAs at Dodoma Region 9

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 checklists 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.

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 respective areas. The numbers of LGAs have increased from 140 in year 2012/13 to 163 in year 2013/14 (CAG, 2013/14).

Generally speaking, the revenue base of local authorities is weak2 contributing to only 6- 20% of the total council’s 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.

2 Kakwesigabo, 2010, Fjeldstad, 2007, LIC (2015), A Study on Revenue for Five LGAs at Dodoma Region 10

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.

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 (R.E. 1999) 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, the revenue from local governments were 137.4bn; 184.3bn, 236.7bn, 269.0bn and 353.5bn in 2009/10, 2010/11, 2011/12, 2012/13 and 2013/14 respectively3.

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;

3 CAG Report 2013/14

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, 1982 CAP 290(R.E. 1999); 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, 1982 CAP 290 (R.E. 1999) 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 Socio-Economic Profile of Chamwino and Kongwa

4.1 Socio-Economic Profile of Chamwino District Chamwino district is one among the seven districts of Dodoma Region. The district has 36 ward and 107 villages with a population of 330,543 people. The main economic activity of Chamwino is agriculture employing around 90% of the working population. Crops which are cultivated around the district include both food and cash crops such as sorghum, maize, and cassava. Others are grapes, sunflower, simsim, groundnuts, bulrush millet and paddy. Livestock is the second income generating activity in the district where by cattle, pigs, donkey, sheep, and goats are the common animals among the households. Apart from agriculture and livestock, natural resources comprising of forestry and fishery have a significant contribution on social and economic wellbeing of people in the district. Forestry produces traded products like charcoal, woods, and logs whilst fishery employs about 22,000 people dealing with fishing, fish mongering, fish trading and fish processing.

4.2 Socio-Economic Profile of Chemba District Chemba district is among seven (7) district of Dodoma region, which is situated 140km north of the regional headquarters of Dodoma Municipality. 40km South of Kondoa district headquarters. The headquarters of this district are established at Chemba village, The Council was established with effect from July, 2013.

Chemba district covers about 7,653 square kilometers, with a total of arable land 925,000 hectares. Cultivated area is 222,184 hectares; the rest is covered by forest game reserve of Swagaswaga. Chemba district consists of 4 Divisions, 26 Wards and 114 Villages and 494 hamlets.

According to the 2012 National Population Census, the district has a population of 235,711 (male 117,585 female 118,126) with an average growth rate of 1.7% per annum. The average size of the household is 4.7 persons. Currently population projection (2015) in the district is 247,938 and the average household size is 5 persons.

The district is characterized by attractive hills and forest reserves. Economically, residents of Chemba District include herders and farmers who represent the main population of the area. Chemba residents herd cattle, goats, pigs, chicken also grow several crops such sunflower, maize, peas and sesame.

5.0 Study Findings

5.1 Revenue Collection Structure and Process The LGA revenue collection structure is composed of two main channels i.e (i) intergovernmental transfers (ii) Own sources. The central government through TRA collects all taxes and channels them to LGAs as per approved budgets while with Own sources the LGAs tend to collect revenue through various channels as discussed below. Since the main focus of this study is on LGAs revenue collections, then our discussion will centre on revenue collection process at LGAs level.

Revenue collection process at the two LGAs can be understood by looking on two predominant types of revenue collection, (i) LGAs collecting revenues by using own staff and (ii) Commissioning revenue collection to agencies as depicted in the following schematic diagram

DED

RCC

LGAs Other WEOs Agents Staff

VEOs

Figure 1: Revenue Collection Structure for LGAs DED= District Executive Director, RCC=Revenue Collection Committee, WEO=Ward Executive Officers VEO=Village Executive Officers

5.1.1 LGAs collecting revenue using own staff In this case, the LGA uses own staff in collecting revenue from the sources that have not been outsources. The staff used in collecting revenues could also be categorized at three levels a) District revenue collection team In both two districts, a study found that recently, the LGAs formed the so called District revenue team. The main function of these teams are to oversee revenue from own sources at the LGA level. The team is formed by District treasurer, Trade officer, Heads of department (Planning, legal department, Cooperatives and Agriculture). These teams in both districts reports directly to the District Executive Director. In most cases respective department is responsible in collecting revenues related to their mandates. For example, the department of livestock and fisheries is responsible for collecting abattoir levies that has not yet been outsources.

b) Ward Executive Officers (WEOs) The Ward Executive Officers (WEOs) are also agents of revenue collection at ward levels. The WEO are responsible for collecting fines and penalties imposed at their area of jurisdiction. The collected sums are then submitted to the revenue accountant at the council level.

c) Village Executive Officers (VEOs) Village Executive Officers are the revenue collection agents at village levels. They are involved in collection of fines and penalties and also they are mandated to collect levies accrued from mobile towers, electricity pols and minor auctions.

5.1.2 Advantages of Using LGAs Staff in Revenue Collection There are a number of notable advantages of using LGA staff in collection of revenue. They include the following but not limited to:

i. Availability of skilled staff One of the big advantage of using LGA own staff is availability of qualified and skilled staff. But this has to be taken with caution; these staff in most cases is available at the council level as opposed to village levels. 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.

ii. Possibility of maximizing revenues Using local staff could be associated with higher revenue collection under optimum conditions i.e sufficient human resources and facilities. This is because almost the whole sum collected will be availed at the LGA. Nevertheless, LGAs doesn’t have sufficient human resources and on the other hand, the cost of collecting revenue using own staff is higher, as they would need transport and allowances to be out of offices and sometimes working over normal hours needs compensations.

5.1.3 Disadvantage of Using LGAs Staff in Revenue Collection

i. Lack of enough human resources Despite the envisaged advantages of using LGAs own staff in revenue collection, but the two LGAs are facing shortage of enough staff that could be dispatched on the field for revenue collection.

ii. Poor staff motivation The study found that, despite high potential of using LGAs staff for revenue collection there had been a concern from LGAs staff on motivation for doing the same. It was noted that previously the staff were motivated by given a small percentage or appreciation letter for the job done. But currently nothing is given back apart from refunding the transport fare. Lack of motivation in many cases is associated with inefficiency and probably frauds.

iii. Inadequate facilities Revenue collection is accompanied in investment on some important facilities. Given the huge geographical diversity of Chamwino and chemba districts a need of having functioning and reliable four wheel (4WD) vehicles is of paramount importance. But this has been inadequate/missing on both districts making follow ups and monitoring a problem. On both districts the DT offices were not having a 4WD or any vehicle to monitor revenue collections. This could result into a problem in terms of timely coverage to all wards and weak monitoring of the revenues.

iv. Lack of monitoring mechanism It has been noted that there is weakness in tracking revenue collection due to shortages and underfunded staff who cannot efficiently manage to monitor collection of revenue.

v. High revenue administration cost It has been noted above that, Chamwino and Chemba are highly geographically diversified. In such cases travelling from one point of revenue collection to the other may need hours of travel. While that is the case, LGA staff are working normally 8 hours above that, the staff is entitled to overtime. With huge geographical diversification the LGA will be required to pay a lot of money as overtime. Otherwise, the LGAs have to employ more revenue collectors who could be stationed at divisions or wards for effective functioning.

5.1.4 Commissioning revenue collection to agencies Revenue collection by using LGAs staff was more predominant by 1990s and early 2000s. Post 2000s the government decided to put some measures to improve efficiency. In accomplishing the goal of improving efficiency it was decided that all LGAs should outsource the revenue collection to private agencies. This was also the case with Chamwino and Chemba LGAs. Some of the large sources of revenue have been outsourced to private companies. For example, at Chamwino district, livestock levies and crop cess which accounts a large percentage of revenue have been outsourced.

In Chemba all own sources of revenue i.e. auctions and crop cess were outsourced to agents. Council provides the documents to be used in revenue collections i.e. receipt books; to be used to collect revenues by agents while monitoring activities were conducted by LGAs officials. During the interview with district revenue officials they pointed out that usually agents collect more revenue but since they have already entered in legal contracts with council whatever they collect end up in their companies but when

they realize losses or poor collection usually they consulted or bargain with LGA for amendments on the amount they could file to the council.

Outsourcing of the revenue sources are guided by the Public Procurement Regulatory Authority (PPRA) regulations. In most cases if not the entire highest possible bidder is awarded contracts for collecting the revenues. The big challenge that was noted by this study was the basis for determining base/contract price was unclear. The two LGAs are just basing on trend of collection during the past years with minor percentage additions.

5.1.5 Advantages of Using Agents in Revenue Collection It has already been pointed out that, efficiency in revenue collection is supposed to be a salient feature of outsourcing revenue collection. But more to that, the following are the advantages of outsourcing revenue collection;

i. Ability to meet planned estimates The big advantage of using agents in revenue collection is the ability to meet LGAs planned estimates. This is because agents are given fixed prices of which they have to meet as contractual obligation. In that case the LGAs are sure of getting what they plan, although this is not always the case. For example, at Chamwino LGA, it was found that in some instances the agent responsible for collecting crop levy has to re-negotiate with the council on the estimates owing to drought that resulted in low yield of agricultural products. Nevertheless, that has not been the case when there is bumper harvest.

ii. Less operational cost By using agents in revenue collections, the LGAs also tend to minimize the operational cost. This is because most of the activities are done by the agents themselves save for monitoring of the same that has to be done by the LGAs staff.

5.1.6 Disadvantage of Using Agents in Revenue Collection i. LGAs not being able to get maximum probable benefits The two LGAs do not have any informed study that acts as a basis of contract price setting. As results basic trend analysis is used to estimate the price. In one way or the other the LGAs are losing substantial amount of money that could have been availed to them if proper calculations and basis for price setting were in place.

ii. Conflicts with agents At some cases there are conflicts that emerge as a result of agents not obliging to contracts they signed. One case has been reported at Chamwino where by the LGA opted for legal measures against the agent.

iii. Agents using unskilled labourers in revenue collection The main objective of revenue collection agents is profit maximization. In that case they plan to operate under very minimum cost while maximizing the profits. Realizing higher profits the agents tend to employ unskilled labourers who at some point become ghastly to tax payers.

Case 1: Outsourcing Revenue Collection Vs LGAs Own Collection: A mixed move

There had been a mixed approach of LGAs own sources collection. The two approach has been fueled by two existing school of thought that each approach in each way could enhance LGAs revenues. Over the past years the LGAs were collecting their own revenue using own staff; in this case revenue collectors. However, little collection and high operating cost forced the government to emerge with a directive for LGAs to outsource revenue collections in 2000s.

Most LGAs if not all abides to the directive and outsources major sources of revenue to private agencies. In one way or the other the LGAs were able to meet their objectives. Nevertheless, the approach has been challenged by weak capacities of LGAs to set price resulting into higher benefits to the private agents. Responding to the challenges facing LGAs using private agents, the government came up with a directive again that all LGAs should use own staff in collecting the revenues. This was supposed to st start on 1 July5.1.7 2016. RevenueHowever, thisCollection study noted Trend several issues of concern regarding the same

1.5.2 Understaffing Level of ofdependency LGAs of LGA’s to the central government and its effects to 2. Abolishmentthe LGA Plans of the revenue collectors cadre 3. Insufficient supporting equipment and facilities such as 4WD vehicles, electronic systems 4. Legal consequences of the on-going contracts with private agents

5.3 Revenue Collection Trend

5.3.1 Revenue Collection Trend of Chamwino LGA for the Past Four Years The general trend of actual revenue collected for Chamwino LGA for the past four financial years is presented in Table 2 below and Figure 1. These results also indicate the estimated collection against actual collection. The trend shows that the total amount of revenue collected has steadily increased year by year. The total actual collected revenue for the financial year of 2011/2012, 2012/2013, 2013/2014 and 2014/2015 is Tshs 399,467,968.96, Tshs 612,921,425.52, 1,003,027,948.23 and Tshs 938,037,788.54 respectively. Despite this steadiness on total revenue collection, results indicate that the

council has been collecting less than the estimates except for financial year of 2011/2012.

Table 2: Revenue Collection Trend for Chamwino District

Year 2011/2012 2012/2013 2013/2014 2014/2015 Actual Actual Actual Actual Estimates Collection Estimates Collection Estimates Collection Estimates Collection

Amount 373,951,000 399,467,968.96 1,074,749,000 612,921,425.5 1,457,790,400 1,003,027,948 1,525,303,700 938,037,788.5

Revenue Collection Trend (TZS in Millions) 1,800 1,600 1,400 1,200 1,000 800 600 400 200 0 2011/2012 2012/2013 2013/2014 2014/2015

Estmates Actual Collection

Figure 2: Revenue Collection Trend for Chamwino District

5.3.2 Revenue Collection Trend of Chemba LGA for the Past Three Years The study sought to find out a trend of actual revenue against the budget estimates for Chemba’s District Council. Table 3 and Figure 2 present the findings in relation estimate against actual revenue collection. The findings reveal that for 2013/14 only TZS 563,832,349 (60.9%) was collected. In fiscal year 2014/15 only TZS 1,035,961,257 (78.4%) was collected with an improvement of almost 17.5% while in fiscal year 2015/16 up to March (only 3 months remaining to the end of the fiscal year 2015/16 only TZS 420,092,875 (33.9%) was collected from budget estimates. The council expectation to collect over 66% from its own sources in 3 months was questionable.

Table 3: Revenue Collection Trend for Chemba District

Year 2013/2014 2014/2015 2015/2016(March) Actual Actual Actual Estimates Collection Estimates Collection Estimates Collection Amount 925,273,000 563,832,349 1,385,149,000 1,035,961,257 1,240,951,600 420,092,875.

Revenue Colletion Trend (TZS in Millions) 1600 1400 1200 1000 800 600 400 200 0 2013/2014 2014/2015 2015/2016

Estmates Actual Collection

Figure 3: Revenue Collection Trend for Chemba District

5.4 Sources of Revenue

5.4.1 Source of Revenue in Chamwino District Council Table 4 as well as Figure 3 below indicates data of revenue for the financial year of 2014/2015 and 2015/2016 (covering a period of nine months from July 2015 to March 2016) in relation to Chamwino LGA. The table and figure show revenue source, actual amount collected, and the percentage contribution of each source of revenue to the total actual contribution. The table indicates that for 2014/2015 financial year livestock auction levy (22.43%), crop cess (15.84%), land sales (15.33%), other sources (including community health fund and national health insurance fund) constituting 16.93% and fees 12.06% are the dominant sources of income whereas market levy (0.21%) and parking (0.02%) have the smallest contribution to Chamwino LGA revenue. For 2015/2016 financial year (covering a period of nine months) other sources (38.78%), livestock auction levy (20.61%), land sales (12.55%) and livestock permit (10.54%) are the leading contributors of revenue while market levy (0.12%) and parking (0.01%) have the least share of percentage of revenue collected for particular LGA.

Table 4: Main Source of Revenue for Chamwino District

2014/2015 2015/2016 (March) Actual % Actual % Revenue source Collection Contribution Collection Contribution Crop cess 148,577,700.00 15.84 19,051,120.00 2.82 Fish levy 15,371,500.00 1.64 17,772,000.00 2.63 Business licence 30,053,000.00 3.20 18,883,950.00 2.80 Fishing licence 5,434,000.00 0.58 - - Livestock auction levy 209,552,000.00 22.34 139,244,000.00 20.61 Market levy 1,959,000.00 0.21 825,000.00 0.12 Parking 149,500.00 0.02 56,500.00 0.01 Abattoir levy 8,370,000.00 0.89 10,125,000.00 1.50 Liquor, cigarette and firearm levy 3,081,000.00 0.33 1,673,000.00 0.25 Forest Product levy 12,850,500.00 1.37 7,926,000.00 1.17 Fees 113,171,000.00 12.06 34,540,500.00 5.11 Fines and penalties 3,806,500.00 0.41 2,911,500.00 0.43 Land sales 143,828,251.50 15.33 84,780,691.00 12.55 Livestock permit 77,646,400.00 8.28 71,160,300.00 10.54 Service levy 5,349,742.04 0.57 4,569,919.03 0.68 Other sources 158,837,695.00 16.93 261,939,885.00 38.78 Total 938,037,788.54 100.00 675,459,365.03 100.00

Figure 4: Main Source of Revenue for Chamwino District 2014/15

5.4.2 Sources of Revenue in Chemba DC Table 5 and figure 4 show that there had been dynamic changes from the main sources of revenue at Chemba District Council for the past three years. For example, in financial year 2013/14, crop cess was the main contributor of revenue accounting by 46.1% followed by Auctions (17.2%) and Secondary School Fees (11.7%) but over the three years these crop cess and school fees sources show a declining trend in percentage contribution while auctions trend demonstrating an increasing trend. In 2014/15 the sources that were leading include crop cess 32.0%, Secondary fees 5.0% at decreasing rate while Land rent/ sale of plot (21.3%); Auctions (18.7%); Education Fund (6.6%), CHF (6.4%); and at raising rates. For 2015/16 same sources remained the leading sources of revenue even though it was March 2016; still Auctions 38.1%; crop cess 22.7%; secondary school fees and other sources 8.3% and 8.7% respectively. Chemba as a new District Council still have opportunities to be harnessed to contribute as source of revenue since the Great North Road from Cape Town to Cairo pass at the council.

Table 5: Sources of Revenue for Chemba District Council

Revenue Sources 2013/2014 2014/2015 2015/2016 Actual Collection % Actual Collection % Actual Collection %

Crop cess 260,089,000 46.1 331,400,000 32.0 95,477,111 22.7

Land Rent/sale of plots 2,784,000 0.5 220,513,925 21.3 16,353,885 3.9

Forest Product levy 1,715,500 0.3 1,598,630 0.2 649,500 0.2

License 10,700,500 1.9 17,633,100 1.7 16,067,000 3.8

Penalties and Fines 1,260,000 0.2 116,500 0.0 212,000 0.1

Council’s Contributions for Development 16,713,191 3.0 - 23,707,929 5.6

Auctions 96,992,823 17.2 193,524,990 18.7 160,051,050 38.1

Fees and charges 12,823,600 2.3 - 3,400,000 0.8

CHF 20,835,500 3.7 5,972,292 6.4 21,490,600 5.1

Cost Sharing Fund - - 4,401,500 1.0

102,475,800 Education Fund 49,933,300 8.9 9.9 - -

51,688,451 Secondary School Fees 66,205,000 11.7 5.0 34,780,000 8.3

1,316,838 Service levy - - 0.1 6,960,000 1.7

Other Sources 23,779,936 4.2 49,720,732 4.8 36,542,300 8.7

563,832,350 100.0 1,035,961,257 100.0 420,092,875 100.0

Service levy Other Sources 0% 5% Secondary School Fees 5%

Crop cess Education Fund 32% 10% CHF 6%

Auctions Land Rent/sale of plots 19% 21%

License Forest Product levy 2% 0%

Figure 5: Sources of Revenue for Chemba District 2014/15

Chemba District Council depends on various sources of revenue including agricultural crops i.e. rice, sunflower, sesame, maize, sorghum; livestock i.e. cows, goats, chickens; small businesses and mining activities i.e. gravels. As shown on Table 1 below. The survey study observed that, in the total own sources from financial year 2013/14 to 2015/16 (March, 2016), more than 88.6 % of the incomes were derived from only 6 main sources in the following order (In total from 2013/14, 2014/15, 2015/16 (March); Crop cess (686,966,111.00), Auctions (450,568,863.00), Land Rent/Sale of plot (239,651,810.00), Secondary School Fees (152,673,450.63), Education Fund (152,409,100.00); Community Health Fund (CHF) 108,298,391.87. Other minor sources amounts with their percent were: Other charges 110,042,967.86 (5.4%), License 44,400,600.00 (2.2%), Council’s Contributions for Development 40,421,119.97 (2.0%), Service Fees and Charges 16,223,600.00 (0.8%), Levy 8,276,838.00 (0.4%), Cost Sharing Fund 4,401,500.00 (0.2%) and Penalties and Fines 1,588,500.00 (0.1%). The structure of revenue collection of Chemba Council is much dominated by crop cess, and auctions sources of revenue. This shows the few sources of economic activities prevailing at the council.

Table 6: Main Source of Revenue for Chemba District Council

Sources Amount % Crop Cess 686,966,111.00 34.0 450,568,863.00 22.3 Auctions Land Rent (Sale of plots) 239,651,810.00 11.9

Secondary School fees 152,673,450.63 7.6

Education Fund 152,409,100.00 7.5 Community Health Fund (CHF) 108,298,391.87 5.4

Other minor sources combined 229,318,755.83 11.4 2,019,886,482.33 Total 100.00

The Percentage contributions of major sources of revenue in Chemba District Council are found on fig 1; it shows that crop cess contributes 34.0% followed by auctions 22.3%, land rent/sale of plot 11.9%; Secondary school fees 7.6%, Education fund 7.5%, CHF 5.4%; and all other small sources in total 11.4%.

Figure 6: Main Source of Revenue for Chemba District Council

5.5 Rates/Charges for Main Sources of Revenue at Chamwino and Chemba District Councils Table 7 indicates the rates of major and other sources of revenue charged by Chamwino and Chemba LGAs as stipulated in the by-laws. However, some of the rates are charged based on the market price and the value of a specific item. As it can be seen, a large number of items which appear in this table consist of a variety of food and cash crops as well as livestock. This justifies the fact that crop cess and livestock levy are the main sources of revenue for these particular LGAs.

Table 7: Rates and Charges for Main Source of Revenue for Chamwino and Chemba District Councils

Revenue Sources Chamwino Chemba (New Rates) 0.3% of Annual Turn- Service levy 0.3% of Annual Turn-Over Over License 10,000-300,000 10,000-300,000 Crop Cess Maize (per bag of 100kg) 1000 3% of market value Beans (per bag of 100kg) 1000 per bag of 100kg Groundnuts (per bag of 100kg) 2000 Sunflower (per bag of 100kg) 2000 Sesame (per bag of 100kg) 2500 Sorghum (per bag of 100kg) 1000 Cowpeas/peas (per bag of 100kg) 2000 Millet (per bag of 100kg) 1000 Baobab fruits (per bag of 100kg) 500 Grapefruits (per bag of 1kg) 30 Livestock Levies and Charges Livestock levy Cattle/Donkey/Pig (per head) 4000 5000 Goat /Sheep (per head) 1500 1500 Chicken/duck/guinea fowl (per head) 500 - Livestock permit Cattle/Donkey/Pig (per head) 2000 2000 Goat /Sheep (per head) 1000 1000 Livestock movement permit (Within District) Cattle/Donkey/Pig (per head) 1000 Goat /Sheep (per head) - 500 Livestock movement permit (Outside District) Cattle/Donkey/Pig (per head) 1000 1500 Goat /Sheep (per head) - 500 Forest Products levy Timber (1 piece of 8ft) 2000 1000 Charcoal (one bag of 100kg) 2000 - Log (1 piece) 2000 - Fishery Levy One fresh fish 20 Fresh fish (1 kg) 120 Dried fish (1kg) 1000 Sardines (one bag) 1000

5.6 Ability to Meet Budget Estimates

5.6.1 Ability to Meet Budget Estimates for Chamwino District Council Results of four financial years indicating the ability of Chamwino LGA to meet the estimated revenue collection are presented in Table 8 and Figure 6. For 2011/2013 financial year, results show that the LGA was able to meet and collect beyond the estimated budget as it collected 106.82% of the estimates (6.82% beyond the estimates). Nevertheless, during 2012/2013 actual collection significantly declined to 57.03% before gradually rising and dipping again in 2013/2014 and 2014/2015 to 68.80% and 61.50% respectively.

Table 8: Own Source Budget Estimates against Actual Collected for Chamwino District Council

Year 2011/2012 (‘000,000) 2012/2013 (‘000,000) 2013/2014 (‘000,000) 2014/2015 (‘000,000)

ESTIMATE ESTIMATE ESTIMATES ACTUAL % S ACTUAL % S ACTUAL % ESTIMATES ACTUAL % Amount 374 400 106.82 1,075 613 57.03 1,458 1,003 68.8 1,525 938 61.5

120

100

60 106.823613

40 68.80467509 57.02926223 61.4984274

0 % % % % 2011/2012 2012/2013 2013/2014 2014/2015

Figure 7: percentage Own Source Budget Estimate against Actual Collected for Chamwino District Council

5.6.2 Ability to Meet Budget Estimates for Chemba District Council Table 9 and figure 7 demonstrate the ability of Chemba District Council to meet the targeted budget revenue collection against the actual they collect in the past two years. In the year 2013/2014 financial year, results show that Chemba LGA was able to meet the estimated budget only by 60.94% of the estimates (39.06% less the estimates). Nevertheless, during 2014/2015 actual collection slightly increased to 74.79% still less by 25.21%.

Table 9: Own Source Budget Estimate against Actual Collected for Chemba District Council

Year 2013/2014 2014/2015 ESTIMATES ACTUAL % ESTIMATES ACTUAL % Amount 925,273,000 563,832,350 60.94 1,385,149,000 1,035,961,257 74.79

80 74.79

70 60.94 60

Percentage 30

0 % % 2013/2014 2014/2015 Year

Figure 8: Percentage Own Source Budget Estimated against Actual Collected for Chemba District Council

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

5.7.1 Level of Dependency for Chamwino and Chemba District Councils Table 10 and 11 show that on overall average, Chamwino and Chemba District Councils had the capacity to finance their budget by less than 5%, which is less to the national average of 6%. Over the past four years the capacity has indicated variations; for example Chamwino LGA have contributed 2.16% (2011/12, 2.86% (2012/13), 5.25% (2013/14), and then declined to 3.75% (2014/15), however Chemba LGA for

the past three years have contributed an average of 4.5% only. 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. Less

Table 10: Budget Dependency to Central Government for Chamwino District Council

2011/2012 (‘000,000) 2012/2013 (‘000,000) 2013/2014 (‘000,000) 2014/2015 (‘000,000) Total % LGA Own Total % LGA Own Total % LGA Own Total % LGA Own Source Budget Contr. Source Budget Contr. Source Budget Contr. Source Budget Contr.

399.47 18,471.78 2.16 612.92 21,398.56 2.86 1,003.03 19,121.84 5.25 938.04 25,017.46 3.75

Table 11: Budget Dependency to Central Government by Chemba District Council

2013/14 ('000,000) 2014/15 ('000,000) 2015/16 March ('000,000) Total % LGA Own Total % LGA Own Total % LGA Own Source Budget Contr. Source Budget Contr. Source Budget Contr. 563.83 15,280.82 3.69 1,035.96 17,622.00 5.88 420.1 10,116.86 4.15

5.7.2 Central Government Budget Transfer to LGAs 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 of Finance (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 have an approved annual budget two months before the beginning of the financial year.

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 the two surveyed LGAs depend on Central Government by almost 95%, especially on personal emoluments, other charges and development funds. Table 12 and 13 show that the government has been able to meet PE and OC for an average of 81.14% and 79.44% for Chamwino and Chemba LGAs respectively. For Development Budget Chamwino LGAs have received an average of 81.40%, while Chemba LGA have received a significant less amount for an average of only 20.66%.

Table 12: Percentage Actual Central Government Transfer to Chamwino District Council

Actual % from Gvt to LGAs

2011/2012 2012/13 2013/14 2014/15 Average PE 101.90 98.88 66.38 57.41 81.14 Development 67.38 83.99 60.32 113.90 81.40

Table 13: Percentage Actual Central Government Transfers to Chemba District Council

Actual % from Gvt to LGAs 2013/14 2014/15 2015/16 (March) Average PE 84.01 78.13 76.19 79.44 Development 15.99 21.87 23.81 20.66

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

5.8.1 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 is 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

32 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 three clear 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 to that effect.

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

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

5.8.2 Strength and weaknesses of the existing by-laws

5.8.2.1 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 strengths of the existing by-laws in the surveyed LGAs are:

• Connection with existing national main acts and laws • 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

5.8.2.2 Weakness of Existing By-Laws Despite its applicability and enforcements of existing By-Laws, several weaknesses have been observed across the two LGAs i.e. Chamwino and Chemba. The following forms part of the weakness of the by-laws.

• Limited resources allocated to legal department

Limited resources allocated to a legal department results into inability of the department to review the by-laws regularly to adopt to the ever changing environment and economic situations.

• Limited Participation of stakeholders in formulation of by-laws

The study noted limited participation of private sector in the formulation of the By-Laws across the two surveyed LGAs. Resource was one of the major factor that was associated with the process not being participatory. Majority of stakeholders including 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

Formulation of by-laws are too bureaucratic with many procedures and regulations. This results into having outdated rates and by-laws that inhibit revenue collections. Table 14 shows an example of by-laws that needs amendment/review.

Table 14: By-Laws that needs review

Chamwino District Reason S/No. Item of By-laws that needs changes Agriculture and food storage: Section 1 Reviewed to add "if doesn’t have 1 (7)1a Prohibiting selling of food crops surplus" There should be a range 0-5% and Rates of agricultural products basing on should be varied basing on crop 2 5% of market price type and value Adopted from Pangani. Customization basing on new mineral discoveries at Chamwino 3 Minerals used for construction is important Fees and charges: Section II Table H: Fees on fence (TZS 100) and solid waste Very low charges doesn’t reflect 4 disposal time value of money Chemba District Council Reason Permit Fee: Table 3 on Environmental While it said types of livestock, The Protection: Other Permit fee for assertion “ transportation of farm“ 1 transportation of farm (TZS 50,000) is not clear and confusing Permit Fee: Table 3 on Environmental Very low charges compared to Protection: Other Permit fee for cutting a impact to environment and doesn’t 2 tree (TZS 1,000) specify type of tree **Note: By-laws for Chemba LGA have just been approved in September 2015

• Non-compliance of the by-laws

Inadequate participation of private sector and other stakeholders results into low awareness of the existing by-laws which in a way affects compliance. The interviewed individuals opines that, the by-laws lack sense of ownership from the tax payers hence its compliance is at jeopardy.

• Political interference

the study has found that during formulation district by-laws all political personals were involved and they are the one who approve the by-laws before taken to the high level, however during implementation when tax payers starts raising complains, politicians especially councilors interfere and make difficult for implementation of by-laws.

5.9 Description of Qualities of Revenue Collection Staff The local government Urban and District Authorities acts provide set up of the Local government authorities. For example the LG District Authorities Act of 1982 provides establishment of district councils to village councils. It provides clear that, the LGAs are governed by District council under the Council chairperson. However, it has to be noted 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.

Following the hierarchy of decision making, the director is supported by a number of Heads of Department. The Departments at LGAs includes, Human Resource, Treasury, Trade, Planning, Health and Community Development, Education, Legal affairs, Agriculture, Irrigation and Cooperatives, Livestock and Fisheries, Forest to mention a few. Each department is mandated a specific or multiple task depending on the nature of activities under its jurisdiction.

Collection of revenues for the LGAs is a function of the whole council. Nevertheless, both surveyed districts have formulated a team known as Revenue Collection Committee under either District treasurer or Trade officer to oversee the collections. As it has been pointed out above, apart from the RCC, LGAs also uses other staff to assist in collection of revenue.

During the survey, the study was interested describing qualities of staff involved in revenue collections. Staff forming the RCC and WEOs4 were analysed in terms of education levels in relation to their responsibilities. See Table 15 and 16.

Table 15: LGA Staff Qualifications at Chamwino District

RCC Position Education Level District Treasurer Graduate District Trade Officer Graduate District Planning officer cum Economist Graduate

4 Chemba has 26 wards and 114 villages while Chamwino has 36 and 107 villages

District Legal Officer Graduate District Agricultural Officer Graduate District Livestock and Fisheries Officer Graduate District Land and Natural Resources Officer Graduate

WEOs Sampled Wards Education Level Msanya Diploma Mlowa/Makang'wa Diploma Chamwino Ikulu/Bwigili Diploma Zajilwa Diploma

Table 16: Revenue Collection Staff for Chemba District Council

Stand Second Certi Dip No. Category ard ary ficat lom Degr Master of Requ Existin of Staff Seven School e a ee Degree Staff ired g Gap Human Resource 0 0 0 4 0 4 5 1 Treasury 0 0 1 6 2 9 20 11 Trade 0 0 0 0 0 1 1 3 2 Planning 0 0 0 0 2 2 4 6 2 Law 0 0 0 0 1 0 1 2 1 Village Executive Officer 36 21 11 1 0 69 114 45 Total 36 21 12 1 13 5 88 150 62

5.10 Challenges Facing Private Sector on Revenue Collection Process Public Private Partnership (PPP) is sought to be an important instrument for the Government to attract private investment with a view to offer better public services. In that view therefore, the government 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

i. Heavy tax burden The survey reveals high burden of tax that to some extent results into non-compliancy for some traders. For example, traders engaging in livestock business mentioned at least

37 five taxes/levies that are paid for the same animal on different point. E.g. (i) permit (at village level), (ii) Livestock levy at auctions (iii) livestock movement permit (iv) abattoir levy (v) business license.

ii. Different rates of charges within the same region The study also identified that business community/private business personnel’s were paying different rates of levies (especially on produce cess) at different location/district within the same region. For example at Chamwino traders are paying TZS 1000/= for a bag of maize while at Chemba its TZS 1200/= and Dodoma Municipal it’s only TZS 500/=. The difference on rates within one region is a demotivating factor for doing business to parties where the charges are higher.

iii. Limited participation in formulation of By-laws Private sector are rarely involved during formulation of by-laws at district level; this is a result of two main factors (i) limited funds at LGA level and (ii) passiveness of the private sector in some areas (they don’t participate in public issues sometimes due to lack of information on what’s going on).

iv. Negative attitude towards tax paying

Some of the private sector interviewed admitted having negative attitude on tax/levies payments. The main reason given was that services provided by the LGAs don’t reflect the levies/taxes paid by traders. As a result traders don’t pay tax accordingly.

v. Bureaucratic/Cumbersome Procedures

The study also noted those private sectors are facing difficulties in adhering to payment of some levies because of cumbersome procedures and processes. For example, in order for one to get a business license, he/she has to pass through a number of offices till he/she gets one (E.g. Wards offices, planning, TRA, Trade office in some other cases OSHA, TFDA are also obligatory) in such cases many traders opt to proceed operating informally and not paying due taxes and levies.

vi. Lack of proper tax payers education

The other challenge facing private sector in the process of revenue collection has been noted to be lack of proper tax education. The LGAs and other agents such as TRA has

not reached many tax payers in terms of educating them the importance of paying taxes/revenues and its contribution to their own (tax payers) development.

vii. Lack of statistical data

It was found that there is absence of statistical data on potential income sources for taxpayers due to lack of maintained database and at the same time there is no frequent surveys by LGs to identify new potential revenue sources

viii. Lack of transparent on private tendering system

The private tendering system has very serious flaws. The most obvious of these is the substantial gap in practice between the revenue potential of markets assessed by local governments, and the revenue that is in practice collected from market places by the tenderers. The size of this gap reveals that District Tender Boards and local tax administration more generally do not operate as they should in theory. The vested interests in retaining low reserve prices which undermine official goals of local revenue enhancement are strong and take a number of different forms. The incentives for improved collection are there, provided that realistic estimates of the potential revenue yield of markets are made, and the tendering process made less prone to hijacking by officials and politicians seeking the income supplementation opportunity it provides.

5.11 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. All LGAs in Tanzania were supposed to have shifted into electronic revenue collection systems by October 2015. Nevertheless, due to different reasons including limited funding some of the LGAs such as Chemba are not yet into the electronic system.

5.12 Electronic Collection 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. For example, when the Prime Minister of Tanzania was launching the integration between National Microfinance Bank and Local

Government Authorities Revenue Collection and Information System (LGARCIS), he was told by NMB CEO that; “…In a pilot with Arusha City Council in quarter 4 of 2015, the collections increased from 2,189 transactions valued at TZS 1.2bn to 7,485 transactions valued at TZS 2.7bn in quarter on in 2016” (The Guardian 11 April, 2016).

This could also be substantiated by an increase in revenue collection in Kinondoni MC; Revenues source from Mwananyamala Hospital for only four months. See Table…..below. Generally, the introduction of LGRCIS in Kinondoni MC raised revenues by 73%.

Table 17: Revenue Collection at Mwananyamala Hospital

Before Electronic System 2013 After Electronic System 2014 June July August Sept Feb March April May 61,673,200, 73,848,500 59,124,300 71,140,200 86,646,066.65 86,444,108.03, 89,214,712.18 113,788,483.99 Source: Field Survey 2015

Despite the fact that, many LGAs including Chamwino has adopted the electronic systems, several challenges have been noted with respect to Chamwino LGA.

1. Availability of few gadgets

The study identified that, Chamwino LGA possess only 10 Point of Sales (PoS) gadgets5 that has been distributed to high revenue collection areas of the LGA i.e auctions and on gates that collects crop cess. There had been notably a significant increase in collection as a result of introduction of electronic system see Table 18. Nonetheless, Chamwino district is very huge with several point of sales, thus 10 gadgets are not enough to cater for the LGA needs.

Table 18: Revenue Before and after introduction of Electronic System

Before Electronic System After Electronic System Auctions TZS 20,000,000/= Crop Cess TZS 21,000,000/=

2. Configuration of the gadgets

5 The Gadgets has been availed to the LGA by Local Investment Climate (LIC) project

Configuration of the PoS was Case II: Performance of Electronic Revenue Collection System also found to be a problem, at Kongwa where by other categories of business or information is Chamwino LGA adopted the LGRCIS at march when they were missing. For example, it was given 10 PoS by LIC. Seven PoS were given to the agent who found that, the PoS that were collect crop cess and forestry fees and 2 PoS were directed to distributed on auctions did auctions and the remaining one to abattoir. not capture some There had been an increase in abattoir collection by almost information on secondary 20% as a result of the system. But it has been abit difficult to business such as food tell whether there is increment in crop cess collection because vending, fines and penalties out of 18 gates only 7 gates has PoS . Nevertheless, collection etc. this leaves some from auctions is averaging at TZS 16-17m while agents are loopholes of getting all collecting an average of TZS 21m on monthly basis. revenues in the system. The LGA is facing with acute shortage of the PoS. But there had 3. Lack of electricity been an initiative of purchasing android phones and mobile connectivity to other printers that are cost-effective and would serve the same parts of the district purpose as PoS gadgets.

The other main challenge is network connectivity as a result of Electricity connectivity was absence of local server and reliance of server from PO-RALG. also a problem to some areas This was evidenced during this survey, when the consultants especially at Chamwino were unable to get the e-revenue report as a result of network district. It was noted for problem. example at Naguro Mwitikira there is no grid electricity and It was observed also that Monitoring of Revenue Collection if the charge is over on the through electronic devices needs close follow-up to see what is gadget, the operators were to collected is what enters into the system, which has been travel almost 30kms to consistently been missing at Chamwino LGA. charge it. However, this challenge has been intervened by Local Investment Climate (LIC) project by supplying power bank to the LGA.

4. Network Connectivity The study also identified network connectivity to be a problem especially in areas with limited or no connectivity. For example at Manda, the gadgets were taking too long to print receipt owning to limited connectivity.

6.0 Study Recommendations

6.1 Recommendations on the Possible New Sources of Revenue for the LGA The study findings show overreliance of Chamwino and Chemba LGAs on crop cess and auctions as major sources of revenue. On the other-hand it should be noted that, the government is in a process to remove/reduce some levies emanating from agricultural products. That being the case, LGAs need to look for new sources to expand their revenue collection base. The following are some suggested new sources that emanates from the interviews, observation and analysis of the consultants.

Table 19: New Source of Revenue for Chamwino and Chemba District Council

Chamwino District New Source Assumption Expected Revenue Potential Partners Work with Social Assuming 100 bus pass per day Security Funds, Construction of bus stand charged 2000 (100*365*2000)= 73,000,000.00 Financial 73,000,000.00/= Institutions and 1 Private Sector Work with Social Construction of investment Building 9 complex/business centre Security Funds, buildings such as Shoping that would each earn 5,000,000/= a 540,000,000.00 Financial centres/Conference centres month Institutions and 2 Private Sector Assuming each ward have 1 mobile Engage into discussion with mobile Mobile operators, tower, and each tower is charged at 54,000,000.00 operators and introduce charges LGA 3 1,500,000/=per year Business licence for new 100 LIC, Central Facilitate establishment of industrial business (12,000,000/=) and service 27,000,000.00 Government and park/clusters 4 levy (15,000,000) Private Sector Improve sanitations at auctions and Improve the existing sources by abattoirs, building fences to improving services provided eg. auctions. Charges for the services 9,600,000.00 Private sector Improving sanitation conditions in assuming 1000 people uses the auctions and abottoirs service at Tsh 200 per auction per 5 week LIC, Central 1000 surveyed land, average 300 sq. Land use survey 1,200,000,000.00 Government and m per land. Price per sqm 4000 6 Private Sector Total 1,903,600,000.00 Chemba District Improve sanitations at auctions and Improve the existing sources by abattoirs, building fences to improving services provided eg. auctions. Charges for the services 9,600,000.00 Private sector Improving sanitation conditions in assuming 1000 people uses the auctions and abottoirs service at Tsh 200 per auction per 1 week LIC, Central Construction of business and market 100 small business chambers 12,000,000.00 Government and centres at Chemba charged at 10,000/= per month 2 Private Sector LIC, Central 500 surveyed land, average 300 sq. Land use survey 600,000,000.00 Government and m per land. Price per sqm 4000 3 Private Sector

Formalize sustainable charcoal business, establish specific establish Average 50 bags per day =18,250 18,250,000.00 Private sector market - heavy fine should be bags per year charged 1000/= 4 introduced, control environment Assuming each ward have 1 mobile Engage into discussion with mobile Mobile operators, tower, and each tower is charged at 39,000,000.00 operators and introduce charges LGA 5 1,500,000/=per year Total 678,850,000.00

6.2 Recommendations on the possible electronic systems to be used to improve revenue collection for the LGA’s The need of electronic revenue system at LGAs is not to be overemphasized. We have noted several advantages of the system to both central government and LGAs. It has also been noted that, the government through then PMO-RALG issued notice to all LGAs to transform their systems of revenue collection from manual to electronic on October 2016. The aim is to enhance and improve collections.

The study has also noted that, councils that are in full operation of the systems are performing much better. The common system that has been adopted by LGA is Local Government Revenue Collection and Information Systems (LGRCIS). The system is supported by several gadgets including PoS devices.

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 (See Table 19).

Nevertheless, despite its importance, the electronic system has several challenges that has been newly encountered by adopting LGAs. The challenges has been documented as, limited fund to acquire sufficient gadgets, grid electricity connectivity, network connectivity and configuration problem. Proper functioning of the system will need also addressing the identified challenges.

In Chemba District Council, the actual amount to be collected from each point of sale was difficult to establish since Revenue Collection agents contracts were in lump sum not individually as per station. During the interview, agents stipulated that to improve crop cess centers with high revenue collection ranked (from highest) Mrijo, Kwamtoro, Kidoka, and Chemba Town on the way to Kondoa as the main source or crop cess. In auction revenue, they recommended Magambua, Kwamtoro, Usandawe, Soya, Mrijo and Farkwa as the main leading revenue sources. Other auctions such as Handa, Takwa,

Maziwa and Mbabayu revenues are small. Other part where Council could possibly collect revenue from forestry products includes Ngezela, Mwigwalo and Chekechale.

Table 20: Recommended Places for PoS Installation for Chemba District Council

Current revenue of the LGA PoS Stations recommended Stations (TZS) Chemba Soya 125,849,250.00

Itolwa 89,083,000.00 Gates for Crop Cess Soya 63,514,550.00

Kidoka 43,734,000.00

Soya 146,304,000.00

Magambua 18,648,000.00 17,448,000.00 Auctions Farkwa 11,580,000.00 Kwamtoro 1,896,000.00 Mrijo

6.3 Recommendation on the feasible rates of taxes and levies Table 20 below shows suggested rates of some of revenue sources for Chamwino District Council. Analysis of the findings shows emphasis on feasible rates was mainly on crop cess and livestock levies and charges particularly sunflower and sesame for the case of crop cess. It was proposed that the current rates of Tshs 2000 per 100kg and Tshs 2500 per 100kg are supposed to be reduced to Tshs 500 per 100kg and Tshs 1000 per 100kg for sunflower and sesame respectively. In regard to livestock levies and permit, it was suggested that the existing levy which is Tshs 4000 for one cow, pig and donkey ought to be decreased Tshs 2000 while for a single goat and sheep it seemed reasonable to cut the rate down from Tshs 2000 to Tshs 1000. For the case of livestock permit, again it seemed feasible to reduce it from Tshs 2000 to Tshs 1000 for a cow, pig and donkey where as for a got and sheep the recommended rate is Tshs 500 instead of the one charged which is Tshs 1000.

Table 21:Recommended Rates for Chamwino District Council

Revenue Sources Rates Crop Cess Sunflower (per bag of 100kg) 500 Sesame (per bag of 100kg) 1000 Livestock Levies and Charges Livestock levy Cattle/Donkey/Pig (per head) 2000 Goat /Sheep (per head) 1000 Livestock permit Cattle/Donkey/Pig (per head) 500 Goat /Sheep (per head) 500

6.4 Recommendations on Feasible Ways Introducing By-Laws Responsible for Taxes and Levies with Private Sector Participation of Private Sector Engagement

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”. Interview with legal departments on both districts and other key informants, it was revealed that many problems especially on stakeholders engagement and participation lies on limited funds and communication breakage. In that view, the study recommends the following:

• LGAs setting out fund for the process of formulation new and or reviewing existing by-laws • Establishment of wards business forums that would be used as a forum for information dissemination to all relevant stakeholders

6.5 Recommendations for Improvement of the Revenue Collection Processes and Rates Setting

The study has found out that, LGA revenue structure is composed of LGAs own sources and inter-governmental transfers. On the side of LGAs, revenues are collected by either staff working at the LGAs or commissioned agents. Nevertheless, since the move of the government is towards LGAs collecting their own revenues, this study recommendations will base on that fact:

i. Establishment of one stop business Centre: It has been noted that, private sector is facing difficulties/cumbersome procedures formalizing their business and paying levies. It is therefore recommended to establish a one stop business Centre that will have all necessary points for business registration and payment of taxes.

ii. Recruitment of revenue collectors The study noted understaffing of the surveyed LGAs, it is therefore recommended to re- establish a working cadre of revenue collectors that will be responsible for revenue collection iii. Staff Motivation and compensation Lack of motivation to staff involved in revenue collection was cited as one of discourage factor to staff. It is therefore recommended that, staff involved in revenue collection should be motivated and compensated according to risks involved.

iv. Supporting Equipment and Facilities Availability of sufficient supporting equipment and facilities forms part of the challenge in revenue collection. Provision of facilities which facilitate revenue collection such as vehicles is recommended.

v. Participatory approach in formulation of by-laws 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.

6.6 Recommendation on Strategies for each LGA on how to Increase LGA Revenue in a More Sustainable Manner

Revenue collection has been said to be a process that involves both public and private sector. While the private sector pays tax, the public provide services the former. Sustainable collection of revenue at the surveyed district has to consider good relationship of the two sectors. Moreover, for the LGAs to increase revenue in sustainable manner the following are recommended

• The LGA has to invest in provision quality services that will catalyze tax paying attitude

• Invest in tax payers’ education; the LGAs has to invest in provision of tax education to the community and also train revenue collectors on regular basis the basics and principles of revenue collection. The trainings should be on regular basis

• The LGAs should map to identify all formal and informal business in their jurisdiction. This could be for feasible if it can be done at ward level and then the LGAs to establish a data base that will configure all business basing on their level and type.

• LGAs have to harmonize some of the procedures of registering and formalizing business; this can be done through establishing one stop business Centre that will have all necessary points.

• Communication between LGAs and private sector should be enhanced; this could be possible by establishing business forums at wards level, where there is huge representation of the community. These forums will assist in information sharing and increase participation of private sector in decision making on issues that have direct impact to them.

• Conducting a revenue baseline study on current and potential local revenue sources to widen LGs revenue bases

• The Local Governments should develop contextual training modules to address differing training needs for personals involved in revenue collection.

• LGs should provide incentives to mobilize own revenue, which ensures sustainability of local investments.

• Since the cost of revenue collection using own staff is associated with many challenges including, shortage of staff and resources, the study recommend training of WEOs on basics of revenue collection and use them for the same purpose.

7.0 Appendices

7.1 Terms of Reference 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 Dodoma and Kigoma 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 two years 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 in two remaining LGA’s in Dodoma of Chemba and Chamwino 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 two 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 2 LGAs i.e due diligence report – IMED, mapping report; • Review main laws guiding LGA’s revenue collection and their bottlenecks • Identify and asses all existing sources of revenues for the 2 LGA’s of Chamwino and Chemba, and rank from the major contributor to the minor for the past three years (including rates imposed). • Assess contribution of respective LGA to their budget from own sources of revenue for the past three year • Assess and analyze all means of revenue collection and it’s efficiency and weaknesses • Assess qualities of responsible staff • Assess and establish the level of dependency from central government and how does it affect district plans

• Assess flow of funds from the central government for the past three years • Identify and prioritize possible new sources of revenue for the LGA • Identify and prioritize possible electronic systems to be used to improve revenue collection for the LGA’s • Identify and list challenges facing private sector on revenue collection process • Assess processes engaged on imposing by-laws responsible for taxes and levies and level of private sector engagement. • Assess how to improve local revenues from business that will complement and strengthen the Tanzania Strategic Cities Project activities.

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) • 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 5 days 10 man days (for 2 LGA) = 5days 5days

7.2 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): 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.